Category Archives: Trading Business

Trading Business – In this category we explore the business side of our trading endeavour. This includes topics such as: (a) Market and timeframe selection, (b) trading procedures – pre, during and post-session, (c) The journal and review processes, (d) Money Management, (e) Risk Management, (f) Hardware and Software, (g) The office environment.

An Exceptional Example of Historical Chart Study

 

Today I want to share with you some examples of the work done by Johnny, as he learns to read and trade the charts as taught in the YTC Price Action Trader ebook series.

Chapter 17 of Volume 5 of the ebook series provides a graduated development plan.

Before you trade live you must prove success on the sim.

And before you trade on the sim, you must ensure complete understanding of the analysis and trade concepts via historical chart study.

Johnny is working through that first stage, through detailed study of prior sessions in his chosen market (YM) and timeframe (3 minute TTF, 1 minute LTF).

His work so far is of the HIGHEST STANDARD. So much so that I absolutely had to seek permission to share it.

If you're just starting out in your journey as well, whether with my strategy or with one you developed yourself, set Johnny's work as the benchmark that you try to also achieve.

Imagine doing this for 100 prior sessions, before you even hit the sim. Yes, there are completely new challenges at the hard, right hand edge of the screen. But you'll be tackling those challenges with complete confidence in knowing what it is you're looking for. And more importantly, why!

The following charts have been compressed in size in order to fit on the webpage. If you click each image it will open a larger copy in a new browser window.

You'll note that they all examine the exact same price sequence, from a number of different perspectives – (a) Trend Assessment, (b) Clues and Observations, (c) Changes in Sentiment, (d) Changes in Structure, and (e) Setup Areas.

I hope you get great value out of this. If it inspires even just one of you to improve the quality of your own learning, this will have been a massive success. Thanks Johnny!

Enjoy…

 

TREND

An Exceptional Example of Historical Chart Study 

CLUES AND OBSERVATIONS

An Exceptional Example of Historical Chart Study

CHANGES IN SENTIMENT

An Exceptional Example of Historical Chart Study

CHANGES IN STRUCTURE

An Exceptional Example of Historical Chart Study

SETUP AREAS

An Exceptional Example of Historical Chart Study

LOWER TIMEFRAME CHARTS  (note: there is some overlap from one chart to the next)

An Exceptional Example of Historical Chart Study

An Exceptional Example of Historical Chart Study

An Exceptional Example of Historical Chart Study

An Exceptional Example of Historical Chart Study

 

Happy trading,

Lance Beggs

 


 

It is NOT your job to win on any particular trade!

 

Before you can consistently win, you're going to have to learn how to lose really well.

That is…

  • Completely accepting losses as a normal part of the game.
  • And containing the damage to pre-accepted limits.

 

This has been one of my favourite themes of the last year or so. Let's go over it one more time.

It really is that important!

Here's an extract from an email discussion I had on Wednesday with another trader in response to a really challenging sequence of price action.

(5) This point may not be a problem for you. You might understand it completely. But in my experience, while the vast majority of "developing" traders say they do understand this, the reality is that very few traders actually do REALLY GET it at a deeper level. Their actions and decisions prove they don't get it. And often when I'm sent an email asking "why didn't this trade win", it's obvious that this is the case – they don't really understand the game.

It is not your job to win on any particular trade.

It is your job to identify opportunity that contains edge. And to take it and manage it well. Some will win. Some will lose.

Our aim is not to profit on any particular trade. But rather to profit over a series of trades.

Feel free to define a "series of trades" based upon whatever number you consider provides a sufficient sample size. For the sake of this email, let's assume it's 20 trades, which is the absolute minimum I'd consider as sufficient.

So we aim to profit over 20 trade groupings. Within each group there will be some winners. There will be some losers. Both are absolutely fine. They're meant to be there.

And in fact, there will likely be strings of losers, from times when either the market environment was not optimal. Or our decision making was suboptimal.

Again, that is completely normal.

So our decision making pre-entry should be in confirming that (a) the trade idea has edge, and (b) regardless of whether it wins or loses, it's a trade that we really want contributing to our 20 trade sample.

And during the trade management stage, at the forefront of our mind is always the thought about whether or not we still want this contributing to our 20 trade sample.

