(Return to Current Free Newsletter)
May 14, 2007
In this week's free
newsletter, we'll discuss
The Numbers Game of
Trading.
You don't have to be a math whiz or
a geek to know that Trading Is A Numbers Game. Buy at one price,
and sell at another. Book a loss of X% and a gain of Y%. Be right
more often than you're wrong...
Oops! Wait a
second....that last one isn't necessarily true. If you trade like I do,
the win rate isn't nearly as important as the SIZE of wins and
losses. And it's that principal that takes so much pressure off my
trading.
Valuable Lessons Provide Key
Concepts
In last week's Free Newsletter, I
talked about learning from losing trades. I pointed out how I began to
review my trades early on in my trading career, and I got some valuable lessons
from those losses. Along those lines, I learned another important lesson
as I started to run the numbers and evaluate my trades: No one trade was of
paramount importance!
Think about that concept.
How often do you find that the stock you're holding can barely budge
without you knowing it? Do you watch its every move, constantly checking
its health like a brand new parent? That's a common thing among traders,
but it isn't always beneficial to the bottom line.
Size Matters!
As I looked at my trades closely, I
realized that by structuring my trades properly I could establish the
risk/reward profiles that would be favorable mathematically.
By deciding (and it IS
a decision!) to win bigger than I lose, I can be profitable even if my
win rate is only 50/50. In fact, I can actually be wrong more often than
I'm right and still come out ahead, as long as my risk/reward profile is
structured properly.
This realization was HUGE for my
P&L, but it was equally big for my mentality. Knowing that even if I get
stopped out on any given trade would only cost me a small amount, I wasn't so
emotionally tied to every single trade. Trading became a numbers game, and
I got to control the inputs. Every trade I took after that simply became 1
of the next 100 or 1000 trades I will take, so it reduced the importance of each
outcome.
Losses are inevitable in trading,
so the key is to keep them manageable. Many small losses can be covered
with just one good winning trade, and that's how we trade here at
TheStockBandit.com. Taking our medicine in small doses when we're wrong
for 3-4% means that even a decent winning trade of 12-15% erases the small
losses, and it's even more fun when we hit a hot streak or nail a few big
trades. Trading is a numbers game, so use it to your advantage!
Trade the Numbers Game With Us!
Start your
Membership
today!
"Stock Bandit, you have a great strategy
- look for charts with the perfect setups, take small losers if they don't work,
and let the winners run big." -
Mark M., TX
COME TRADE WITH US!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
The Stock Bandit, Inc. - 17460 IH-35 N. #160, PMB 240 - Schertz, TX 78154
Copyright 2004 -2006 The Stock Bandit, Inc. All Rights Reserved
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