Each week we receive dozens of E-mails from investors that have a history of great trades and yet their portfolios fail to grow. The most common trait in each of these cases is the failure to manage losses properly.

The facts are obvious! No one can successfully predict the market in every case so the key is to take small profits regularly and prevent losing plays from significantly eroding capital. Losses are bound to happen, they are inevitable; but that shouldn't keep you from profiting on a regular basis. The fact is, it's very difficult for most investors to close out losing plays early. Successful traders understand there is no reason to hang on to a losing position when there are so many other profitable plays that deserve their time and money.

Emotion is the capital killer! Hope, greed and fear all conspire to remove money from your account that you will never see again. What generally happens is that the trader says to himself, "If I just hold on...I'll eventually break even"; "It can't go lower!"; "It's going to come back...it has to!"; The reality is, it rarely does.

One of the best ways to avoid this trap is to use a trading plan with pre-determined exits. Stop-loss orders can be used to remove on-the-spot decision making from the equation, and trailing stops can be used to follow a position into greater profits while protecting for reversals.

If you are going to have a plan, stick with it. Don't jump into trades on emotion, wait for the proper entry points. Study and identify trends within individual issues before opening a position. Use technical support areas as buying opportunities and sell on rallies towards resistance. One of the oldest phrases is; "Buy on down days, sell on up days" and it is really not that difficult.

If you discover that your losses are consistently larger than your gains, stop trading! Step back, take a break, a few days off. When you are ready to try again, evaluate your trading strategies and review the losses to learn from previous mistakes, then move on!

Success will come when you create a favorable balance between hard work, sound judgment and patience. Too many traders give up after a few losing plays, long before they have time to learn and absorb the various methods required for profitable trading.