The reason for bringing this up, is because the interaction with S/R that you have provided in your example, is rather messy. We don't know that will be the case until after the fact, when we can view the charts with the benefit of hindsight. But it's not unusual in messy price sequences to end up with two, or maybe even three losses or scratched trades. This is completely normal. And it should be absorbed within the 20 trade sample, with other better sequences providing sufficient profits to overcome them.

This is also why I will typically only limit myself to two attempts at a trade idea. Three at most (if the prior losses are less than 1R each). If after these 2-3 attempts, I've not captured a good entry, then I'm clearly not reading the market well. Stand aside. And wait for the structure to change. If one further entry would have been sufficient to capture the planned move, and it now occurs without me, so be it. It wasn't mine to catch. Let it go and move on to the next.

 This is VERY IMPORTANT. In fact, key to success. ALWAYS be thinking about the larger sample of trades. Is the current trade one you want contributing to the sample? And if it's one of the losers, keep it small so that it can be easily overcome. And if it's one of the winners, work to take as much out of it as you can.

 

There is no need to review the sequence from that email.

Let's instead look at a few trades in the first hour on Tuesday.

Trades in which there is nothing particularly special. They're just normal run-of-the-mill trades.

Some lose. Some win.

It is not your job to win on any particular trade.

It is not your job to win on any particular trade.

It is not your job to win on any particular trade.

It is not your job to win on any particular trade.

It is not your job to win on any particular trade.

Let's look at the two losses…

It is not your job to win on any particular trade.

It is not your job to win on any particular trade.

Here's the plan:

KEEP THE LOSSES SMALL.

CONTAIN THE DAMAGE.

SO THAT IT ONLY TAKES ONE OR TWO SMALL WINNERS TO MORE THAN MAKE UP FOR THEM.

It is not your job to win on any particular trade.

It is not your job to win on any particular trade.

It is not your job to win on any particular trade.

Before you can consistently win, you're going to have to learn how to lose really well.

That is…

  • Completely accepting losses as a normal part of the game.
  • And containing the damage to pre-accepted limits.

 

Stop worrying about profiting on every single trade.

Aim instead to just manage them well.

And seek to profit over a larger SERIES of trades.

Happy trading,

Lance Beggs

 


 

Before Making Changes to your Strategy, Ask These Questions…

 

We're one week into the new year. Are you already trying to tweak your strategy, or your trading process, based upon a bad session or two?

Before making changes to your strategy or process, ask yourself the following questions:

1. Is the change the result of deliberate analysis of past performance, in order to improve upon a recognised deficiency or to further enhance a current strength?

A Deliberate Process

2. Or is the change a result of looking at a few different indicators or settings and thinking, "This might be a good idea"?

I know it will work this time!

It better be the first one!

If not, the major problem is not with strategy, but with your growth and development process. Yes, the strategy may well need further work. But without an effective growth and development process you'll likely never find the right solution.

Let's fix it now.

First, review this article – http://yourtradingcoach.com/trading-business/dont-break-the-chain-a-simple-tool-to-improve-consistency/

We're going to use this method to try to force some consistency. But with a tracking sheet designed just for this purpose.

Right click to save a PDF copy

(Larger copy: http://www.yourtradingcoach.com/products/ebooks/consistency-tracker.pdf)

And second, commit to a better process.

Review this article – http://yourtradingcoach.com/trading-business/its-time-to-fight-to-get-to-the-next-level/

Print out the article if necessary.

And take action.

A Deliberate Process

Your trading success requires consistency in application of your plan… and an effective process for driving growth and development.

You can do it!

Happy trading,

Lance Beggs

 


 

Stretching to the Next Level – Followup

 

Let me start by sending out a massive THANK YOU to the whole YTC community.

I believe last week's article set a new record for the amount of feedback it received.

And all positive, which is nice to see!  🙂

Check it out here if you missed it – http://yourtradingcoach.com/trading-business/stretching-to-the-next-level/

The aim of the article was to have you bring your goals closer.

Closer in time. And just a small stretch above and beyond your current capabilities.

This ensures that you receive quicker feedback. And most importantly, that you have a greater chance of achieving the goal.

Small wins, received often, do wonders for your mindset and self-belief.

Plus… it's just the way that progress works. So many things in life are achieved through small, incremental steps. For some reason we tend to forget that when it comes to trading.

