Do you want to learn how you can improve your profitability by at least 100% starting from next trade you take? In this article we will discuss the most important thing that you can do that will increase your profitability.
Below are the key things that if you focus on them will give the best result with the least effort.
Check if you are in correct state of mind
Checking your state of mind is the most important things of all and most of the trader does not do it. That is the reason there is not a lot of successful trader around.
If you are angry or frustrated when you are placing trade when there a strong chance that you will not be able to give your 100% and you are competing with the world’s best when you are trading. So if you are not in the right state of mind close the software and take a day off the market will be there next day for you.
Determine the risk on this trade
You should have a set risk that you want to take on every trade. You should set a risk per trade in dollar amount at the start of the month and do not change it. So if at the start of the month you decide what you will risk $100 per trade then do not change it if you previous 2 trades need up in loss. You do never know when the next profitable trade will come so fix your risk and stick to it.
What I have seen happening in my trading is that at the start of month I set a limit but after some losing trade I reduce the risk on trade then that trade result in profit. Now because I have set a smaller trade then I should have the profit is also reduced. If at the place of doing that if I have stated with the same risk then I might have covered all the loss.
Do you have a stop loss and profit target?
When you see a trade do not jump and just try to trade it without a plan. The plan is your stop loss and your profit target. You should determine the lot size that you need to trade so that you do not cross the risk that you have set for this month on your trade if it goes wrong and you should know when you will get out when you start.
What is your risk reward ratio?
If you have followed the entire step above it will be easy for you to answer that question. If you do not know the answer then you should not be trading period. If you really want to make money in the long run in the market then you should focus on your risk reward ratio. Because if you have a ration less than 2:1 then it will be a lot harder for you successes in long run.
A good ratio to target is 3:1 or even better is 5:1 but never less than 2:1 if you really want to make money in the market.
This are some of the things that you need to do if you want to make money in the market in the long run. If you want to make big money in the market then you should focus all you energy on your risk reward ratio first and when you have if above 3:1 on every trade. Then you should focus on your success ratio.
Trading is simple as anything in life but it is not easy.