Whether trading in the cryptocurrency market or stocks, the key to achieving substantial profits in day trading is the same: balancing the set risk and reward.
During this time, reasonably determine the position size. In this article, we will explore how to increase the account in a trade within a few minutes.
2%-4% returns.
If we achieve a 2%-4% return on 40% of trades while only losing 1% on other trades, we will be able to
Make a lot of money. If we can win 50% or more of the trades, that would be even better.
It sounds simple, but most people completely misunderstand the core concept of generating high day trading returns.
Most people think that using wider stop losses (to avoid being triggered) and having large target prices is the way to make money. But in reality, to succeed in
To make big money in day trading, we need to wait for opportunities that allow for small stop losses, then set the target at the typical volatility of the price.
within the range, ensuring that the profit-to-risk ratio is reasonable.
There are many ways to trade; different styles suit different personalities. This is one of those ways, and if it suits you, it is a very
a good way.
Here are four steps to achieve high profits in day trading:
1. Control the risk of each trade within 1% of the account (it can be less when starting).
2. Use the minimum stop loss allowed by price action. This may sound counterintuitive, but there is no reason to stubbornly hold on to losing trades. Even if
When a small stop loss is set, I usually also close the position before the stop loss is triggered.
3. When in profit, take profit at 2 to 3 times the stop loss. This ensures that profits far exceed losses. In some cases, slightly smaller targets may apply.
Target levels (such as 1.5 times) are acceptable, and larger targets (such as 4 times or more) may also apply.
4. Only trade if the target can be reached by typical price fluctuations.
Each of the above steps will work together to help you identify high-return, low-risk trading opportunities based on typical price behavior (not luck, nor relying on extreme market conditions).
Returns and low-risk trading opportunities.
You may also notice that achieving decent day trading returns does not actually require long hours of watching the market or learning numerous strategies. Just do it for a few minutes each day.
Finding suitable risk-reward opportunities within 30 minutes to a few hours and mastering one or two strategies can lead to excellent profit performance.
1.1% risk principle
Before making big money, we must first learn to control risk. If we lose the principal, we earn nothing.
Adopt the '1% risk principle'. This means we can lose a maximum of 1% of the total account funds on each trade. We can do this in each trade.
Use all the funds in the account (or even more if using leverage), but the loss cannot exceed 1% of the total funds.
For example, if our day trading account has $45,000, we can open positions using this entire amount (or even more with leverage).
Easy, but the maximum loss per trade cannot exceed $450. This concept applies to any account size.
When starting to trade, the maximum loss per trade should be 0.1%. If you continue to profit at this risk level for several weeks, you can increase the risk.
down to 0.2%, 0.3%, and so on.
It is important to note that as the account size increases, continuing to use a 1% risk will become difficult because that would mean the position size would be significantly larger.
often larger. But by then, you have already made a lot of money, so it won't matter.
2. The minimum stop loss allowed by the market
Now we know how much we can lose per trade at most, which is 1% of the account.
Next, we need to wait for opportunities that allow for small stop losses to enter the market.
A stop-loss order means we will close the position immediately when the price reaches a specified threshold. This is the simplest way to control the risk of each trade.
One. Many people make mistakes here.
Let's look at two examples of traders: one is a professional day trader, and the other is a novice.
The following chart (1-minute chart) shows a potential trading opportunity. The entry point looks good: the price is on an upward trend after the opening, then there is a pullback.
adjusts, traders enter when the price starts to rise again. This is one of my favorite trend trading strategies.
Novice traders are afraid of losses, so they choose to set a large stop loss. They set the stop loss below the opening price or the day's low. In this case, this means the stop loss is 5.46% away from the entry price, or $0.78.
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