Whenever you open a trade it’s a far better approach to have an exact exit strategy in place and not over concern yourself with how much you can make.
Let’s say that you are going to open a trade, you login to your trading account and you see your lovely balance of £1000 or £2000 or whatever you have in there. You have made your decision based on your system rules and you buy UNOY stock currently trading £6 for £10 a point; now you fully expect the price to rise but you have no idea how much by or how long the trend is going to last, it may go £6.50, £8, £18 and beyond over a year or 10. But you have also set your stop loss at 20 points, so you know the most you can lose is £200.
So you have huge upside potential all for a risk of £200. Yes you might lose but you already know exactly how much, but you may well win based on your analysis and it’s not limited to £200. It might be 50 points, 100 or 150+ or in cash terms £500, £1000, £1500 and more. As long as you don’t open positions that over stretch your bank and move to fast for your point size. Maybe even set your stop loss at 5% of your overall bank for all your trades and then you can keep adjusting as you go.
So you have created a solid exit point that limits losses but don’t stop your profits. Losing traders take profits as soon as they come but don’t close losing trades because they hope the position will turn round! Ridiculous!!!
Also if you use a trailing stop you can lock in profits along the way and before you know it you’re in a no lose position.
There is no substitute for experience in trading but as you gain confidence stop losses will become second nature to your strategy. Many people say trading is way too risky, mainly because they don’t know what they’re talking about and probably because they have no experience in the markets.
Since the beginning of the stock exchanges there have been winners and losers and that is one trend that is set to continue this pattern is fueled by many fledgling investors, and so called experts trading and losing lots of smaller investment funds that get hovered up by the winners with the correct trend trading system and proper money management.