What’s the best way to go about setting your trading or investing goals? Well, as with most goal setting in your life it involves two important elements: perceived difficulty, and how specific you are in stating your goal. These two elements play an important part in attaining your goals.

The following factual story is from a US University experiment to understand the psychology of success. There has subsequently been many repeats of this experiment by different people in different locations.

A stop loss is a pre-determined price that we use as the trigger to sell out of a losing trade. If the share price falls instead of rising then we sell and we sell at a pre-determined price to ensure that we minimise losses. We need to have a stop loss price because not all trades succeed – some fail. Even the best trading techniques struggle to deliver a success rate of more than 70%. Therefore even using some of the best trading techniques we will still end up with two or three losing trades out of every ten. For these losing trades we must keep our losses really really small.