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.
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.
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.
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.
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.