After knowing the four previous principles, let’s continue our discussion about 10 trading principle to maximize your profit.
Check out these 10 trading principles to maximize your profits:
5. The risk/reward ratio is acceptable
Every trader who has a trading plan has a limit on the amount of profit (Take Profit / TP) and also a limit on the amount of risk (Stop Loss/SL). The risk/reward ratio set by each trader is different, there is a set of 1: 2; 1: 3; until 1:10.
However, it must be remembered, SL level should not be too close to the entry-level. For example, you set SL 5-10 pip from the entry-level. Because, your trading can stop when there is a chance the price touches the level of TP declared, causing the trading strategy to not run properly. Likewise, Take Profit should not be too far from the entry-level, because when the market is not volatile the profit level is not reached.
6. Potential profit of at least 2 times the risk
Set a risk/reward ratio, at least 1:2 because even if you only have a 40 percent winning rate, mathematically, you can still get profit. For example, you set SL 50 pips, TP 100 pips with 10 times trading. The count is as follows:
4 x TP = 4 x 100 = 400
6 x SL = 6 x 50 = 300
Even if you only win 4 times and lose 6 times, you still get profits of 100 pips.
7. Execution of profits according to plan
Suppose you set a 50 pip profit but suddenly volatile market conditions cause the lowest level or the highest level of more than 50 pip from your entry-level causing you to change the Take Profit level to 60 or 70 pips. When you have changed, the market is no longer volatile and turns into sideways or horizontally. Therefore, do not change the TP in the middle of trading.
8. Losses that can be accepted are equal to maximum drawdown
Even if you apply a Stop Loss, you can experience a continuous loss in your trading. Thus, it erodes trading capital. Set a maximum drawdown or loss limit that you can tolerate. If the loss is nearing the limit, you need to evaluate the trading plan.
9. I am ready to accept losses
According to Binary Options, everybody will lose trades. Thus, every trade certainly has a risk. As with physical goods trading, forex trading, gold, and oil futures, there are also risks. Therefore, prepare yourself mentally and make a good trading plan so that losses are minimized.
10. My emotional and physical condition is good
Make sure your emotional and physical situation is in good condition because it will affect your trading. When you are physically or emotionally ill, your mind is unfocused and can affect trading losses.
Read more: How can Emotions Affect Your Trading?
