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You've heard all the arguments: There's no ''system" that works forever, it's not possible to put the odds in your favor, there's no free lunch, and on and on. But that's nonsense; you can manage this process profitably. |
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This is serious stuff, so let's be crystal clear here. These are the rules you must follow: |
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Every trade you make must be based on a chart pattern that has been back tested to show at least a 50 percent success rate. If one of the chart patterns you are trading does not return 50 percent winners, you stop using it and choose others that do. |
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Every trade you make has a statistical risk/reward ratio of at least 1:2. If you find that you are risking too much, you can adjust your stops and trade stocks with a narrower spread or less volatility. |
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Every trade you make applies sound money management techniques. If you are burning through your capitalstop! You can reduce your position size. |
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Every trade you make manages risk ruthlessly . . . according to predetermined stops. If you are not executing at your stops, you can either start executing stops properly or quit trading! If you're not using stops, you're only gambling. |
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Every trade you make manages reward through the application of intelligent exit strategies. If you find that your rewards are too small, you can revisit your exit strategies to adjust them for more profit. |
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All you have to do is hold firmly to your trading process. If you are not achieving the predicted results, the problem is not with the trading process, it is in your application of it. You can identify and change the things that are preventing you from sticking to these rules. You are in complete control of maximizing your profits. |
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Concentrate on the logic of the processthe math, the trading techniques, the valid planand you can be consistently profitable. |
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In Chapter 9 we defined confidence as the "expectation of a positive result." This is exactly what we are describing here. Chart patterns that return 50 percent winners and a 1:2 risk/reward ratio give you the "expectation of a positive result"they give you confidence! |
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We'll give you even more reason to have confidence in the approach we outline here. Even if your chart patterns only produce winners 33 percent of the time1 profitable trade in 4you still would make money. Look at the math. |
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