“You can learn from this how to develop independent judgment, so that you need never ask anyone’s opinion or listen to anyone’s tips, or take anyone’s advice. You can so train your judgment that you will know just what to do and when to do it. When you are in doubt you will do nothing.” –Richard D. Wyckoff
Wyckoff was talking here about trading. He was talking on the subject of studying the markets to determine how they operate. You will find developing your own trading strategy/method can be the most rewarding and challenging experience of your lifetime. You need to be comfortable with the risk, before you are comfortable with the reward. There is an age old saying, ‘If you can’t stand the heat, then stay out of the kitchen.’
As traders, we are exposed on a daily basis to the trading concepts of risk and reward. Personally, my own reward to risk tolerance took some time for me to feel comfortable with it. How much do you want to risk on each trade, and how much are you looking to make at a minimum?
Are you at its minimum profit objective going to make more money than you risk? So if you would take two trades, and one would win and the other would hit your stop loss, would you turn a small profit on your trading? Obviously, the goal of every trader should be the three general trading rules. (more…)