Impending disaster looms on the horizon for beginning traders who do not adhere to proper risk management methods. It is easy for a rookie trader to get distracted by riches waiting to be had in the stock market. Anyone who has been trading stocks for a while knows and understands the importance of risk management. I would like to share my top 3 ways of preventing an STD (stock trading disaster).

I was a cocky beginning trader. Soon after attending a stock trading seminar, I had several big wins. In my own mind, I was the exception to any and all stock market trading principles. I could do no wrong. My short-lived reign as a trading Adonis came to an abrupt end. All my money began raining down into the pockets of real stock market professionals. Fortunately, I wised up before it was too late.

In short, I was a knucklehead. I often times had to learn things the hard. Learning to trade in the stock market was no different. So, I am revealing my top three ways to avoiding an STD.

#3 Way To Prevent An STD

Do your research. If you have had a few profitable trades early on, you probably have taken research for granted. Trust me, I sure did. Giving research its due diligence is absolutely imperative in sidestepping a stock trading disaster. Remember it is much easier to get yourself into any situation than to bail yourself out of a bad one.

#2 Way To Prevent An STD

Eliminate hope from your emotional make up when you trade. Wishful thinking can be dangerously detrimental to your success as a trader. There is nothing noble about going down with the ship. Just face it. You will make mistakes. I have been trading for 10 years now and still make mistakes. I make corrections much quicker nowadays. I am sure you have heard that making more mistakes at a faster pace accelerates your learning curve. I would agree with that statement only to a degree. In stock trading, making too many errors, too fast will certainly cause you to be unceremoniously ousted from the game if you do not adhere to the #1 method.

#1 Method of Avoiding an STD

Use a protective stop! Immediately place a protective stop loss after your order has been filled. Not doing so exposes your entire position to massive losses. Failure is eminent for a trader who handles the duties of risk management in the absence of a stop loss. Albeit not perfect, a stop loss is the only insurance policy a trader has against career ending losses. Stop being a philanthropic trader who continues to give money away to the markets.

Using a protective stop loss continues to be the most effective method of risk management. Fortunately, it is also the easiest of the three to apply. Methods 1 and 2 are developed over time as you gain experience. Simply use my top three ways of preventing an STD and you have cut your chances of getting burned.