One trade cannot make you rich, therefore it is important to not run behind every breakout trade and risk too much on a single trade.
By working equaly on all the 3Ms of trading we can balance our emtions and trade effectively.
Let's see how with the help of 3M framework we can trade above range breakout pattern.
1- Method Management
Simple range breakout
Price has respected the upper and lower trend lines multiple times which makes it a valid trend line. Now after the price breakout, the upper trendline which was previously acting as resistance will now act as support.
We can place the stop loss just below the upper trendline.
Exit immediately if the price fails to respect the upper trendline, do not hold the losing trade
2-Risk management:
Risk only 2% of your trading capital
Enter 30% of your position at CMP and if trades goes in our favor then execute your remaining 70% position.
Be patient. Don't bet too soon.
The point of entering with 30% position is if the trade goes wrong then our loss will be only on a 30% position.
The whole idea is to lose less money when you are wrong and to win more money when you are right
3-Mind managment:
Note= Trade with probabilistic mindset , no matter how much analysis you do there is always 50-50% chance.
Our main objective is to ''Cut your losses short and let your profits run.''
To be profitable you don’t have to be right every time, you just have to be right big and wrong small.
Remember that the trade we are taking is just 1 of the next 1000 trades we are going to trade. We should not get so much emotionally attached to it that we end up losing our sleep if it doesn’t go according to the plan. By minimizing the importance of that one particular trade, we can really trade with ease and would be in a better situation to take sound decisions.
Note= Get in the habit of focusing on your trading system and following the process for entries, exits, and position size, rather than the money you are making or losing at any particular moment
By working equaly on all the 3Ms of trading we can balance our emtions and trade effectively.
Let's see how with the help of 3M framework we can trade above range breakout pattern.
1- Method Management
Simple range breakout
Price has respected the upper and lower trend lines multiple times which makes it a valid trend line. Now after the price breakout, the upper trendline which was previously acting as resistance will now act as support.
We can place the stop loss just below the upper trendline.
Exit immediately if the price fails to respect the upper trendline, do not hold the losing trade
2-Risk management:
Risk only 2% of your trading capital
Enter 30% of your position at CMP and if trades goes in our favor then execute your remaining 70% position.
Be patient. Don't bet too soon.
The point of entering with 30% position is if the trade goes wrong then our loss will be only on a 30% position.
The whole idea is to lose less money when you are wrong and to win more money when you are right
3-Mind managment:
Note= Trade with probabilistic mindset , no matter how much analysis you do there is always 50-50% chance.
Our main objective is to ''Cut your losses short and let your profits run.''
To be profitable you don’t have to be right every time, you just have to be right big and wrong small.
Remember that the trade we are taking is just 1 of the next 1000 trades we are going to trade. We should not get so much emotionally attached to it that we end up losing our sleep if it doesn’t go according to the plan. By minimizing the importance of that one particular trade, we can really trade with ease and would be in a better situation to take sound decisions.
Note= Get in the habit of focusing on your trading system and following the process for entries, exits, and position size, rather than the money you are making or losing at any particular moment
