I’m addressing a major topic today...

It’s a really big deal:

Learning to cut your losses quickly. You must learn how to do this.  

If you don’t know how to do it, just one mistake could seriously damage your confidence — not to mention the balance of your trading account.

And since every trade won’t be a winner, you need to be prepared for this right from the start.

For that reason, I prepared this multi-day issue to show you exactly how I cut losses on my trades.

After 20+ years trading stocks, I’ve found this is truly one of the most important things you need to know about trading, so I hope you can learn from me here.

I want you to know that this is MANDATORY for all of my students, so make sure you read the rest of this multi-day issue for tips that can help you build the foundation of your trading career.

What Is the Meaning of “Cut Your Losses Quickly”?

A lot of people ask me, “Tim, what does it mean to cut stock losses? How do you know when to exit a trade?”

Both questions are very important and point back to my number-one rule in stock trading…

My answer: “I cut stock losses quickly. Period.” I live and die by this rule.

But what are the reasons behind it?

Well, first and foremost, let’s look at the origin of cutting your losses. It traces back to the foundation of any good trading plan: Exit a losing position before things can get worse. It’s a way to control your losses when things don’t go the way you’ve planned them.

There are also other factors I consider to determine exactly when to exit a trade, like the timing and the pattern behavior. But overall, I cut my losses quickly — and you’ll soon see why.

Why ‘Cut Your Losses Quickly’ Is My First Rule

Cutting losses quickly is of paramount importance because I want to keep trading with confidence and protect my trading capital.

I don’t want small mistakes to turn into a bigger disaster for whatever reason. I’m not interested in taking that risk!

I’ve seen newbies freeze in panic, losing more money by the minute, without knowing exactly what to do. And a big loss doesn’t just wreck your confidence, but it can also take a serious chunk out of your account.

Education is key in helping you here. I’ve learned these trading patterns inside and out and know their behavior very well. If a stock doesn’t do what I think, I’m out, and sometimes just for small gains.

My motto: Trade scared and cut losses fast. When in doubt, get out!

Trade scared? Yes!

As wonky as that might sound, it can ultimately help you. You see, for me, trading scared actually makes me NOT scared to trade — instead, it helps me stay calm and ready to take the potential rewards on my next position.