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How to escape going nowhere and becoming profitable

We find that at the beginning of their trading days many of our students will go into a period where they do not really make any substantial profits or losses but stay on a horizontal profit line. They may have a good period where they make some nice profits but then invariably they lose that profit in a shorter time that it took to make it. This cycle is then repeated over and over.

If you are perhaps also in that situation then we would recommend you look at the following two approaches that may change your profit graph into one that is rising and growing instead of flatlining:

1. Maximising your profits when the markets are in your favour:

Markets change all the time. There are times when you should not be trading, e.g. when there is bad volatility and/or weak momentum. But during those times that the market offers excellent trading opportunities you should make the most of it and “milk the cow”.

During these times you should:

  • Increase your number of trades to utilise the opportunities
  • Scale in or add to your position where possible
  • Increase your lot size where there are quality trades and excellent price action.

It is in these times that the market offers us “low lying fruit” that we should profit from to the maximum. Often the profit that you show at the end of the month came from a short good period(s) during the month while the other times you could have been happy to just break even.

2. Reconsider your risk: reward or run your profits and cut your risk:

Look at your statistics and if you are trend trading your average profit should be larger than your average loss. As a matter of fact, your average profit should be at least twice as large as your average loss.

If it is not, you may not be applying risk: reward correctly or you are not letting your profits run and getting out of the trade quickly when the price moves against you.

Make sure that you trade at a risk: reward of at least 1:2 or better and when there is a good trend learn how to run your profits to make the maximum possible profit from that good opportunity.

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