It's a super clear diagram on what key ingredients you need to find the 'sweet spot' = profitability.
The thing is, most people are desperately hunting for the holy-grail, you know - that 100% winning strategy... the silver bullet.
It doesn't exist - I'm sorry.😢
So even a profitable strategy that's awesome can blow your account if the other 'factors' are not considered....
Greed and risk management.
With poor risk management you can blow your account on a profitable strategy.
Much like if the casino didn't set a trade limit - they could go bust if a gambler got 'lucky' - because its the casino that has the mathematical 'edge', right?
You must factor in your losing runs to ensure you not exposing your account to the 'risk of ruin'.
So yeah a profitable 'edge' is key, but without managing your mindset and using effective risk management, its actually useless too.
Having an understanding of probability is fine too - but if you don't execute your 'edge' or if you don't have one, you won't be profitable too.
And lastly, yeah - you can have your risk management nailed on - but if you've not got a profitable edge too, you'll lose money.
Just less money.
You could absorb 500 consecutive losses on a £1000 account at 1% risk per trade, but you'd only have about £6 left. Your strategy would have to be really poor for that to happen!
But you catch my drift, that effective risk management is vital.
So in summary, you need these three key ingredients...
You can't get to the 'sweet spot' without all 3 being in perfect alignment.
Good luck.
Darren
If this helps - please show me by liking this post if you can, its appreciated and I'll do more like this 😎
The thing is, most people are desperately hunting for the holy-grail, you know - that 100% winning strategy... the silver bullet.
It doesn't exist - I'm sorry.😢
So even a profitable strategy that's awesome can blow your account if the other 'factors' are not considered....
Greed and risk management.
With poor risk management you can blow your account on a profitable strategy.
Much like if the casino didn't set a trade limit - they could go bust if a gambler got 'lucky' - because its the casino that has the mathematical 'edge', right?
You must factor in your losing runs to ensure you not exposing your account to the 'risk of ruin'.
So yeah a profitable 'edge' is key, but without managing your mindset and using effective risk management, its actually useless too.
Having an understanding of probability is fine too - but if you don't execute your 'edge' or if you don't have one, you won't be profitable too.
And lastly, yeah - you can have your risk management nailed on - but if you've not got a profitable edge too, you'll lose money.
Just less money.
You could absorb 500 consecutive losses on a £1000 account at 1% risk per trade, but you'd only have about £6 left. Your strategy would have to be really poor for that to happen!
But you catch my drift, that effective risk management is vital.
So in summary, you need these three key ingredients...
-
Strategy with an Edge
Effective Risk Management planning for probability
Trading Psychology - (greed under control, no fear, discipline, resilience, etc)
You can't get to the 'sweet spot' without all 3 being in perfect alignment.
Good luck.
Darren
If this helps - please show me by liking this post if you can, its appreciated and I'll do more like this 😎