I was most excited mid-week to see a new blog post by Dr Brett Steenbarger, which ties in nicely with our "stretch goals". Dr Steenbarger has for a long time been one of my favourite trading educators. His writing is of the highest quality. Every blog post is something I never miss.

I recommend reading the post in full here – http://traderfeed.blogspot.com.au/2016/12/how-to-trade-with-peace-of-mind.html

But the key points, as they relate to our article last week are:

  • "…the way in which we set goals greatly impacts the probability of our success and the mindset we're likely to come away with."

  •  "…the importance of keeping goal-setting flexible and doable. Flexible means revising goals at intervals: for example, setting monthly goals rather than annual ones. Doable means that both the number of goals and their difficulty be set in such a way as to set us up for success rather than frustration. Many big goals can be broken down into a sequence of smaller ones that create an ongoing sense of progress and momentum."

  • "Over time, the accumulation of small goals creates large changes. The idea is to make each day a win, regardless of the P/L of the moment. That creates peace of mind, and peace of mind frees us up to trade with open minds."

I'd like to also share with you an extra step to the "stretch goals" which I shared with a couple of traders via email last weekend.

It's the idea of having TWO TIERS of goal-setting.

Why?

To ensure an even greater likelihood of success and peace of mind.

The aim of our "stretch goals" last week was to ensure that it targets something only a slight reach beyond current capabilities. But this of course doesn't mean we'll achieve it.

Stretching to the next level

And that's fine. The reality is that we won't always achieve this new level of performance.

But we will learn. And we can review our plan for achievement of the goals. Or even amend the goals themselves, bringing them another step closer. And then we launch ourselves off on another attempt.

The problem is…

Stretching to the next level

This is where it can help to have two tiers of goal setting.

Our stretch goal is the second tier. It's the one we're really pushing for. It's the one we put all our focus and attention on achieving.

But it's also something that we completely accept we may not achieve. Or may not achieve, just yet.

But we NEVER judge our self-worth on achievement of this goal. EVER!

Because, although it's just a small stretch, it might take a lot longer than we expect.

This is where the first tier can help.

Set something that is so damn easy that you absolutely should achieve it.

Something like SURVIVAL.

However you want to define that is fine. For me it would be – "My aim this week is to ensure that my family is safely provided for and my trading business is not threatened in any way. I survive to trade another week!"

Stretching to the next level

Don't under any circumstances allow failure to achieve Tier 2 to influence your self-belief. You achieved Tier 1. That is awesome. Well done. Now, examine Tier 2 and find out why you didn't achieve it. And set in place plans for the next assault at that target.

It's all about maintenance of a positive mindset, while at the same time always pushing yourself to expand to new levels of performance and skill.

Tasks for the Christmas / New Year week:

  1. Review the prior article, if you missed it – http://yourtradingcoach.com/trading-business/stretching-to-the-next-level/

  2. Review Dr Steenbarger's blog post. And subscribe to his RSS Feed, or find some other way to get all his future posts.  http://traderfeed.blogspot.com.au/2016/12/how-to-trade-with-peace-of-mind.html

  3. Consider the use of two-tier goal setting in order to maintain a positive mindset, while still stretching to reach the next level.

  4. And set your goals. Trading recommences in early January. What are your goals for the first week? Do not start trading until they're clearly defined.

Go for it!

Lance Beggs

 


 

Stretching to the Next Level

 

Do you have trading goals?

Stretching to the next level

Whatever it is, that's fine.

As long as you're making progress towards that goal.

Let's be honest though… are you actually making progress?

I hope you are!

But I speak to a lot of developing traders and the fact is that MOST are not making progress.

Here is a problem I see over and over again:

Stretching to the next level

The target is just too far away to be able to see any real progress.

And even worse, there is no solid plan for how to get there.

Stretching to the next level

Wrong!

Stop it!

Let's fix this now!

How?

Step 1: Bring your goal closer in time.

Much closer. No more than a month away. Ideally weekly.

Let's say for example that your goal is to achieve $100k per annum. But you're not yet able to ever achieve a positive week.

GOAL: $100k per annum

"That's too far away. Bring it closer."

GOAL: Ok, I will aim to achieve $8k months.

"Which is how much per week?"

GOAL: I will aim to consistently achieve a weekly average of $2k.

Step 2: Reduce the size of the goal till it's just a slight stretch beyond your current capabilities.

