As a Professional trader, you have 1 goal...Make money!! That said, traders like to measure their success differently. Some use pips, some use wins v. losses, personally I use daily return. Understand my focus is on generating income and my mantra is "keep stacking positive days" Imho, using pips to measure success can be misleading, I know of traders that will brag about making 300 pips, when they traded 10 micro lots for a 30 pip move. Obviously, the same could have been accomplished by trading 1 mini lot for the same 30 pips. Don't get me wrong, breaking your position down has a strategic purpose, if you have multiple profit targets or another reason to do so just understand that it was a 30 pip move and not a 300 pip move. Win/Loss Ratio can also be deceiving. if you have an inverted (negative) Risk Reward Ratio (RRR) then win/loss ratio means nothing. You most often see this with advertisement's for EA's where the claim is 95% win rate, or something along those lines, and then you look at the trading history to find out the profit target are small 2-5 pips and the stops huge 75-100 pips. Again, don't get me wrong win/loss ratio is important as long as the RRR is not wildly inverted...(Scalpers for instance will often have a negative RRR but usually not more then 1-3). Which brings me to daily % return, which, imho, is the best way to measure success. it is the the great equalizer. For example, if I told you Trader A makes, on average $500 a day, while Trader B makes $200, you might say that Trader A is a better Trader. However, if I then told you that Trader A has a 100K account while Trader B only has a 10K, that clearly changes things because now you realize that Trader A although making more money is only generating .5% per day while Trader B is generating 2%. Big difference. Moving forward, Trader B's account will increase to the point where he will surpass Trader A's account. Hence why, imho, measuring success in daily, or weekly, % return is the best way.
All this leads me to Goals. I am often asked "what should my goals be" and this is the most loaded trading question there is. I say that because it does not matter what I can do, or what any other trader can do, it only matter what YOU can do at Your Current Skill Level. Psychology in trading is so important and permeates all aspects of it. Knowing what other traders can generate can be disheartening, even if, you are a good trader! I feel the best goals a trader can have are 1) a daily/weekly % return that their current skill level permits and 2) constantly working to improve. It is number 2 that is most important. Their are so many ways to improve one's trading. More precise entries, better exits, smaller stops, larger profit targets, better trade selection, better money management, and the list goes on and on. Reviewing and documenting your trades is so important in this process (and will be the topic of my next educational post). Today, for instance, I did not have a valid set-up, so I did not trade! Understand I get up at 1;15 am est., everyday and start analyzing the market. I am up and I am ready to trade, however, their are times when it is better not to. As you know yesterday, we hit on 2 Solid trades, their is no reason to give any money back on a bad trade. I'm greedy that way...lol
I hope this post is informative and helps. If it does, I would appreciate if you "like" it and follow me :)
Totally agree with you bro....thx for being up front and personal with your trading strategy...very good info...
AGold54
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@nigel317, Thanks my friend :)
elvin30ca
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wow I couldn't agree more with your post very deep and congruent at the end of the day Making money is the end of the game, but making money responsibly with excellent set ups and RISK MANAGEMENT a must . stay green all the way.
thank you so much Allen for staying legit and honest with your trading by just reading your post make me think a lot risk that I take sometimes with no reason I will start implementing a different approach on every trade i'll make.
thanks.
AGold54
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@elvin30ca, your welcome and let me know if you have any questions :)
elvin30ca
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@AGold54, actually I do... lest say I want to make $1,000 a month with an account of $10,000 do you think its possible ? with an win/loss ratio of 60% !
AGold54
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@elvin30ca, it is only 10%, so it is very doable. However, if you are ok with some tough love... here it is. if you are at 60% you need to improve that. Might I suggest reviewing your trade set-ups, execution and completion and figure out how to improve. ie find out what's not working and eliminating it. My bet is that you are taking to many trades. After reviewing your trades, take out the low probabilty trades and see how you would fare? Let me ask you, if you could make 10-12% per week, but could only take 2 trades, would you do it?
elvin30ca
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@AGold54, wow you hit the nail in the head. 10-12% per week, but could I only take 2 trades! ... mmmm that means i will sacrifice more capital meaning I will have more money at risk per trade. I think it will be ok to do it... since im trading like Shawn i like his style but it takes to much of energy and time and also he is like a machine i cant beat his performance. i think im sold in your style its more relax and focus only on daily return . I must review my trades set ups. you got me thinking and yes im trading too much and thats why i got so low expectancy. thank you so much i will work on how to improve my batting average.
thank you so much you kind of open my eyes to see clear what im doing.
AGold54
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@elvin30ca, your welcome Elvin. I don't know what you risk now per trade but I only risk 2%. My trades usually have 3-1 RRR or better
FabioCv
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Cash is a position, i've learned it the hard way in the past and is always helpful to remember it.
I think the best way to stay away from overtrading is to have a solid method like your that give you the confidence to stay on the sideline when is better to. No pressure to rush because of certainty of future better setups.
Thanks Allen.
AGold54
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@FabioCv, Your absolutely right Fabio. if you think about it (and I will cover this in another educational post down the road) is how many trades do you need? Pigs get slaughtered....