2022-06-10 17:57:59
#Learning - Trading Psychology
Look for low risk , high reward , and high probability setups . - Richard Weissman When entering a trade , you want a low probability that your stop loss level will be triggered . If you buy Apple stock when the price is 1 % over the 200 day SMA , and Apple has not closed below the 200 day SMA in 18 months , then there is a good chance that your stop loss will not be triggered if you set it as a close under the Apple 200 day SMA . You should have a low risk to your account if your stop loss is hit . Buying 100 shares of Apple at $ 120 a share in a $ 100,000 trading account with an end of day stop loss $ 1.20 away from your entry , is a low risk setup . ( Of course it is low risk as long as earnings aren't being released the next day while you're still holding this stock position ) . It is a great risk to reward ratio if your price target is a 6 % price rally back to the 50 day SMA , or a 10 % rally back to uptrend highs . Each entry should have a great stop loss level that v risk of being triggered . Your position sizing should have low risk so that in the event of a big loss , you will live to fight another day . Your reward should be two or three times larger than your capital at risk to make the trade worth the risk . This may give you a smaller win , but you should have that potential . has a Trade so that when you're wrong your losses are small . Look for trades with the potential of being big winners . Enter when the odds are low that your stop loss will be hit before you're profitable enough to exit . Use trailing stops when possible to maximize winning trades , exit a winner when you have a reason to , and not because open profits make you nervous.
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