To stay profitable in trading, you must master the balance between protecting your capital and maximizing your winners. Here is the short-form breakdown of those core principles:
1. Small Losses = Survival
The goal is to cut losing trades before they spiral. Emotional trading kills accounts; logic saves them.
* The Golden Rule: If the price moves against you, get out immediately—no ego, no hoping for a reversal.
* Strict Risk Management: Limit risk to 0.5%–1% per trade.
* The Hidden Killers: Always factor in commissions, spreads, and slippage. An unmonitored 0.2% extra loss per trade can wipe out 10% of your account over 50 trades.
* The Bottom Line: Small losses lead to survival, and survival leads to opportunity.
2. Big Wins = Profitability
You don't need a perfect win rate to grow your account; you need a strong risk-to-reward ratio.
* The Math: If you risk 1% to gain 3–4%, you only need to win 3 out of 10 trades to remain profitable.
* How to Get Big Wins: Focus on clean setups, practice patience, and let your trades "breathe" rather than exiting too early.
* The Strategy: You don't grow by trading more frequently; you grow by holding your winners longer.