This is final post in this 4-part series. I hope this has helped some of the people reading it. Let's recap. The below are links to the previous 3 posts in the series.
Series 1
Series 2
Series 3
I think it's best you read them in order. If we're all caught up, let's dive in. My complete strategy/tactics are listed below.
Trading for Profit Strategy:
1. Trade Strategy Allocation-Discussed
2. Execution Strategy -Discussed
3. Trade Plan Worksheet -Discussed
4. Accounting-Tracking Drawdown & Measuring Risk
5. Analysis
Accounting-Tracking Drawdown & Measuring Risk
To account for the integrity of each of trade, I track how far it went against, or for me.
For example, If I shorted Ethereum at $1400 and I set my stop to $1550, but Ethereum rose to $1500 that’s a 7.14% trade drawdown. If the Ethereum trade was 10% of my account value, that trade would cause a .00714% Account Drawdown or less than 1%. That’s just an example. However, when managing risk, you have to manage each trade size in relation to your overall account value. When starting out and having small account balances, the exposure to risk becomes exponential. In my Ethereum example, if my account balance is an even $100,000, then it makes sense. But if my account balance is $10,000 then the Ethereum trade is more than likely 50% of my account balance or more. Now my account drawdown could be as high 3.6% and now this trade is occupying an outsized exposure to risk. I say that because trades add up. Meaning, if each trade was causing an account drawn down of 3-4% and you’re trading actively, then 10 trades over a period of 30-90 days could cause your account value to shrink by 35%. Now those trades have to move 50% in your favor to get you back to even. This is not where you want to be folks. So, if you’re account balance is $10,000 you have to look at this as a long-term endeavor. In my opinion, the smaller the account balance, the pressure to be right consistently is much higher. If you’re not winning with a small account balance, you might as well be gambling. However, if you want to trade for a living, then look at it like starting a business. If your initial investment in a new business idea is $10,000 the don’t expect much unless you found the cure to cancer on the cheap. On the other hand, if your see capital is $100,000 or even higher, then with discipline and a process of managing risk, you should be able to grow the business over time. Managing risk is the most important thing you can do. I will discuss analysis later on, but without strict controls on risk, you’re going to lose a lot of money. Case in point, you’ve done the analysis and you are very confident Ethereum is going to move up and you take an outsized position due to confidence. If that doesn’t pan out, you’ve now wrecked months, years of hard work. You have to have rules in place. Look at your account as a separate partner in the business. You’re the analyst. Who is going to protect the interests of your business partner (your account). I DO NOT CARE HOW GOOD YOU THINK YOU ARE AT TRADING...THIS IS WHERE NOVICE TRADES GET KILLED.
Risk management is the most important protocol to have in place.
Analysis
This entire series is moot, if you don’t have an edge. Remember, you’re trading against millions of other people who have the same hopes and dreams as you. They all are entering trades thinking they are the smartest. HOW ARE YOU ANY DIFFERENT? If you cannot answer that question...stop trading. Unless you have an edge. Some sort of differentiating factor that allows you to win more than lose, it’s going to costs you dearly. Now, I’m trying to talk anyone out of building a successful trading plan and trading for profit. But the numbers are kind of a bummer. 60% of retail traders lose more than they gain over a period of 1 year. That number grows to 80% over a 2-year period. 90% over 5 years. That means you have a 10% chance of being successful over a 5-year period, unless you have an edge.
My Edge: I have worked hard to master Elliott Wave Theory as my primary form of analysis. (long-term Chart of Solana above) I have spent years arriving at a seller's perspective vs. that of a buyer. I have gone through the crucible of losses to have constructed a solid risk management plan.
Sidenote: I undertake no trade unless the risk/reward ratio is 4:1 minimum. I won’t even consider it.... move on, no interest whatsoever.
My understanding and application of EWT is something I’m comfortable with comparing to counts to anyone. I’m pretty sure I learned from the second best Elliotition alive on Planet Earth. (I will not name him so don’t ask). Suffice to say he lunches with Pretcher, who is 1 down from RN Elliott himself. I’m not saying that to brag, because the truth is I met my mentor by chance. But everyone has to learn from someone. I hope to teach to the next generation of Elliotitons.
IN DOING SO, I BELIEVE TURTLES CAN ONCE AGAIN BE SUCCESSFUL TRADERS.
