There are certain indicators, levels, or other ways you can increase your odds of being right >50%, but you'll never get significantly higher
You always hear people let your winners ride or cut your losers early. Easier said than done, right?
Well, it's a mathematical fact that implementing this will improve your trading profits
The math behind leaving runners on and cutting losers early 👇👇👇
There are certain indicators, levels, or other ways you can increase your odds of being right >50%, but you'll never get significantly higher
You HAVE to let your winners run and cut your losers early.
Example: you take 100 trades for $100. Winners win $10, losers lose $10. To profit, you need 51 winners (+$510) and 49 losers (-$490)
Example: you take 100 trades for $100. Winners win $20, losers lose $5. To profit, you need 21 winners (+$420) and 79 losers (-$395)
You can essentially lose 4 out of every 5 trades and still make money if you simply let your winners run and cut your losers
2:1 (winners run 20%, losers stopped out at 10%), you only need to win 34%
3:1, 26%
4:1, 21%
You decrease the # of trades you need to hit by having your winners outweigh your losers
1) Have a rule on your stop losses. Personally, every trade I enter I immediately set a STOP order for -10%
2) Have a target profit level for winners. For me, I like the 2:1 risk/reward so once a trade hits 20% profits, I start to scale out
So when my trade hits 20%, I scale out part of my position and move my stop order for the rest to 10% profits
Remember, YOU CAN ALWAYS RE-ENTER.
1) Your thesis of it breaking the level is no longer valid
2) If it breaks above the level again, you can just re-enter
Special thanks to @AdamSliverTrade , @notmrmanziel , @TradingWarz , and the rest of the #LDL crew for getting me on this path and helping inform threads like this