All competent stocks traders are practical people who quickly calculate risks, results and odds. It is of great importance to manage your risks when picking stocks in order to limit your losses.

• Limit your loss on any stock trade to 2% of equity in your trading account.

• Never have more than 6% of your total trading account exposed to the stock market at any one time. This means that you could have three trades risking 6% of your total account at any one time, or six trades risking only 1% each of your total trading account, or multiples thereof.

• Whenever the value of your account dips 6% below its closing value at the end of the month, stop trading for the rest of the month. In other words stop trading as soon as your equity dips 6% where it stood on the last day of the previous month. Close all positions and spend the rest of the month on the sidelines. Continue to monitor the stock markets and undertake a review of yourself and trading systems.

Keeping these points in mind when trading stocks will help reduce your losses.