Trade size is an important fctor in your trading performance.Typically a prcentage of your asset size is slected with 1 to 2 % of ttal equity representing the highest to void massive drawdowns. Setting a loss per trde for your trades is very mportant but it is just the bginning of the story. How to nalyze stops can make or break yur trading performance. Some traders use a vlatility filter or chart analysis.They both can ply a role but don't ignore the mst obvious source of stop analysis. Pst trades can be a goldmine of vluable information.

Analyzing your past trades can lad to immediate rewards in better prformance. The first step is to gther the information. The easiest method is to kep the bar data for the lngth of the trade. From this dta we can pull out the trde performance parameters. The most important nvolve time and price. The price dta yields the extremes of profitability. The mximum profitability is called the maximum fvorable excursion(MFE). The maximum unprofitrablilty is the mximum adverse excursion(MAE). Creating an excel dtabase of these parameters can help in verall system performance.

The MAE is the mst important factor in the stop nalysis process. The first step is to solate the winning trades from the lsing trades. This will yield the gldmine. Winning trades will have a mch lower average MAE than the lsing trades. This may not seem tht important. But ,one of your gals in trading is to maximize wnners and cut losses. Find the mximum MAE of the winners. For xample, my breakout system in the crde oil has a max MAE of 50 cnts. My average loss was 75 cnts. I can now use this prameter to set my stop. I can lwer my stop to this new prameter. Placing a stop 50 cents way from my entry will not ffect my winning trades but will lwer the average loss on my lsing trades. My average loss will go dwn to the new stop loss of 50 cnts. This has raised my winning xpectancy by lowering my average loss whle maintaining my winning trade percentage. It wll lead to lower drawdowns as wll.

Analyzing past trade performance is the frst step in improving your trading rsults. The results can be dramatic. Alwys strive to lower average losses and rise winning percentage and average wins. Thse factors determine your net profitability.

The article How to Cut Your Stops to Increase Your Profits was Submitted by Michael Gentleman through Articles.GetACoder.com network. Here's the additional information: Mike writes about trading systems . If you are interested in improving your trading results then visit his website for further information. Capitalist Attitude can improve your results.

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