Question
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Can the loss be controlled, if yes, how?
4 Answers
<p>You need to learn to manage the losses. Every day trading setup will have some loss making trades & hopefully more profit making trades. Losses arising out of continuously trading a trade setup should be seen as cost of doing business. If you are trading a pattern that has a 60% hit rate. Out of 100 trades 60 would be profitable & 40 would hit losses. In such a scenario if you are able to maintain a reward to risk ratio of over 1 you could earn decent money assuming each trade is of same position size.</p>
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<p>Don’t risk more than 1% of your trading capital on each trade. So, if you have a trading capital of 100000 your position size should be such that you don’t lose more than 1000 on each trade (1% of 100000). Use this to determine the size of your position. For example if you have the following trade idea: Buy ABC at 20 target 23 stop 18. Since your potential loss on each share is 20–18 (or 2) an since you don’t want to lose more than 1000 on each trade. Your position size should not be greater than 1000/2 or …</p>
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<p>Use Reward to Risk ratio on your trade setup to determine if you take a trade or not. So for example if your trade setup generates the following idea: Buy ABC at 20 target 23 stop 18. Your Reward = 23–20 or 3. Your Risk = 20–18 or 2. Hence the Reward to risk ratio is 1.5. If this ratio is <1, don’t take the trade</p>
1 View
<p>Create a strategy and follow it strictly. Don’t let your greed to trade. Before every single trade create a entry, exit point and use stop loss. Wait for trade signal. Don’t trade without analyzing a stock.</p>
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