DOUBLE YOUR MONEY – RECOUP YOUR LOSSES:

Ninety percent of the trading tips that I supply for Hotwiredstocks.com contain the reminder: ” never forget to protect your positions by using “stop loss” orders.”
I repeat this refrain because to me it is the single most important tip I hope every trader will follow. Quite simply traders hold on to losing trades too long. A “stop loss” order entered 5%. 8% or 10% away from your position price ensures that you minimize your losses according to your risk tolerance and preserves the balance of your capital for the next [and hopefully winning] trade.

Until a few years ago I had never come across the information I am about to share with you. I retrieved it from a very old USA Today article and it speaks specifically to the problem of limiting losses and in particular the difficulty in recouping losses from bad trades as well as doubling your investments.

For a rough estimate of how long it will take to double your money, divide 72 by the percentage rate you earn on your investment/trades. For example, if your investment product returns you 6% then by dividing 72 by 6 we get 12 which is the approximate number of years needed for your money to double.

Here are a few examples:

If your earn this % each year:      Years to double your money:

3%                                                       24.0 years

4%                                                       18.0 years

5%                                                       14.4 years

6%                                                       12.0 years

7%                                                       10.3 years

8%                                                        9.0 years

9%                                                        8.0 years

10%                                                      7.2 years

11%                                                       6.5 years

12%                                                      6.0 years

13%                                                       5.5 years

****OF GREATER IMPORTANCE IS WHAT IS REQUIRED TO RECOUP LOSSES FROM LOSING TRADES THAT GET AWAY FROM YOU. REMEMBER THAT WHEN YOU LOSE A PORTION OF YOUR PORTFOLIO YOU NOW HAVE FEWER INVESTMENT DOLLARS WORKING TO REGAIN THOSE LOSSES.

If you lose this much:                   You need to earn this much to break even:

10%                                                         11%

20%                                                        25%

30%                                                        43%

40%                                                        67%

50%                                                     100%

60%                                                     150%

70%                                                     233%

80%                                                     400%

90%                                                     900%

The figures speak for themselves. Ride your winners and allow me once more to repeat: “never forget to protect your positions by using “stop loss” orders.”