Take a quarter and flip it 10 times. Now imagine that heads equals wins and tails equals losses. Theoretically the number of wins should equal the number of losses. To make a point, let's assume that in your own trading you enjoy the same record of wins and losses represented by our coin toss metaphor; roughly 50%.

When you break trading down like this, it is easy to see how to be successful. Simply make sure that when you win, you win more than you lose when you lose.

Probabilities

Successful stock trading means understanding and managing probabilities. Nothing more. In order to be successful, you must put the probabilities in your favor by learning to limit losses. Any other trading methodology is destined to fail. It doesn't matter how much you win when you win, if you don't control your losses, you will eventually blow up your trading account.

There's an old trader saw that says "cut your losses quickly, but let your winnings run."  It sounds nice, but it is impractical.  By letting winnings run, most traders find that their winnings run away from them and turn into losses. 

If you quickly limit your losses and also quickly lock in your gains, it is actually possible to be wrong 50% of the time and still profit handsomely. 

In this example, losses are cut quickly at 3% for unsuccessful trades and profits are automatically taken at 10% for successful trades.