Try to get a 3-1 ratio on your trades. It's as simple as that. Just as ELCubana says...if you can get 3 dollars for every dollar you risk, you can be wrong 7 out of 10 trades and still make money.
Thanks for the tips. Some of the brokers are beginning to offer trailing stops. Any ideas on the most effective use of these tools?
Thanks. I ordered the Tharp book. $29.95 list $20.97 at Amazon $15.36 at TradersLibrary (through Amazon)
"Come Into My Trading Room" by Alexander Elder has excellent material about money management. "How To Take Money From Wall Street" by Tony Oz has good detailed descriptions of techniques for position sizing and setting stops. You can also download the "Oz Calculator" from TonyOz..com for free which has functions to calculate position sizes. I'm a real newbie trader just getting started but I have to say that Tharp's book mentioned earlier in this thread is not as clearly written as these two books. In my opinion, Tharp's book has many great ideas but it seems to make things more complicated than necessary. Dale
In the end, you'll have to develop an exit strategy on your own, depending on the stocks you trade. Every stock trades differently, so even the best setup doesn't work in every stock. Same with risk management, and taking profits. If you control your losses long enough, a winner will come to make you profitable. The best way to figure out when to take your profit, depending on the trader you are it will differ. For swing traders it all depends on volume and price action. For day traders it's the action on the tape (i.e. is the buyer/seller done). Another helpful area is to watch support and resistance levels, if a stock approached one, you may want to take some money off the table by offering or bidding part of your position out. If the stock cuts through those levels, then you can always put that part of the position back on, at least you maximized your profit if the stock turns the other way, and you're still able to participate in the trade if it keeps going in your direction. Personally I like to keep my losses to no more then a couple of cents, cause if the stock ain't moving, why should I waste my time with it.