Every trading strategy needs an entry reason, an exit plan with profit targets and stop losses, and proper position sizing. These three components prevent catastrophic losses and protect your risk-adjusted returns.
Every single trading strategy needs to have these 3 boxes filled. You need to know why you're opening, you need to know where to close, and generally having take profit, stop loss. And a 3rd condition is having an exit linked to time, for example, closing a position after 1 hour or at a specific point in time like 3 PM. And 3rd component, position sizing. It's really like knowing how you size your trading strategy. Your position can make a huge difference in both reducing the risk of blowing up your account and improve the risk-adjusted return of your trading strategy.
