The Path to Success 🚀

Today, as we find ourselves in the comfort of our homes during the weekend, let's take a moment to delve into an important topic.
We're all aware that 99% of traders lose money, yet many still strive to be part of the elusive 1% who succeed.
So, what sets the successful traders apart from the rest?

It boils down to this: the losing traders trade what they think, while the successful ones trade what they see.
There's a significant distinction between the two approaches.
You shouldn't be driven by fear or excessive confidence when taking trades. The key to being stoic in your trading lies in having a solid plan—one that has been thoroughly backtested.
With such a plan in place, you can trade fearlessly, even in the face of losses. Sticking to your plan is paramount for survival in the markets.

To start on the right foot, it's essential to find a suitable strategy for yourself and thoroughly backtest it.
Once you have confidence in your strategy, you need to define your initial risk.

Let's consider an example: you have a $100,000 funded account with a maximum drawdown limit of 10%.
Through backtesting, you determine that your strategy's maximum drawdown occurred over five consecutive trades.
At first, you might think risking 2% of your initial capital to reach a 10% drawdown at worst is reasonable.
However, it's important to consider unforeseen circumstances, such as technical issues that could temporarily disrupt your ability to monitor a live trade.

To mitigate such risks, it's advisable to not risk more than 1.25% or even 1% of your capital.
Remarkably, you can achieve profitability by simply risking 1% per trade. Imagine making just one trade per week with a 50% win ratio and a risk-to-reward ratio of 1:3 such an approach can lead to substantial profits.

Another critical aspect of risk management is knowing when to call it a day. Personally, I adhere to the rule of stopping after two consecutive losses. If I'm trading aggressively, that translates to a maximum 2% loss per day. However, when trading live accounts, I reduce my risk to 0.5% per trade.By effectively managing risk and diligently following a well-tested plan, you can navigate the treacherous waters of trading and increase your chances of long-term success. Remember, it's not about the occasional losses; it's about consistently implementing a disciplined approach that withstands market uncertainties.

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Thank you for being a part of our newsletter community, and we encourage you to keep exploring the path to trading in perfection.