trading is hard. don’t let anyone ever tell you otherwise.
but that doesn’t mean you shouldn’t try. especially if you’re competitive.
the markets are the hardest sport in the world. and unlike my wife’s pickleball league, markets rewards you with a bunch of money when you win.
but winning is really less important than you might think it is.
the goal to making a lot of money in the market is understanding how to make a lot of money when you’re right versus losing a small amount when you’re wrong.
and trust me.. you’re going to be wrong often. unless you’re a fintwit marketer. then you have your fake winning percentage in your bio.
so how can we stack the odds in our favor?
how to make a lot of money while being wrong often
the secret is building a trading process where you don't need to be right very often to make a hell of a lot of money.
so how do you do it? by taking trades that pay you out 4, 5, 6, 12, 100 times the amount that you risk.
for every 1 dollar you risk, aim for (at least) 4 dollars in reward.
your breakeven win rate is 20%. meaning you can lose 4 out of every 5 trades and still not lose any money.
you are now freed from the burden of performance. congratulations!
annie duke in “thinking in bets” says human beings need to win twice as often as they lose in order to feel good..
newsflash: markets don’t care about how you feel. time to man up and learn how this all works.
ready to put this into action?
here’s how i’m going to win 4 dollars for every 1 dollar i’m risking
step 1: identify which sectors and industries wall street is pointing its money printer towards
step 2: find the strongest stocks in those areas
step 3: draw lines on the chart, define your risk, and take the trade
here’s pfizer (PFE):
financial institutions have spent the last two years accumulating shares and this week its breaking out on the back of better-than-expected earnings.
momentum is firing higher, bulls are in control, and a breakout about 30.50 puts PFE into a stage-2 breakout.
using fibonacci extensions as price targets (who said math wasn’t useful after high school??) gives us opportunities to take profits at 36.30 and 45.41.
and we’re using a mix of volatility and price structure to place a stop out at 29.25.
entry: 30.50
stop out: 29.25
take profit(s): 36.30, 45.41
reward-to-risk: 4.62:1
do you get it now?
maybe this trade works. maybe it doesn’t. but the math plays out in my favor over time.
i’m historically a 45% win rate kinda guy. as long as i keep taking 4:1 setups or more, i win. and so can you.
i don’t just talk the talk. i put my money where my mouth is. i own pfe and am following the same trade as i outlined here.
blessed are those who risk their money (and reputation) on a daily basis. amen.
tired of egotistical furus shoving fake winning percentages down your throat? gaslighting you into thinking everything is your fault because you can’t keep up? i hear ya. come lose with our community we’re building. you might even end up making some money in the process.
or don’t. all good. i know how important it is for most people to feel special.
follow the money,
hamilton
founder, the trading initiative