As everyone else in trading knows, deficits certainly are a area of the business, and you canat prevent them. If thatas something you’ve difficulty taking, then you shouldnat be trading. Rate Us contains more about where to ponder this hypothesis. But, thereas a huge difference between losing big on a normal basis and losing little in a controlled trading plan. You already know just that you should keep your losses small; the main element is to keep them smaller that your average benefits.
Letas look at a trading strategy that produces $300 in earnings for every win and costs you $200 for every loss. Now, if your weekly goal is $300, and if your first business was a loss of $200, then you definitely need to make two winning trades to achieve your weekly profit goal.
Allow me to simply take this just a little farther and really break it down for you: youave dropped $200 on your one losing trade, and then you definitely make $600 on your two winning positions ($300 each). Your net profit = $400. Purpose achieved. Now, STOP TRADING. Otherwise, youall end up giving back you to the money just designed to the markets. Lock in your profits!
Of course, youare not necessarily guaranteed a week with only 1 loss. Letas look at a week that starts with three losses. With three failures, you are now down $600 ($200 each). Which means you will need to have three wins that end up in $900 ($300 each). Take the $600 you lost on the losing trades from the $900 you won on the winning trades, and your resulting net income is $300. Target accomplished. End trading.
aWait a minute a youare saying that I’ll achieve my aims with a percentage of only 50%?a
YES! Thatas exactly what Iam saying! Browse the example above again: you lost $600 on three losing trades, built $900 on three winning trades, and arrived with a net income of $300. This means that you could pick a losing trade every other time and STILL achieve your weekly revenue goals!
Because many investors overlook this essential notion of setting weekly goals, I want to stress this point again. They determine daily objectives, which create a huge psychological stress, and then markets are traded by them when they shouldnat, and they drop.
Therefore letas just suppose for one minute that you do find yourself achieving a real winning percentage of only 50%. Now, when you begin trading again on Monday morning, what are your chances of having a winning trade? 50%! You’ve a one in two chance of achieving your regular profit goal in only one, single trade!
So if you DO achieve your weekly income goal on the first business Monday morning, what next?
Stop trading for that week! Just take it easy! It doesnat get any benefit than that.
Remember, you’ll need to adhere to your weekly goal and your trading plan. Don’t enter into yet another trade once youave already achieved your regular goal; the possibility your second trade may be a losing trade is too good, and you would be giving your money and profits back to the marketplace. Over-trading and greediness are a traderas problem, stick to your methods and so avoid them.
Now, you realize that you can achieve your regular income goal with a percentage of only 50%. You should really be able to improve this winning percentage with time and still meet your financial goals, as you improve in your trading features..