darwisy
Forex Moderator
- Messages
- 1,797
- Joined
- Dec 2, 2008
- Messages
- 1,797
- Reaction score
- 1,089
- Points
- 101
Successful trading not just about winning and losing individual trades—it’s about sustaining profitability over time (making money and holding onto those profits in the long run). A common mistake traders make occurs when the success of a trading strategy is determined based on winning percentage alone, which can be quite misleading. Risk vs. reward must be taken into account. Most newer traders (unknowingly in most cases) are willing to risk far more than they are looking to gain (reward) just to be “right,” or win, each trade. Keep in mind that trading is all about making profits over time , not about trading ego (which is usually the result of focusing just on winning percentages).
In other words, significant returns can be achieved when you allow yourself to look at the big picture. The key is to be able to determine both entries and exits in advance so that risk vs. reward can be determined. This will significantly help to keep the decision making process as consistent and mechanical as possible, which is essential regardless of the technical/fundamental strategy that is used as it helps to eliminate emotions when making trading decisions. Only then can a truly objective decision be made as to whether or not to take the trade since this decision will be based on established/actual results, and not a “gut” feeling or reaction. Understanding the mathematical “law of averages” and “law of large numbers” reinforce this mechanical approach to trading which, again, is crucial to trading success because mixing emotions with money-based decisions is usually a recipe for disaster!
In other words, significant returns can be achieved when you allow yourself to look at the big picture. The key is to be able to determine both entries and exits in advance so that risk vs. reward can be determined. This will significantly help to keep the decision making process as consistent and mechanical as possible, which is essential regardless of the technical/fundamental strategy that is used as it helps to eliminate emotions when making trading decisions. Only then can a truly objective decision be made as to whether or not to take the trade since this decision will be based on established/actual results, and not a “gut” feeling or reaction. Understanding the mathematical “law of averages” and “law of large numbers” reinforce this mechanical approach to trading which, again, is crucial to trading success because mixing emotions with money-based decisions is usually a recipe for disaster!
