«is a simple formula»
Being profitable boils down to a single formula:
Sum of winners > sum of losers
That’s it. No matter your strategy, system, or rules, you must capture more profit overall on your winning trades than you give back on your losers.
Some systems have a high win rate, small average gains, and the occasional big loss. Yet, they still make money. For instance, they make $1 eight times and then lose $3 two times. Strategies like naked puts, bull puts, and iron condors often look like this.
Other systems have frequent losses but the occasional big win. They too can make money. It might look like losing $1 eight times and then making $5 two times. This usually describes lower probability, directional strategies.
Our Tackle Trading Trade Journal helps you calculate key metrics like win rate, average gain, and average loss so you can better understand why you are (or aren’t!) making money.
Chart of the Day: Disney (DIS)
Disney cratered nearly 9% on earnings yesterday. Look for secondary bearish patterns to develop in the coming days.
Today’s line up
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