InvestorQ : How should I focus on being profitable in trading rather than being right?
Dhwani Mehta made post

How should I focus on being profitable in trading rather than being right?

Dilmini Mercia answered.
3 years ago

The first step is to always trade with a stop loss. Keep the stop loss as a discipline and don’t compromise on your stop loss under any circumstances. When the stop loss is hit just close your position and then take a fresh view.

When you trade it is not just about putting stop losses but also about profit targets. The idea of profit target is to churn your money quickly. That is how your ROI can be maximized in trading. You don’t want to get stuck in positions and lose out on other opportunities along the way.

Make the best of your profits when you are right. This may sound like a contradiction to the previous point, but it is not. When you are in a trade and you are right, there is a trade-off in front of you. Should you put trailing stop losses and hold on to the position or should you exit and shift. This decision is crucial to your profitability.

Don’t lost perspective when you trade and that is the key to being profitable. You need to evaluate your risk in terms of your daily loss, your positional loss and your loss on capital overall. This will constantly keep you on your toes.

Keep a tab on costs, they matter a lot. Costs are not just in terms of brokerage but also in terms of statutory costs as well as in terms of hidden costs like liquidity, spread risk etc. As a trader, the onus is on you to keep these costs at the bare minimum so that your effective return on investments can be maximized.