Saturday, October 27, 2012

E-35: Setting Your Limits

In the stock market, investors regularly issue stop loss orders. These are standing orders to sell stock when the price dips below a predetermined limit. If they were to buy stoock at $100, they may issue a stop loss order for when the stock drops below $50. This doesn't protect all of their investment but it means they are not completely at risk either. This is somethinng that you should do when gambling.

Most players walk into a casino thinking "Ive got $500 to blow" And they often don't leave until every dollar is gone. A smart gambler thinks "I've got $500 in my bankroll for the weekend and I want at least $250 for tomorrow"
The smart gambler has set a stop loss limt for that day and will leave the gaming floor as soon as they reach that level.
There are several ways to set stop loss limits;
  • Time loss limits: Where you stop playing after a predetermined amount of time
  • Winning limits: Set a reasonable profit goal. 50% of your initail buy in is sound
  • Winning loss limits: Set a limit of how much of your winnings you are willing to lose back, again 50% is safe.
  • Breaks: Stopping for meals is a safe way to protect your bankroll

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