Profit and Preserving Capital

An important aspect of the Master Plan is setting a profit target and preserving
capital. The approach is fairly conservative – the profit target is approximately 7%
with a potential loss capped at 4%. The actual profit is likely to be more than 7%
while a loss is likely to be smaller than 4%. Here’s how it works. Once the target price is reached (7% above the entry price), half of the
shares are sold, locking in a 7% profit. The other shares remain invested to
benefit from any further increase in price. If the price moves against the trade, the maximum loss tolerated is 4%. This
preserves capital for future trades. Typically, more trades will produce a profit than a loss. The net result is
profit. The movement of the entire market is very powerful. When the market is
moving with your trades, a very high percentage of your trades will be
profitable. When the entire market is moving against your trade, a higher than expected
percentage of your trades will lose. The stop loss protects you from
excessive losses.