Stop Chasing Big Winners
The majority of people who trade the markets are only focused on looking for that next big winning trade. They either feel like they need to make the money back which they have lost or they feel like one big trade is going to change everything for them. It's a trap that many amateur traders fall into and one that time after time works against them.
If you think about it, the further away you set your profit target, the lesser chance your trade has of reaching that profit target. If we illustrate this through an example let's say we have three traders. Trader 1 looks to make a dollar for a dollar risked and has a 70% win rate. Trader 2 looks to make 2 dollars for every dollar risked and has a 40% win rate. Trader three is only focused on looking for big winning trades and hence they are looking to make 5 dollars for every dollar risked and therefore they have a 20% win rate. Which trader would you rather be?
The trader that chases the big wins with a low winning % is adversely impacted in a number of ways:
- Allot of their trades will go well into profit however because their target is so far away the trades will more often than not, come back to stop them out.
- Psychologically a really low win rate is hard to deal with as you could have a really large number of losses in a row which is well within what’s expected from your system. Would you happily execute your next trade if your strategy gave you an entry signal after 10 losses in a row? It wouldn’t be easy to!
So what should you focus on instead? Well instead of focusing your attention on big profits start focusing on risk control and taking your profits at much more achievable levels. You don't build a year’s trading around a few big wins; you build a year’s trading through grinding out those smaller wins more often than not and thereby making that cash register ring. Focus your attention on making sure you at least make a dollar for every dollar risked at a win rate of over 50%. Once you can consistently achieve that then you will achieve profitability.
Reign in those targets and focus on flawlessly executing your trading strategy over and over again.
Happy trading!
The TWP Team
Follow Trade With Precision on: 
Receive more articles and videos like this straight to your inbox. Sign up for the TWP Free Newsletter!
Newsletter Archive
If you get a video not found error, please refresh the web page and try playing the video again. You may also need to update your flash player. If you still need help, email support@tradewithprecision.com.