What Makes Money?
In trading, money is simply made by making more money when you are on the right side of the trade than you lost when you were on the wrong side. That is rarely understood. Even many of the best traders in the world only win 50% of the time or less. In baseball the pitching competition is so fierce, that batters do great to get on base slightly more than one out of every three at-bats. The same thing applies to trading, traders do great to win over half the time due to fierce competition in the markets. The real key is big winners and small losers. Home runs and Grand Slams to off set the strike outs and being tagged out at first base. If you make $10,000 on your winners and lose $5000 on your bad trades you are still up $5000. This is why it is important to let your winning trades run with a trailing stop as far as they will go and cut your losing trades as quickly as possible or at the stop loss. This is how we really make money, WIN BIG, lose small.
“Simplicity is the ultimate sophistication” Leonardo DaVinci
