Announcement

Collapse
No announcement yet.

The 2% trading system

Collapse
This is a sticky topic.
X
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • The 2% trading system

    Wall Street Forum's 2% trading system is a result of over a decade of trading in real markets with real money. The system is designed to teach new and advanced traders how to better pull consistent and quick profits from the markets.

    In my years of trading, I have noticed that the majority of my GOOD trades work almost immediately(1-5 days max). If a stock is trudging along slowly and gaining no ground day after day there isn't much chance that it will miraculously recover. It took me YEARS to accept this. As a trader, you have to look for trades that you feel are ripe for takeoff and trade them according to your plan. If the stock doesn't move quickly enough you jump ship and look for another trade.

    Here is an excerpt from one of the best trading books out there, "Pit Bull: Lesson from Wall Street's Champion Trader":

    Because my scope is so short term, I'm in and out for a point or two on a 10,000 to 20,000 share position. If an idea isn't panning out in a day or two, I jump ship. Because I play large, I don't want the risk of riding a stock down $3.
    That excerpt is from page 276

    "PIt Bull" is a trading book about the life of Marty Schwartz. In the book, he hammers home the idea of "hearing the cash register ring". What he means by that is selling a stock for a profit, in and out like a boxer in the ring. He wants the reader to train their mind to think of trading, not as a slow-moving snoozefest but a series of fast-paced hit and run transactions. The only way you can do that is the adopt the 2% system for swing trading.


    Why 2 percent?

    The 2% in our system has a double meaning. First and foremost, you should only risk 2% on any one trade you take on. Secondly, you should look for around a 2% profit on each trade. Give or take a percent depending on the stock and overall market conditions.


    Risking 2%

    When I first began trading I would risk around 5-10% on each trade because on occasion a bad stock would rebound and I'd make a profit. That strategy was ok when the market rose and saved me but it was an absolute disaster when the stock or the market had other plans in mind. Let me tell you it's near impossible to gain any traction or grow your account with 5-10% drawdowns every few months. With that being said, please only risk 2% of your trading capital on any given trade. To make it easy for you, here's an example of how to calculate 2%.

    Stock price: $100
    2% of $100 = $2

    If the stock goes to $98 you jump ship and run for the hills.

    The reason it took me so long to adopt this strategy is because of one simple word...EGO.

    Every trader deals with ego. You don't want to sell the stock for a loss and you like the idea of being able to say 80% of my trades are winners. That's all well and good but mathematically speaking, 99% of your trades can be winners and you can still go broke if you lose 90% of your trading capital on the 1% of losing trades. I would rather win more actual dollars than number of trades. That second number is irrelevant if your losses are too big.


    My years of trading have taught me that good trades tend to go into positive territory within a day or two. A trade that starts to fall or go sideways usually doesn't do anything spectacular over the life of the trade. Cut it loose and look for better opportunities.

    Risk 2% on each trade.



    Making a 2% profit

    Over the years, I've noticed that the majority of my trades are sold at obvious resistance areas on a chart between 1-3% profit. What you as a trader have to do is look for the "meat" of any situation. If most of your profitable trades are between 1-3% you should be looking for around 2% to book profits.

    Holding out for 5-10% gains on a swing trade is rather dangerous and greedy. A trader who can consistently profit around 2% per week in the stock market is a trader well on his way financial freedom.


    Refer to the images below for visual examples of how the 2% system works:

    Good



    If you were to make a series of trades with the above outcome you'd end up with an overall gain of 10%.

    That is 11 trades. Any active swing trader should be able to find 11 trading opportunities a month. 10% per month can definitely build your account and make you a full-time professional trader.




    Bad

    If you were to make a series of trades with the above outcome you'd end up with an overall gain of 3%.

    That is 11 trades. If your month of trading only yields 3% you will have a hard time generating both income and wealth.

    As a trader, you absolutely have to do the MATH. It is our bread and butter. No guessing. No hoping. No wishful thinking. Just irrefutable and verifiable numbers.

    Happy trading.
    Best Stock Picking Services

    Sign up for the forum to reply to this post!!!


    Best FOREX Signals Software

    Stock Market Investing For Beginners

    Facebook Group
    StockTwits Room


    "Step into the arena and hold on to your hat. Don't get discouraged if you don't make 8 trillion dollars in your first month. Trading is not a get rich quick scheme. Realize that trading is a skill and just like any other skill it takes time to learn. Have convictions in your decisions in life and trading. Ignore the comments and "advice" of those that have never traded a day in their life."


    Terms Of Service

    Disclaimer: This website provides information about the stock market and other investments. This website does not provide investment advice and should not be used as a replacement for investment advice from a qualified professional. This website is for informational purposes only. The Author of this website is not a registered investment advisor and does not offer investment advice. You, the reader, bear responsibility for your own investment decisions and should seek the advice of a qualified securities professional before making any investment.

    Promoted content: You should assume that this website has an affiliate relationship and/or another material connection to the persons or businesses mentioned in or linked to from this website and may receive commissions from purchases you make on subsequent websites. Always exercise due diligence before purchasing any product or service. This website contains advertisements.

  • #2
    Great article. Yes 2% is a great stop loss amount for swing trading. 1% is good for day trading and 10% is good for long term investing.

    Comment


    • #3
      Can't go wrong with 2%. Its been the sweet spot for most of my trades so far

      Comment


      • #4
        Originally posted by TomMack View Post
        Can't go wrong with 2%. Its been the sweet spot for most of my trades so far
        True. I tend to go dor 2-3% on swing trades depending on market conditions and volatility and 1% or less on day trades. Any more than 5 or 10 % and you're getting into long-term investment territory.

        Comment


        • #5
          I like to do a bit more on swing trades like 3 %. It also depends on the market sentiment

          Comment

          Unconfigured Ad Widget

          Collapse
          Working...
          X