The Way Your Trades Should End

The Way Your Trades Should End

All your trades should end in one of four ways:

A small win.
A big win.
A small loss.
Break even.
Never a big loss.

A small win puts money in your trading account, a small win is a success as long as your did not forfeit a big win by exiting too quickly during a trend in your favor.

A big win gives you the profits to pay for all your small losses. Big wins are needed for long term profitability because the bigger wins you have in your system the smaller your winning percent needs to be to achieve profitability.

A small loss is the cost of doing business as a trader. Taking a stop loss when it is hit for a small loss is insurance against big losses.

Break even trades usually happen with time stops where a trend never happens and you are neither stopped out and your target is not reached. A break even time stop frees your capital up to seek other opportunities.

You should never experience a big loss. If you can get rid of big losses, you have a great chance of being profitable for years to come. The biggest reason most traders are not profitable is that they give back their big wins with big losses.