I do not know the outcome of a setup, how would I know anyway?. How to be profitable by managing my risk? Please do not suggest hedging as I am against it. Thx!
Unless you can predict the future you will NEVER know. The aim is to repeat the same actions (taking the same setup with good execution) in similar conditions enough times to see if over a large enough sample you end up profitable or not. Its a game of probability, not prediction.
Nothing will ever be exactly the same. That's why its not predictable By taking the same setup I mean the same kind of trade Eg: In a bull trend: - After a pull back to a 50ema - Buy the open of the next bar - Set a stop below the bar that tested the EMA - Set Take profit order at 3 or 4R/R Now repeat 100 times and see what the results are. Even though the market characteristics will vary from trade to trade, you will execute each setup in the same way.
@vortextrader the key to profitability lies in risk management. You don’t need to know the outcome of a setup—no one does. You’ve got stop-loss and lot sizing—use them. Control your risk per trade, let probabilities play out, and the edge in your strategy will do the rest. Others talk about risk-reward ratio, which has never made any sense to me. However, I think your ability to manage emotions is key.
The only way to "control risk" is to trade with a stop. That is.. (1) assess the situation and determine whether it's r/r favorable for a play.... then (2) determine how much you are willing to risk that your assessment is correct. That's where your place your stop. If you learn Price TA, you can make the best risk/reward plays. Price TA... KISS!
A great way to figure out the art of trading risk management is by learning boxing. NEVER let the other guy land a clean shot! Block with your armz, roll your head away from it, or just dodge it, and another great tip is to not open up your attack until it's safe. The opening dance can be a little dumb because you're both punching each others arms, but mix it up on the body. How does this apply to trading? Step 1: don't try to land a heavy punch, at least not at first!
It is important to first test how often a particular setup or pattern works and leads to successful trades. And if it gives signals for profitable trades much more often than for unsuccessful trades, then trading with stop-losses you will be able to earn.