Would it not be nice to find the ultimate trading method and system where profits are guaranteed and one never has to consider the notion of taking a loss, or when to take the loss? I submit that is more a dream than reality. In practice, stock traders will encounter losing trades - it becomes a question of how often these losses are encountered and the amount of loss on each occasion.
I would say a good trading method or system is one in which losses occur infrequently and that the system provides you good exit points thus establishing a clear price at which to take the loss. Even if you use a good trading system, by the measure just stated, it becomes a task for the trader to follow through with the action of taking the loss. It is as much a fight against one's own emotions and psychology as it is anything else.
Also bear in mind that while your capital is tied up in a losing trade, you are not able to utilize that capital to make further trading gains. This is a double whammy in that you are losing to time as well as money (if the trend continues to go down, you lose even more money). I like to think that by taking the loss, I am freeing up my capital which can be used to tackle another trade.
The underlying premise is that you are using a good trading method (e.g. strategy plus discipline) and/or system (e.g. technical analysis with good trend following results) without which you will be faced with more stop-loss situations than you would like, which means your net trading result will likely be negative overall.
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