Offense and Defense in Trading

Offense:

You need big winners to pay for all your little losses. When the opportunity of a high probability entry happens you must take it. Or if you are trading a trend following system and are in a draw down you must keep trading in the direction of the trend so you will catch the big wave when it hits.

1. Let your winners run until you are stopped out with a trailing stop or a candle stick signal of an eminent reversal.
2. Do not exit a winner until it stops moving in your direction.
3. Enter a trade only with the a minimum 1:1 risk to reward ratio, the upside has to always appear to be bigger than the downside.
4. Only trend trade trending equities and markets, swing trade range bound stocks and markets. Remember that they only fit these classifications until they don’t.
5. Do not marry a trade, only date it.

Continue Reading