Most of the traders in the market are trying to find out a way of making successful trading career, there are many reasons behind this bold attempt of being an independent professional trader in stock market. This is a part of money market and money is not easy to earn here. We know that near 90-95% traders are not making continuous net profit in trading, while investing is little different. People may apply buy and hold strategy even in a wrong stock and sometimes it helps them to get back the invested money, may be after a long period of time but it is little easy part of market. Whereas trading is little tough indeed, we have specific time to hold futures or optoins segment contracts, we have to correct and that too quickly as options tends to lose time value over the holding time.
Therefore we can understand that trading is little tough job to succeed. But how to get the success!
The Formula of Success is -
Unless your trading strategy meets this minimum requirement of risk-reward and accuracy, irrespective of your system/segment/software, you'll continue to incur losses.
Let us unerstand the formula with an example;
Mr.X is trading with 1:1 Risk Reward Ratio and 50% Accuracy
In this example, we find the outcome at NIL as (1000+1000)/1000 * 50/100 = 1
We can understand the break even level more easily with the below mentioned table -
If you want higher accuracy then risk reward ratio will fall and if you want higher risk reward ratio, then accuracy percentage shall drop. We need to maintain a healthy balance as per the trading strategy, as different strategy offers different risk and accuracy levels.
If you are struggling with losses, then you need to understand the minimum requirement of a trading strategy and fix it immediately. You'll start seeing net profits in your account soon!
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