SKILL OR APTITUDE PRACTICE, PRACTICE, PRACTICE KNOW YOUR RISK Rules for Risk
I have two rules when it comes to risk for traders. The rules are this:
1. If the specific risk of a trade is not known, then don’t do the trade.
2. If the risk is too great, don’t do the trade. CREATE AND EXECUTE A PLAN CONTROL YOUR FEAR BE GREEDY ENOUGH
There are a few reasons why trading the trends offers the best Opportunity to make the most money:
Trends move in one direction with higher highs and higher lows when in an uptrend, and lower lows and lower highs when in a downtrend. If trading with the trend, the account equity should not go negative and should continue to go higher with each successive directional trend leg up or down.
Trends tend to move faster with corrective waves that are shallow and sometimes quick. This should keep profits accruing at an accelerated rate. The faster a trend moves, the better chance a successful trader has to manage the trend without getting scared and covering. Plus, the trader has more money to play with in the account, which also works to his or her mental advantage.
Often a trend trading range can be multiple of the range of a nontrend. A larger range increases the potential for a larger profit.
Trends are a powerful profit dynamic for traders and one that should therefore be a focus if the trader is geared toward making the most money. What retail traders do not realize is that for the same reasons that trading with the trend is so proffitable, trading against the trend can be devastating to the account equity.
When a trader trades against the trend:
Instead of profits accruing quickly, losses accrue quickly. Instead of leading to profit, the larger trading range leads to larger losses. Instead of account equity not having a chance to go negative.
If you want to see equity disappear from your account quickly, then simply trade against the trend.
