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Trade within the (expected range) x 2 or less
- Why expect more?
ATR is the easiest way to do this, but there are others like dynamic range and channel studies like Donchian and Keltner channels. So target 2 times the expected range or less.
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Get better Rewards than Losses, ie R:R > 1
- Be better at winning AND better at losing too.
So if you target 2xATR then your stop of 1.5xATR will get you a good R:R. Look at your bar edges for the last few bars, and use them for “smaller than your target size stops,” as well as locking in profitable trades.
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Try to beat the coin flip
- However, 40% profitable will be ok if you are good at the prior point.
50% winning in trading is actually hard to do, but if you win 40% of the time and can get a good R:R, then you will still beat the commissions by a little. Remember most fail miserably, for lots of reasons, but a big one is losing on one trade much more than they win on any trade. Winning 80% of the time is absolutely achievable, but you will have to throw R:R out the window! Though when you master trading, you may disagree with that statement and have high win% and great R:R both, and that is the ultimate goal. At first you need to balance them.
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Pile onto the good trades to get your money faster
- The blackjack dealer is showin’ 16, and you can double down.
Breakout trades are terrible places to start trades, but it’s not so bad to add a little risk to a trade on a breakout. For if you are already long, a breakout is a confirmation of your correctness in choosing to be long. Get you some! However, you will have small profits if you enter on breakouts to begin a trade. This is will skew your R:R against you on the reward side.
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Don’t let decent winners turn into losers
- Cardinal Sin!
‘Nuff Said. But to offer a conceptual mindframe, just think that taking your winners (that have a decent profit) more often raises your winning percentage, and if you go flat with more money than you started, this ALWAYS helps. Nothing wrong with reentering the trade.
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