JasperForex

Expectancy Revisited: Improving your Profitability

FX:EURUSD   Euro Fx/U.S. Dollar
TEST YOUR TRADING SYSTEM
I will not go deep into this, because it quickly becomes a shouting match on who has the best system, which is usually more about ego than fact. It is sufficient to say that I have seen / know of profitable traders who use fundamentals, price patterns, Elliot waves, renko, moving averages , structure levels, pitchforks, trend rules and custom indicators. I will not get into which system is the best, because I have not back tested them all personally. This does not imply that it does not matter what system you use. Far from it. You need a system that gives you an edge. And the only way to know if it does, is to back test it against a relevant amount of data.

ADD FILTERS
Adding filters to your strategy aims at improving your win rate by eliminating losers. It’s a way to get the odds on your side over a larger number of trades. Examples of filters you could add are: trade with the daily trend, trade with the fundamental direction, filter out unprofitable patterns, don’t trade during news events, only trade reversal patterns that complete at a key structure level, only trade breakouts after a retest of the trend line, add an extra indicator (e.g. stoch or sma line crossover or rsi divergence) or use a particular candlestick as a final entry signal. There might be a price to pay: if a particular filter delays your entry point, it can improve your win rate while reducing your reward – risk.

INCREASE THE OPPORTUNITY FACTOR
The opportunity factor relates to how many trades your method allows you to take per day / week / month. If by adding filters you are left with just a few possible trades a week, your win rate can go up, but your overall profit might suffer because there would be fewer trade candidates passing through to your filters. This will leave you with fewer trades to contribute to your overall profitability. You can increase this factor by adding more currency pairs to your portfolio or by adding trading hours to your schedule. When adding pairs, be aware of the correlation to the ones already in your portfolio.

IMPROVE YOUR TRADE MANAGEMENT RULES
Trade management relates to profiting from the trades you decide to enter. It aims at maximising your average winner while minimizing your average loser. The key is having rules that let winners run and exit losing trades without hesitation. Aim for realistic profit targets by reviewing the profit logic of your trades. Predefine a risk that you accept and don’t exceed. One of the ways you can do this, is by managing your trades in a multi-position manner, aiming for several profit targets. Take profit at various stages, as the market makes it available to you and roll your stop loss to break even or a profit protection point as the trade progresses.

DISCILPLINE AND CONSISTENCY
Once you have the right system, rules and filters in place, you just need to trade your plan consistently day in and day out. Monitor your susceptibility for making errors and eliminate them one by one. Relaxed, concentrated and mindful like a Zen             Monk. Don’t overtrade by chasing entries. Don’t under-trade by arbitrarily skipping valid opportunities. Be organized and prepared. A random, inconsistent approach to trading leads to random, inconsistent results that will never be optimal. So plan your trade and trade your plan.

TYING IT ALL TOGETHER
Simply put, your expectancy per month is the opportunity factor multiplied by both the win rate and the average winner less the opportunity factor multiplied by both the lose rate and the average loser. For the example from my prior topic (see the link under Related Ideas), we know that the calculation was as follows: expectancy per month = 90 x 55% x €120,00 – 90 x 45% x €80,00 = €2.700,00. I have tried to give some tips and trick on how to influence each of the variables in this calculation with the aim to arrive at an improved mix, leading to an improved profitability.
You don´t need to be a weatherman to know which way the wind blows - B. Dylan
KlejdiCuni
2 years ago
Thanks, very useful :)
+1 Reply
JasperForex PRO KlejdiCuni
2 years ago
Thank you for saying so. Trading is a game of inches. Its about doing all the little things right every day that impact your P&L.
+1 Reply
EmmyTrades
2 years ago
Great stuff!
+1 Reply
JasperForex PRO EmmyTrades
2 years ago
Hope it helps to make more pips!
Reply
Ahmer
2 years ago
Good information so far. Thanks
+1 Reply
JasperForex PRO Ahmer
2 years ago
You are welcome. Thank you for responding, I appreciate it.
+1 Reply
Cityfox
2 years ago
That is fantastic advice, you are getting a very good reputation. I'm only 2567 behind you lol
+1 Reply
JasperForex PRO Cityfox
2 years ago
Lol those point don't make me any pips. But I am happy if people find my publications / trade ideas helpful.
Reply
M.SoufiJ
2 years ago
you are superb!
+1 Reply
JasperForex PRO M.SoufiJ
2 years ago
Thank you for the kind words.
Reply
leharman PRO
2 years ago
Hey Jasper, great thoughts!
+1 Reply
JasperForex PRO leharman
2 years ago
Thank you for saying that and for taking the time to leave a response. Appreciated.
Reply
StarProsper
2 years ago
This is freaking awesome!
+1 Reply
JasperForex PRO StarProsper
2 years ago
I am glad you like it, I hope it helps to make more pips!
Reply
artmustaches
2 years ago
<3 this, thanks!
+1 Reply
JasperForex PRO artmustaches
2 years ago
Thank you for the kind response.
Reply
moneymaking
2 years ago
Really good advice to all traders. Thanks for sharing!!
+1 Reply
JasperForex PRO moneymaking
2 years ago
I hope it helps to make a little more cash or pips, moneymaker!
+1 Reply
BitzaCrikyRo
2 years ago
Very interesting. Thanks for sharing !
+1 Reply
JasperForex PRO BitzaCrikyRo
2 years ago
Thank you for responding. It may help to survive or shorten the learning curve.
+1 Reply
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