There can be five kind of Outcome of our Trades:
1) Breaking Even ( -10 to +10 nifty points)
2) Small Profits (like + 10 to +50 nifty points)
3) Small Loss (like -10 to -50 nifty points)
4) Big Profits ( like +100 to +300 points)
5) Big Loss ( -100 to -300 points)
Now First three types of possibilities -> Breaking even trades , small profit trades and small Loss trades will neutralize each other and keep us at break even to little negative due to transaction costs.(Range Bound Markets)
And now we are left with last two outcomes which are Big Profitable trades and Big Loss trades, And if somehow we can avoid the big loss trades(Trading against the trend in Trending Markets), we are just left with Big Profitable trades(Riding Trending Markets) which will make us a big winner in the long term.
Think about it.
Happy Trading
Pawan
1) Breaking Even ( -10 to +10 nifty points)
2) Small Profits (like + 10 to +50 nifty points)
3) Small Loss (like -10 to -50 nifty points)
4) Big Profits ( like +100 to +300 points)
5) Big Loss ( -100 to -300 points)
Now First three types of possibilities -> Breaking even trades , small profit trades and small Loss trades will neutralize each other and keep us at break even to little negative due to transaction costs.(Range Bound Markets)
And now we are left with last two outcomes which are Big Profitable trades and Big Loss trades, And if somehow we can avoid the big loss trades(Trading against the trend in Trending Markets), we are just left with Big Profitable trades(Riding Trending Markets) which will make us a big winner in the long term.
Think about it.
Happy Trading
Pawan
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ReplyDeleteExcellent description of the one of most important principle of trading ' Cut your losses and Ride your profits'. Easy to understand but tough to put into practice. But I can vouch that Pawan follows this principle remarkably well. He milks the trend till the last drop.
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ReplyDeleteVery simple and effective/practical analysis...which every trader should know...
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