Today's Quote: “Winning is not a sometime thing; it's an all time thing. You don't win once in a while, you don't do things right once in a while, you do them right all the time. Winning is habit. Unfortunately, so is losing." Vince Lombardi.

Always keep their average winners significantly higher than their average losers, though this amount may vary with different traders and different tactics.

That is a simple statement on the surface. But in truth, in that statement lie most all of the things that make a trader a trader. This concept cannot be given justice in this short article. This simple statement involves initial risk to reward numbers, which of course involve targets and stops. It involves expectancy. It involves management, Sharpe ratios, batting averages, % of maximum target analysis, and % of projected target analysis. It involves record keeping and overall trade analysis. The list goes on and on. Most of all, it actually involves a measurement of the consistency and the discipline of the trader.

So, while this brief article can't begin to get into all of that, we can look at some of the most common pitfalls so you can avoid them. When traders first start off, the issue is usually stops. Ignoring them for the list of reasons you most likely know by now. Either the trader gets so damaged by this step that they are finished, or the pain becomes enough that they learn to correct the problem. Actually, stops are an easy problem. That is because you are aware of them. If you miss a stop, you begin feeling the pain. It is like a knife in your back, you can’t ‘miss it’.

If the trader gets past that, they get to an area where many of you might be right now. It is an area where the trader meets with some success. As a matter of fact, they start feeling pretty good about things. They are having a lot of winners and they see that their favorite strategies are doing well. The only problem is, for as good as they feel, they are not growing their account. It is just sitting there. It is hard to believe, because they feel successful. Sound familiar?

If this is you, then the rule of today’s lesson most likely applies. It is highly likely that you feel good because you have several winners. But your losers, though they are fewer, wipe out all the gains. If you do the math, that only means one thing. Your average loser is bigger than your average gainer. This is usually not a good thing.

Now, if the answer could be typed in this concluding paragraph, it would be. But, as you probably have guessed, the answer is quite involved. It involves an analysis of your trading results and trading plan to see if the problem lies in your initial play selection (reflecting on your knowledge), or the management of the plays (reflecting on your discipline) or a wide variety of combinations of the two which may stem from a poor trading plan or improper analysis. For now at least be aware, that if this is your issue, it needs to be dealt with. Or else you will likely spend a trading lifetime in mediocrity.