October 22, 2015

Possible outcome of any trade

Irrespective of which trading system you follow, there are 4 possible outcomes after taking a trade.

- small loss
- small profit
- large loss
- large profit

Over a period of time, trades with small losses and small profits will cancel each other.

What is left is a trade with a large loss or large profit.

Now it is very obvious that to have an overall profitable outcome, the only option is to limit the losses while holding on to a profitable trade as long as possible.

That's it - it is so simple.

Cut your losses fast and let the profits run.

I don't know why it is difficult to people to follow this one simple rule - cut your losses fast and let the profits run.


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