Trading: Here’s what it’s all about

Why in the world do we wake up every morning and put our hard earned money on the line?

Why do we put up with all the frustration, losses, draw downs of capital,  and government interference in our shorts and trend plays?

Monetary reward, profits, cash, that is the bottom line whether we use that money for financial freedom, to pay off our house, or just to feel secure for a rainy day.

Trading at its core is simply about reward and risk. We put a trade on and take on the risk of being wrong in the pursuit of the profits we will get if we are right. The key here is that our risk needs to be small and our possible profits need to be unlimited. While this principle seemed to have been suspended in most markets over the past month, it still will be proven right in the long term. If you buy 100 shares of Apple at $391 a share at its 50 day moving average and it is the known support for the stock over the long term and set your stop at $387 a share but leave the upside unlimited until it is 10% above the 50 day moving average or if an uptrend begins and you trail the stock with the 10 day moving average as a stop, you have created a good reward to risk ratio. Your downside is $400 your upside could be $3600 if it makes a run for the all time high before earnings are announced. Cut losses short let winners run. You never know when you are going to catch that big winner, or that stock with the consistent support and resistance that can also set you up with a high probability trade at a historical support in an uptrend well below resistance.

You need a trade that is in the direction of the overall market. You need to trade what trends not what lays dead at the same price. Trade stocks and ETFs that are orderly in nature and less volatile and do not give rise to false signals. Trade on the side of the odds. Risk a little each time for a chance to make a lot.

People that make it in this business risk $1 to make $3 over and over with the odds on their side.