Review: a winning trade — what was done right and what wasn't

5 min read · A profitable trade with a stop and a target. Why a profit doesn't yet mean everything was done right.

Level:

Short version for experts: tables, lists and screenshots only.

Words in this lesson (7)

Short — Selling in the hope that the price will fall: you sell something borrowed, then buy it back cheaper. You make money when the price drops.

Stop — A price chosen in advance at which the trade is closed at a loss, so the loss doesn't grow bigger.

Volume — How much money or how many units changed hands over a period. A move on high volume is more reliable than one on low volume.

Level — A price where the market has already turned before. Support is below the price, resistance is above it.

Limit order — An order to "buy or sell at my price or better". It can wait in the order book and may never fill.

Position — An open trade: what you have bought or sold and haven't closed yet.

DEMO — The DEMO account in MAMAY: prices and fees are real, orders don't go to the exchange, and no real money is at risk.

The trade

A demo account, a short on the OGN coin.


Entry	short at 0.042182, a limit order, size about $1,000
Stop	0.05018 — was in the order from the very start
Target	0.02716 — was in the order from the very start
Exit	manually at 0.038359 after 2 h 30 min
Result	+$90.13 (+9.1%)

What was done right

1. The stop and target were set before entry. Out of twelve manual trades, only two had the stop and target in the entry order. One closed at the stop with a small loss of $7.67, the other is this one, the most profitable. It's no coincidence: when the levels are defined in advance, the decision is made with a cool head.

2. The profit was taken manually when the move stopped. The target was still far away, but +9% in two and a half hours is a strong move. Taking it is a sound decision.

What was done wrong

The stop was too far away. From the entry of 0.042182 to the stop of 0.05018 is 19%. With a $1,000 size that's a $190 risk.

Let's count:

risk — $190;
received — $90;
so the trade brought less than half of what was risked.

Had the stop been hit, this one trade would have taken almost 10% of a $2,000 account. The one percent rule allows a $20 risk.

How it should have been. The same 19% stop, a $20 risk → size = 20 ÷ 0.19 = $105, not $1,000. Or the same size, but a stop 2% from the entry.

The takeaway

A profitable trade is not yet a correct trade. A correct one is where the risk was known and acceptable before entry. Sometimes a correct trade loses and an incorrect one wins; over the long run, the correct one wins.

Check yourself

What's the position size with a $20 risk and a stop 4% from the entry?
What was the planned reward-to-risk ratio in this trade (target 0.02716, stop 0.05018)?
Why can't you judge a trade by its result alone?

Ask the mentor for the answers — it will check your math.

▶ The "Risk" lesson ↗ Open "Terminal" in MAMAY

This is how it looks in MAMAY: “Terminal”