What Makes a Trade – Unveil the pillars of profitable trading

by | Dec 20, 2023

To trade well is nothing more than a calculated dance on the trading floor.

You need to navigate the volatile seas of markets and understand the essential elements of a trade.

And whether you’re a newbie or the MOST experienced trader out there, you need to adopt the same quintessential factors with your trading.

And that is, the elements that make a trade.

Let’s get into them…

  1. Position Size

Imagine building a mansion without a blueprint.

That’s what trading without considering position size feels like—chaotic and prone to collapse.

The cornerstone of any robust trading strategy is for you to figure out the right amount of exposure to each position.

It’s not just about the quantity of trades but the quality of each.

You need to be precise in the position sizing with each trade.

That is to maintain your risk and money management.

That is to make sure you will only deposit a certain amount into your trade.

And it is to ensure you have enough money to take on new and even higher probabilities of trades.

Precision in position sizing is the silent architect behind the towering fortresses of successful traders.

 

  1. Entry: The art of timing of execution

Whenever you enter into a market, 98% of the work is done.

You have everything lined up according to the criteria, strategy and plan.

You already have your idea on whether a market is likely to rally on up or fall off its horse.

It’s not just about being in the market; it’s about being in the market at the right moment.

  1. Risk Level: Taming the market beast

In the wilderness of financial markets, risk is the untamed beast that can either devour or be tamed.

You need to be able to recognize the risk levels you’ll set to contain the beast.

  • Where to place your stop loss

  • The calculations of where you are NOT most likely to be hit

  • Your risk per level and what you can stand to lose.

Your risk level is your shield to protect from unexpected peril.

You have to have all your calculations to lose a battle but NOT the war.

  1. Reward Level: Harvest your fruits

Yes a MAJOR element to trading is RISK.

But it’s also about reward, or else why would we be doing it?

You need to meticulously set realistic reward levels that mirror the potential gains of a successful trade.

Your reward must ALWAYS be more than your risk.

You need to see the potential and likely future for the price to hit the take profit.

  1. Profit and Time Protection Levels: Safe-guard your winners and cut your losses

Trading unfortunately is NOT always 100% mechanical.

You need to safeguard your positions at times.

What if the position becomes a non performing investment?’

And you’re losing daily interest?

Well you need some type of time stop loss.

This will get you out of your trade at a certain period so you can look for better positions.

Worst case scenario you lose less than expected. Or you even bank a bit of profits as the trade remains in the money.

 

FINAL WORDS:

Trading is a game of calculated strategy and skill.

But there are pillars of trading, you can’t avoid including:

Position size, entry

Risk level

Reward level and

Profit and time protection levels.

These will help you form the bedrock upon which the palaces of prosperous trading are built.

As you embark on your own trading odyssey, remember: mastery of these elements is not just a choice; it’s the key that unlocks the doors to financial triumph.

So make sure you have these elements ready to execute to make a trade happen.

Trade well, live free.

Timon Rossolimos
Founder, MATI Trader

 

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Trade well, live free.

Timon Rossolimos

Founder, MATI Trader

 

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