Like all normal people, I also have a lot of losing trades. Here is an outstanding example of one of them in AKAM shares:
If you have the willpower Cut the profits and let the losses flow, then it is possible that something will work out…
It came to us from the American stock market, when the stocks started to rise, it was difficult to stop them..
Now the markets have changed..
This does not work..
Важно так как только прибыль есть ее надо брать всю, особенно важно забирать резкую быструю прибыль..
Убытки же наоборот резать нельзя, you need to let them live as long as possible (it doesn’t mean to trade without stops) especially those, which arose abruptly.
The longer the losses live, the more likely it is that they will be transformed into profit..
so, now I wish to tell you about 2 important main principles of profitable trading - cut losses and let income flow!
What is hiding behind this and for what reason is it so important?
Cut the losses - this principle means, that you must always have a stop! By opening a deal - you count, that the cost will go in your direction - it's true? In addition, by opening a deal, you risk a certain part of your own capital.. If the cost does not go in your direction, the transaction must be closed immediately and the risk must be limited in advance by this amount.!
Why is this principle so important - if you do not follow it?, then your losses become uncontrollable!
For instance, you decided that your risk in this contract will be two percent, вы делаете сделку, but the cost goes against you, the biggest mistake would be not to close the deal hoping, that the cost will unfold.
- Q1 Close the deal, for the reason that, that if the cost went against you, it means that the market is not the same as you expected
- Secondly, it is easier to open a new trade at a different time and recoup the current small loss, than drink later a sedative and fight off a big loss for a long time
- Q-3 By doing this, you cease to be a disciplined trader - it will be even more difficult for you to close the trade next time. You create an incorrect behavioral reaction!
Let income flow - this principle means, that by opening a deal, we keep it until a predetermined goal or exit the deal according to certain rules! The implementation of this principle allows us to earn huge amounts of money., much more than you risked. Imagine, making a good swing deal (a trade holding a position for a number of days) you, at first risking, for example, one and a half percent of your own capital can earn 30 to forty-five percent, in other words in 20-30 times more than the amount of risk!
What does the combination of these two principles lead to in trading? Your losses are under control and small, your income is high. Even if you have 3-4-5 in the order of unprofitable agreements, which was heading profitable will ward off all your losses and take you to a good plus!
What does violation of these principles lead to - you take on very large losses and you close profitable deals very early. As a result, you evenly lose money or spin around 0.
