You know those free samples they give out at supermarkets?
I'm a sucker for those.
One day, I came home and my wife was baffled to find a sample tin of cat food in my bag (we have a dog ...)
But like most people, I love free things.
We're just hardwired to appreciate that feeling of receiving something for nothing.
So what if I told you that there was a way you could effectively make half our your trades free?
And that over the next few minutes I'd like to share it with you. But first, hear me out …
I'm not talking about some harebrained trading scheme or 'magic' trading system.
In fact, to get a situation where the latter half of your trades are 'free', you only need to follow a simple, logical principle. It's my third essentail rule for safe trading:
The P1 Rule
I developed the P1 rule after many years of experimenting with and refining various trade management methods. After everything I tried, the P1 rule was the clear winner. It balances the potential for huge profits with guaranteed safety. Follow this rule and you'll be able to:
- Avoid situations where your profits turn into losses
- Take your profits to guarantee a zero risk trade
So how does it work?
Use P1 to lock in zero risk trades
'P1' stands for your initial profit target. To make use of this principle, you simply set yourself an initial profit target above your trade entry point. The fact is that profits are meaningless if you cannot protect them - using P1 allows you to do this.
Once your P1 point is hit, you can guarantee a profit for that trade. At the very worst, you can guarantee that you'll break even. When you follow this rule, you have two options:
- When your P1 is hit, you can partially close your trade to bank a small profit, then raise your stop loss to your entry point or higher. This will guarantee that at worst, you break even. In many cases, you'll stay in the trade, allowing your profits to grow even more.
OR ...
- When your P1 is hit, you don't take partial profits. Instead, you raise your stop loss to just below the P1 point. Even if you're stopped out, you have guaranteed yourself a winner.
The examples above are for a bullish trade. If you're shorting a stock, you simply do the opposite - set your P1 below your entry point, and lower it once you hit P1.
Follow the P1 rule, and you can create a situation where many are trades are effectively free. In other words, the risk you take on by staying in the trade is practically zero. Not only is this a great way to safely grow your account, it also removes a huge amount of stress and second guessing out of trading. And of course, a winning trade is MUCH better than a sample tin of cat food.
Where do you set your P1?
When you set your P1, there are several things you should take into account. Set it too high, and a trade may change direction before you have a chance to lock in your profits. Set it too low, and you could be limiting your trade's potential. In my courses and live events, I teach a specific formula that automatically calculates the best place to place your P1 for any given trade.
But I don't want to flood you with too much information today.
I hope this has convinced you to start following the P1 rule when you trade.
Bye for now
Guy
P.S.
I'm always looking to find ways to help traders with the challenges they face. If you've enjoyed reading this, I'd love if you could tell me about the biggest challenges you're facing right now. It will help me serve you with the most useful trading lessons in the future.
You can tell me here.
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