Unlock your trading success by using a simple formula

economictimes.indiatimes.com:

how you can unlock trading success by measuring it. Today, let us understand the right way to measure and evaluate your trades. Every trader or investor must know these three things:

To begin with, every person involved in the stock market must know his success rate. What do you mean by this? Success rate refers to the percentage of profitable trades a trader has out of the total number of trades taken over a specific period of time. For instance, in cricket, the batsman’s aim is to score runs on each and every ball he faces. If he scores 75 runs in 100 balls, we say he has a strike rate of 75%. Similarly, in the stock market, the trader’s aim is to make as many profitable trades as possible. For instance, if a trader has executed 100 trades and achieved profitable outcomes in 60 of those trades, the success rate would be computed as:Success rate = (60 / 100) x 100 = 60% On the other hand, his failure rate will be 40%. In this scenario, the trader demonstrates a 60% success rate, implying that 60% of their trades were successful in generating profits. One of the great investors of all time, the late Mr. Rakesh Jhunjhunwala had a success rate of merely 35%-40% yet he was the greatest investor of our times. So is having a high success rate important to make money? Will improving your success rate only help you to make money? The answer to both these questions is no. The success lies in the formula encompassed below: The key here lies in improving the average gains when you are right and reducing the average losses when you are wrong. How can you achieve this? The answer is simple – Holding onto your winners and cutting down your losers early. Let us understand with the help of the