Let profits flow
Let profits flow and trim losses. This idea is one of the most common among traders.
As George Soros said:
It doesn't matter whether you're right or wrong. It matters how much you make when you're right and how much you lose when you're wrong.
The key to success in trading is to build up your profitable trades.
Traders who are afraid of losing their money often stop paying attention to market conditions and get too attached to current profits. They base their decisions on open positions solely on the fear that the price will not reach their take profit.
We know that the unfixed profits still belong to the market. But once you start cutting back on your profitable trades, you are also cutting back on your risk-to-profit ratio. Suddenly, a 3R trade idea turns into a 1R.
Of course, sometimes the market will give you less profit than you bargained for. And that's okay. To trade successfully, you have to give the market freedom and stop limiting it.
But if you're trading with money you're afraid of losing, you won't have that luxury. Instead, you will fear losing accumulated profits and will not be able to sit back and let the market do its job.
The beauty of using a multiple of risk to profit ratio is that you can ignore your profit margin and still make good money. If you reduce that ratio, you are faced with having to make a high percentage of profitable trades to make a profit. Essentially, you are reducing your own chances of success.
Let profits flow and trim losses. This idea is one of the most common among traders.
As George Soros said:
It doesn't matter whether you're right or wrong. It matters how much you make when you're right and how much you lose when you're wrong.
The key to success in trading is to build up your profitable trades.
Traders who are afraid of losing their money often stop paying attention to market conditions and get too attached to current profits. They base their decisions on open positions solely on the fear that the price will not reach their take profit.
We know that the unfixed profits still belong to the market. But once you start cutting back on your profitable trades, you are also cutting back on your risk-to-profit ratio. Suddenly, a 3R trade idea turns into a 1R.
Of course, sometimes the market will give you less profit than you bargained for. And that's okay. To trade successfully, you have to give the market freedom and stop limiting it.
But if you're trading with money you're afraid of losing, you won't have that luxury. Instead, you will fear losing accumulated profits and will not be able to sit back and let the market do its job.
The beauty of using a multiple of risk to profit ratio is that you can ignore your profit margin and still make good money. If you reduce that ratio, you are faced with having to make a high percentage of profitable trades to make a profit. Essentially, you are reducing your own chances of success.