Best to all,
Chris
Series 1
Series 2
Series 3
I think it's best you read them in order. If we're all caught up, let's dive in. My complete strategy/tactics are listed below.
Trading for Profit Strategy:
1. Trade Strategy Allocation-Discussed
2. Execution Strategy -Discussed
3. Trade Plan Worksheet -Discussed
4. Accounting-Tracking Drawdown & Measuring Risk
5. Analysis
Accounting-Tracking Drawdown & Measuring Risk
To account for the integrity of each of trade, I track how far it went against, or for me.
For example, If I shorted Ethereum at $1400 and I set my stop to $1550, but Ethereum rose to $1500 that’s a 7.14% trade drawdown. If the Ethereum trade was 10% of my account value, that trade would cause a .00714% Account Drawdown or less than 1%. That’s just an example. However, when managing risk, you have to manage each trade size in relation to your overall account value. When starting out and having small account balances, the exposure to risk becomes exponential. In my Ethereum example, if my account balance is an even $100,000, then it makes sense. But if my account balance is $10,000 then the Ethereum trade is more than likely 50% of my account balance or more. Now my account drawdown could be as high 3.6% and now this trade is occupying an outsized exposure to risk. I say that because trades add up. Meaning, if each trade was causing an account drawn down of 3-4% and you’re trading actively, then 10 trades over a period of 30-90 days could cause your account value to shrink by 35%. Now those trades have to move 50% in your favor to get you back to even. This is not where you want to be folks. So, if you’re account balance is $10,000 you have to look at this as a long-term endeavor. In my opinion, the smaller the account balance, the pressure to be right consistently is much higher. If you’re not winning with a small account balance, you might as well be gambling. However, if you want to trade for a living, then look at it like starting a business. If your initial investment in a new business idea is $10,000 the don’t expect much unless you found the cure to cancer on the cheap. On the other hand, if your see capital is $100,000 or even higher, then with discipline and a process of managing risk, you should be able to grow the business over time. Managing risk is the most important thing you can do. I will discuss analysis later on, but without strict controls on risk, you’re going to lose a lot of money. Case in point, you’ve done the analysis and you are very confident Ethereum is going to move up and you take an outsized position due to confidence. If that doesn’t pan out, you’ve now wrecked months, years of hard work. You have to have rules in place. Look at your account as a separate partner in the business. You’re the analyst. Who is going to protect the interests of your business partner (your account). I DO NOT CARE HOW GOOD YOU THINK YOU ARE AT TRADING...THIS IS WHERE NOVICE TRADES GET KILLED.
Risk management is the most important protocol to have in place.
Analysis
This entire series is moot, if you don’t have an edge. Remember, you’re trading against millions of other people who have the same hopes and dreams as you. They all are entering trades thinking they are the smartest. HOW ARE YOU ANY DIFFERENT? If you cannot answer that question...stop trading. Unless you have an edge. Some sort of differentiating factor that allows you to win more than lose, it’s going to costs you dearly. Now, I’m trying to talk anyone out of building a successful trading plan and trading for profit. But the numbers are kind of a bummer. 60% of retail traders lose more than they gain over a period of 1 year. That number grows to 80% over a 2-year period. 90% over 5 years. That means you have a 10% chance of being successful over a 5-year period, unless you have an edge.
My Edge: I have worked hard to master Elliott Wave Theory as my primary form of analysis. (long-term Chart of Solana above) I have spent years arriving at a seller's perspective vs. that of a buyer. I have gone through the crucible of losses to have constructed a solid risk management plan.
Sidenote: I undertake no trade unless the risk/reward ratio is 4:1 minimum. I won’t even consider it.... move on, no interest whatsoever.
My understanding and application of EWT is something I’m comfortable with comparing to counts to anyone. I’m pretty sure I learned from the second best Elliotition alive on Planet Earth. (I will not name him so don’t ask). Suffice to say he lunches with Pretcher, who is 1 down from RN Elliott himself. I’m not saying that to brag, because the truth is I met my mentor by chance. But everyone has to learn from someone. I hope to teach to the next generation of Elliotitons.
IN DOING SO, I BELIEVE TURTLES CAN ONCE AGAIN BE SUCCESSFUL TRADERS.
Best to all,
Chris
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