Understanding Basic Rules To Maximize Upside And Limit Exposure

1. Risk Management

   No matter how great a potential setup may be, we risk 1% VAR (Value At Risk) maximum. This is to limit our downside and always make sure our losses (which are inevitable in trading) are consistently small. We also understand as traders ANYTHING can and will happen in the markets. This rule completely eliminates the possibility of us blowing up our account.

2. Position Sizing

   This is a crucial step in understanding how to benefit from random outcomes in trading. We always use the same position size in every trade. 1% TAV (Total Account Value) is our position size. Trading is really about protecting capital, instead of contrary belief that it's about winning. This step ensures even in a worst-case scenario, our trading business will be okay. You can't blow an account in one trade if you only allocate 1% of an account per trade.

3. Trade Management

   What separates professionals from the typical trader, is how they manage trades. Emotionally and financially. As a rule of thumb, we always take a 1:1 R then move our stop losses to breakeven. After taking the first scale out, ideally, we want to see an average of 3:1 R. Of course, markets don't always move in an ideal fashion. So even if we take 1/3 or 1/4 of our position off at 1:1 R and move stops to breakeven, the trade now has no chance of becoming a loser.

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