Expectancy is your percentage of winning trades multiplied by your average gain, divided by your percentage of losing trades multiplied by your average loss. Maintain a positive expectancy, and you’re a winner. My results went from average to stellar when I finally made the choice that I was going to make every trade an intelligent risk/reward deci

Your goal should be optimal position sizing. The size of your position should be determined by how much equity you stand to lose if a trade goes against you. Let’s say you have a $100,000 portfolio and you put 50 percent ($50,000) into one position. With a 10 percent stop, you cap your loss

But your performance is going to be driven by the results that you are producing over time on average. Your actual results encompass not only your strategy, but more important, your foibles, idiosyncrasies, and emotions that often override a portion of even the best laid-out plans.

I have some general guidelines as to when I raise my stop above the initial placement. Any stock that rises to a multiple of my stop-loss and is above my average gain should never be allowed to go into the loss column. When the price of a stock I own rises by three times my risk and my gain is higher than my average, I almost always move my stop up

The reason most investors fail to sell and cut their loss short is because they fear that after they sell the stock might go back up and they will be wrong twice. It’s driven by the fear of regret, which stems from pure ego!

Either your stop moves or your position size

On the other hand, if you want to achieve superperformance, diversifying your portfolio too much is counterproductive.

at $5,000. But that’s 5 percent of the total equity of your account—and that’s too much risk. If you were to suffer a string of such losses, you would put yourself at risk of ruin. Instead of arbitrarily picking a number, your maximum risk should be no more than 1.25 to 2.5 percent of your equity on any one trade. The less experienced you are, the

moves. One or the other must be adjusted to dial in the correct amount of risk. For argument’s sake, if you wanted to be very aggressive and put 50 percent of your account into one position, you would need to use a 5 percent stop to contain your risk as a percentage of equity to 2.50 percent. But the tighter your stop, the more likely you are to ge