The number one most important and most overlooked component to becoming a successful trader or investor is risk management. As a trader or an investor, capital preservation is priority. Regardless if you are an investor looking at the potential move of months or years ahead or a day trader looking to capture the small intra-day swings for quick profits, you must have a complete plan. You must plan how much risk you are willing to take on each trade before entering, know how to use trailing stops properly and know when to take profits. There will also be times when you are in a trade and things are just not going according to plan. And you must get out of that trade and look for another opportunity.

Do you know what your own risk tolerance is psychologically? How much can you afford to lose? Are you risking too much based on your total capital? Are you allowing yourself a chance to trade another day or looking to hit a home run on each trade? You must have a predetermined plan and know your limits based on the amount of capital you plan to invest or trade with.

Once you enter a trade, if the market moves against you by the predetermined risk amount you planned, get out! Take the loss. Accept that when investing and trading you will have losses. Losing is expected and part of the business of investing and trading. Think of losses as part of the expenses of running a business. Every business has expenses. The key is to manage the loss to keep it small. The most successful investors and traders will have regular and frequent small losses. Understand that taking small losses is healthy for you. By doing so, it allows you to think more clearly to find new opportunities down the road. If you