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There are two important elements that every stock trading system must incorporate for success.

Number 1 - a traders win/loss ratio
Number 2 - a traders profit/loss ratio

Depending on which trader you ask there is always a heated debate about which ratio is more important; your win/loss ratio or your profit/loss ratio. Which ratio is more important? Which ratio needs to be watched more closely? Let’s examine both of these as we discuss ideas on how to make your winning trades win big.

The argument between the two ratios boils down to this example. If your profit on each winning trade is $99.00 and your loss for each losing trade is $1.00 then you only have to win 2% of the time. However, if your profit is only $1.00 for each winning trade and you lose $99.00 for each losing trade you need to win 99% of the time. So which ratio is more important? The debate will continue.

As investors or traders, part of your trading strategy should be to ensure that your average profits are always more than your average losses and that you win 51% or more of the time. If you win 51% or more of the time and your average gains exceed your average losses then you will slowly and steadily create wealth. My goal is to help you “make your winners win big” part of your trading strategy.

The first step in helping to make your winners win big is to establish an exit strategy. This can be as simple as a price target, a percentage gain or even a time frame. Once your exit strategy has been determined it is very important that you adhere to your target at which the position will be closed for a profit.

Suppose you purchase a stock at $50.00 a share and you set a price target at $60.00 a share. Once the price target is achieved you must adhere to your plan and close the position unless an unusual situation warrants an increase in the target price.

The most important thing to remember about any stock you purchase is that the only reason why a stock will move up in price is because there are more buyers than sellers. There are many reasons why people will buy stock and the more of these reasons you understand the more profitable your trading strategy will become.

A few of the primary conditions that will bring buyers to the table is an increase in earnings, a general bullish market move, a takeover bid, an upgrade, a large contract, lower interest rates, winning a lawsuit just too name a few.

One of your primary trading strategy goals should be to recognize the fundamental and technical driving forces between the stocks that you invest in or trade.

If becoming a DartThrow Trader, so that you can quickly, easily and intuitively determine what is driving your stocks, is something that naturally appeals to your trading strategy; then we would like to invite you to visit http://www.dartthrowtrader.com and enroll in our free - successful investing and money management weekly newsletter.

Jimmy Slagle - The Dart Throw Trader is an 18 year trading veteran, market insider and former national trading seminar instructor and invites you to discover for yourself if you have the skills, tools and knowledge to literally throw darts and make money. To see what it takes to become a Dart-Throw Trader point your favorite browser to http://www.dartthrowtrader.com and get our free report - The Trading Education Industry’s Dirty Little Secret and we will also send you our weekly newsletter successful investing and money management.

Article Author :Jimmy_Slagle

Tags: irs, stock trading system, Investing, Stock Trading, trading strategy

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Tags: Investing, irs, Stock Trading, stock trading system, stocks, trad, trading strategy