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Letting Profits Run

Letting Profits Run

2010-06-07 20:13:00
Richard Krivo, Trading Instructor
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Power Course Instructor’s Response:

 
Certainly…
 
In my opinion, the best way to accomplish what you ask is to use a 1:2 Risk Reward Ratio on all of the trades. For example, if a 50 pip stop is set, look for that trade to be able to achieve a realistic limit of 100 pips…risking 50 to gain 100…1:2. 
 
By implementing this tactic, your winning trades will always gain double the amount a losing trade lost. A trader need be correct only 40% of the time to be profitable using that scenario.
 
Another tactic would be trading multiple lots. When the trade reaches a predetermined level of profitability, close out half the lots and move the stop to breakeven on the remainder. If the trade continues in your favor, the stop can be adjusted as needed to secure additional pips. On the other hand, if the second part of the trade retraces, the worst that can happen is a breakeven stopout on that portion of the trade but the pips from closing out the first portion of the trade have already been secured.

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