Often we encounter the problem of where to book profit.
I donot know about other traders but I would like to share here what I normally do.
I keep a track of losses and arrive the average of losses.
For example, i have following losses.
40, 20, 10, 80, 50
total of five losses is 200. The average of losses comes to 40.
So, I strive not to book profits below 40 which i consider early exit.
I am free to book profits anything above 40 and more above that level is beneficial to our trading health.
This method helps you to reduce your losses by keeping loss booking level below average losses and increasing profits by booking profits above average of losses.
Call it "Loss aversion method"
I donot know about other traders but I would like to share here what I normally do.
I keep a track of losses and arrive the average of losses.
For example, i have following losses.
40, 20, 10, 80, 50
total of five losses is 200. The average of losses comes to 40.
So, I strive not to book profits below 40 which i consider early exit.
I am free to book profits anything above 40 and more above that level is beneficial to our trading health.
This method helps you to reduce your losses by keeping loss booking level below average losses and increasing profits by booking profits above average of losses.
Call it "Loss aversion method"
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