Nov 2, 2013

Percentage gain required to recover percentage loss

There is reason why big names like Warren Buffett and others in investment and trading put focus on 'not losing' money as their first rule.
When you lose money, you have to recover it first and get even before you make any profit on the initial or starting capital.
What happens is that when you lost money from the start or out of the initial investment or margin money in case of trading, you have to earn more in & terms to get even.
Above is the table depicting how much more you will need to make when you lose out of your capital and margin. If you understand the important of the same you will make your investment and trading decisions differently. This is perhaps one of the foremost important fundamental of risk management in stock trading and risk management in investment.


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