Many traders have two or more trade set ups.
It is important to know the following:
1)Your share size should increase or decrease in accordance with the winning percentage of the trade set up.
Why? If you do not increase in share size as the winning percentage of your trade set up increase, you are not taking advantage of the Expected Value of the trade set up.
Example:
Increase share size exponentially in accordance to winning percentage of the set up.
C Set UP: 50% — 1000 shares
B Set UP: 75% — 2000 shares
A Set UP: 90% — 4000 shares
This will yield higher profits. If the same share size is used for all set ups, your profits will obviously be less. You will not be taking advantage of the statistical advantage of the set up.
2)The risk of your trade must be in accordance with the winning percentage of the trade set up.
Why? The risk of your trade set up, depends on the win rate of your set up.
Example:
RISK AND REWARD:
25% winning set up: Risk must be at least 5:1
50% winning set up: Risk must be at least 2:1
75% winning set up: Risk must be at least 1:1
90% winning set up: Risk can be negative ratio .80:1 (which simply means a wider stop loss)
These concepts are what separates really good traders from average traders.
Example:
Lets say that over the span on two weeks a trader got 5 trade set ups using the following win rate (remember the above, R:R depends on the win rate of the set up).
C set up 50% win rate (2:1 R/R)
B set up 75% win rate (1:1 R/R)
A set up 90% win rate (.80:1 R/R)
Increasing share size:
–2 C set ups: 2 losses (-$2000) @ 1000 shares
–3 B set ups: 2Win , 1 Loss (+$2000) @2000 shares (increased shares as win rate increased) .
–1 A set up: 1 win (+$4000) @4000 shares (increased shares as win rate increased).
The above trade will have a profit of $4000 (-2000 + 2000 + 4000)
Conversely: Sticking with the same share size for each set up
–2 C set ups: 2 losses (-$2000) @ 1000 shares
–3 B set ups: 2Win , 1 Loss (+$1000) @1000 shares (shares NOT increased) .
–1 A set up: 1 win (+$1000) @1000 shares (Shares NOT increased).
The trader that did not increase share size will be at break even
(-2000 + 1000 + 1000)
With commissions/Slippage probably in the negative.
SO:
Always know the winning percentage of your trade set up
Adjust Risk: Reward in accordance of the winning percentage of trade set up
Increase position size exponentially the higher the winning percentage of your trade set up.
STAY GREEN
I started trading during covid and blew up my account 4 times Primary reason not stopping out. i knew the basics that pennystocks go up and then dump but not the techniques or setups. i bought Tim grittani’s trading tickers Dux’s courses and many videos i’ve seen all yet not profitable. stock starts to dump and you’re not in it or you short too early and get squeezed out blowing your account because of no risk management. grouchybear’s trading signals explains it plain simple where you get in and when to stop out and also your potential profit targets, all algos can be used for different strategies but GUPS is a game changer it keeps your entry and stop loss exceptionally close, perfect for gap-ups bounce and parabolic shorts. lastly you will get great help and advice personally from the bear himself which you won’t from other big traders .
RISK MANAGEMENT have courage to stop out.
GOOD LUCK.