This is an advanced strategy, so if you’re not ready for it, save this one for the future, file it under “Optimizing For Maximum Profits”..
Imagine that 50% of your trades are winners, therefor 50% are losers, and both winners and losers are the same in size. In this scenario, you are near break-even over time. One way to improve your results is to have larger winning trades than losers. If your position was double the size when you win, your profits would be twice the size. Now if your winning trades were all bigger positions than your losing trades, you would come out ahead over time even if you were only winning 50% of the time.
We never know in advance which trades are winners, any trade can become a loser. But as the trade develops, we often get a sense that the trade is a good one, the setup and trigger were executed, and the trend is solid. Using specific setups and triggers, we can take advantage of winning trades to improve our performance.
There are strategies to increase your trade size as the trade progresses, so your winning trades are bigger, and your losers are smaller. With a good strategy, trades that fail quickly will be small, only the winning trades will be larger. An additional aspect, is to keep your risk under control. This is vital for your survival! It is important not to exceed your tolerable risk exposure as you increase the size of your position. Every time you trade, you should be operating according to your trading plan, including your risk exposure.
Imagine if you could increase the size of winning trades, without increasing the risk… Think about that.
These techniques are advanced, well beyond the scope of beginners. I have a seminar that specifically teaches this technique (practical stop-loss planning) on my website Fibonacci Trading Strategies
I don’t present those seminars very often, so watch that website for updates, so you can get in on the “practical stop-loss-planning webinar.