Success high, profit Nil!!

Seniors,
This is site where I have learnt a lot about trading and markets, thanks a lot to all who contribute. I started trading, and after persistence and constant loss now I am having success rate of 80%, but the 20% which I loose takes everything I gain. How do I limit my loss and protect my profitwhat should be the ideal stop loss, how do I define it.

regards
Talon

Money management is one very important thing which you need to consider, you should be keeping the risk at 1-2% of your total capital, then you will definately wont be loosing much.

Stop loss is one thing which needs lot of debate and proper understanding, which myself also is in confused state of mind, For me what I do is I use the Average true range to determine the volatile of how much the price will range for a particular time frame. I see the charts for that particular scrips at the particular time frame and then decide on that


rajendrani

% of Winning trades or % of loosing trades does not mean anything in evaluating a trading sytem. You need to also look at Average Win and Average Loss amount with this.
Most basic equation of any trading system is
Expectancy = %of Winning Trade * Avrg Win amt - %of Loosing Trade * Avrg loss amt.

If above equation does not give you +ive result, just pass the system.. or improve it.

Stop loss is great tool to limit 2nd part of above equation i.e. controling average loss.
You can define SLoss based on
- ATR as mentioned rajendrani
- Market structure based - pivot low/ high points where price took turn. This has to be in timeframe that u are trading. If you trade 60m charts then don't put SL on 1m chart
strcutures..
- Price Low of last 2 bars/ 3bars etc
- Short term moving average (say 3bar or 5bar).

whatever approach your take to decide on Stoploss rules, plz back test and find out the result for yourself and then trade. What we need to look at the cases when stop was hit and it was good that it got hit (i.e. mkt took the turn and better u got out by stop).
Also look at the cases when stop was hit, but mkt turned back in the original direction of trade.
Aim for not <100% perfection on this. There will be cases when u are wrongly stopped out.. but that shd be reasonable say 20% of time. You can always reenter the trade.
But if you are getting stopped out 80% of the time.. and out of that 60% of the time mkt goes in your direction of the trade.. then probably yr stop is too close.

It is one of the most trickiest subject of developing a trading system. but you can find out a method that works for you.

Happy Trading.

Then no problem.

Study Money Management thread by CV from this forum. Will will be in great success as your are 80% right. The losses are due to bad money management.
Try this and report here...

haribird.

Thanks AW10 for the nice explanation.

Talon, those 20% are your impulsive/emotional trades, where you are not calculating your exit and stoploss beforehand, you just jump to trade and expect a profit. before initiating a trade, decide the stop and exit.

if stoploss >= Exit in profit, then you should not enter the trade. wait for the right time which gives you 1:3+ ratio to enter a trade.

Here's a way for you, if you gain any profit, just transfer the profit to your bank account and do not re-invest the profit into your trading capital. this way, you'll take good care of your money.