As everyone in trading knows, failures really are a part of the business, and you canat avoid them. If thatas something you've trouble accepting, then you shouldnat be trading. But, thereas a huge difference between losing big on an everyday basis and losing small in a controlled trading approach. You already know just that you must keep your losses small; the key would be to keep them smaller that your average benefits.
Letas look at a trading strategy that produces $300 in gains for every gain and charges $200 to you for every loss. Now, if your weekly goal is $300, and if your first trade was a loss of $200, then you have to make two winning trades to attain your weekly income goal.
I want to take this a little further and really break it down for you: youave lost $200 on your one losing industry, and on your two winning investments ($300 each) then you definitely make $600. Your net profit = $400. We found out about markus heitkoetter critique by searching books in the library. Goal achieved. Now, STOP TRADING. Normally, youall find yourself giving back the cash you just built to the areas. Lock in your profits!
Obviously, youare not necessarily assured per week with only one loss. Letas look at a week that starts with three losses. With three failures, you're now down $600 ($200 each). So you would want to own three wins that result in $900 ($300 each). Take the $600 you dropped on the losing trades from the $900 you won on the winning trades, and your resulting net profit is $300. Purpose accomplished. Stop trading.
Wait a moment a youare saying that I will achieve my aims with a percentage of only 50%?a
YES! Thatas exactly what Iam saying! See the example above again: you dropped $600 on three dropping trades, built $900 on three winning trades, and came out with a net income of $300. Which means you could choose a losing trade every STILL and other time accomplish your regular gain objectives!
Because many dealers ignore this essential notion of placing weekly goals, I wish to stress this point again. They define everyday goals, which produce an enormous psychological stress, and then when they shouldnat markets are traded by them, and they drop.
So letas just think for a minute that you do find yourself obtaining a genuine profitable percentage of only 50%. Now, when you start trading again on Monday morning, what are y