One of the best NSBroker
Trade management is necessary for the long-term work of a trader. To explain why, consider the most important equation for trading:
Expected duration = average win * Win percentage - average loss * Loss percentage
The average gain and average loss are calculated in "R-terms", which means units of risk return. For example, if your stop loss is 50 pips from your entry and you exit with 50 pips of profit, you have made a profit of 1R (50 pips of profit/50 pips of risk).
One of the best NSBroker https://nsbroker.com
Returning to the expectation equation, achieving the goal of a consistently positive expectation is a difficult task, but the formula shows exactly what needs to be done:
Keep as high as possible the ratio of average win / average loss (you are all well, if your average win is at least twice your average loss)
Keep winning percentage as high as possible (but he probably average closer to 50%, which means that the key to profitability is to use the average of losses, which are much smaller than your average win)
Trading management is important because without a clear plan, you will be more likely to make hasty, emotional decisions. If you don't average at least 1R on winning trades, you will probably lose money over time.
Another thing to consider is that by keeping the losses smaller compared to the winnings, you can be calm, because the minimum win ratio, which guarantees that you will not lose money, will become smaller.