A goal of $2k per week is fine. But if you're not yet even achieving positive weeks, it's kind of pointless.

If your goal cannot be reached from your current location, within three or four attempts, then your goal is crap. You'll just churn away week after week getting more and more frustrated. 

Your goal should stretch you just beyond your current capabilities.

And it should be something you feel that, with improvements in process, you might have a chance of achieving in three or four attempts.

GOAL: Ok. Let's reduce the weekly target to a much more achievable $1k.

"Too much. You can't even achieve breakeven."

GOAL: Fine. My goal this week is to achieve a breakeven week.

"Good. You're close to that already. It's just a small stretch. Remember, when you achieve that, and can prove it repeatable, you will then set further goals to stretch to the next higher level. And so on and so on until eventually you're achieving your original goal."

Step 3: Focus on process improvements required to achieve this outcome.

Break the trading process down into as many smaller sub-processes as you can.

Find the one part that, if improved, will provide the greatest impact upon results.

And then set your goal to improve that part of the process.

It might not be sufficient in and of itself to reach your monetary goal. But it's a start. Once achieved, with consistency, you can then find the next area of improvement.

"Break the whole trading process down into parts for me. However it makes sense to you."

"Ok. How about (a) quality trading ideas, (b) quality entry and (c) quality trade management."

"Fine. Which area is currently contributing to your inability to achieve a breakeven week?"

"All of them. But ok, perhaps the trading ideas. Too many, when looked at with hindsight, are just in poor chart locations. Far too late in the move. In retail zones, I guess you could call it. Definitely not where the professionals are trading."

"So what process changes can you make, and what daily goals can you set, to give you greater chance of trading in good chart locations?"

"I can spend some time this weekend defining "quality trade locations" including the point at which entry is too late. I can put something in checklist form. And then I can then work this week with the following goal:"

GOAL: This week I will focus SOLELY on ensuring the vast majority of my trades are attempted in quality trade locations, in accordance with my new checklist. Quality entry and management are of little importance. I can work on them next. But first, I will aim to ensure I'm at least trying to trade in the right areas. I will consider this a success if by the end of the week, 80% of the trades are in areas that meet my definition of "right area" as best it can be determined at the right hand edge of the chart.

"Awesome."

Ok, I totally made up that conversation. You knew that right!  🙂

But the point is that it takes the goal from something outside the realm of immediate possibility, to something that is much more achievable in a short timeframe.

Progress won't be guaranteed, of course. It might take three to four attempts, with further improvements to the process each weekend.

But if progress is not seen after several attempts, break down the process goal even further to something even smaller and more achievable. Your aim is to start accumulating small wins in the direction of your original and ultimate goal.

And if our trader achieves consistency in trading in better trade areas, but still fails to achieve breakeven weeks due to poor entry or trade management, then the process goal shifts to these areas. At some point, a breakeven week will be achieved. The goal might shift then to repeating this same level of performance, just to prove it's not a fluke.

And then… maybe aiming for something greater. Maybe three out of four weeks positive, with the losing week smaller than the average winning week.

Each step just slightly beyond the current level of achievement.

I don't know what your goals are. And I don't know your current level of performance. But whatever they are, if you're just churning away week after week without any clear evidence that you're closing that gap, you need to take action.

Step 1: Bring your goal closer in time.

Step 2: Reduce the size of the goal till it's just a slight stretch beyond your current capabilities.

Step 3: Focus on process improvements required to achieve this outcome.

Stretch… just a little bit.

And fight to get to this new level.

Stop accepting failure. Redefine your goals so that you can achieve small incremental wins.

One step at a time.

Stretch!

You can do it!

Lance Beggs

 


 

The Good, The Bad and The Ugly! (Part 2)

 

Last week we looked at a simple method for classifying trades based upon a post-session assessment as to (a) whether or not the trade idea did offer edge, and (b) how well we performed in managing the trade.

Let's repeat the key points from that article (or click here to review it in full).

During your post-session review you classify them into one of three categories:

  • The Good – Trade ideas which DID have edge and were well managed.
  • The Bad – Trade ideas which DID have edge but were either poorly entered or poorly managed.
  • The Ugly – Trade ideas which DID NOT have edge.

 

Our aim is to seek constant improvement in our stats. When analysing the stats associated with larger groups of trades (20 minimum), we look for the following:

  • The Good – We want more of these. Always be aiming to increase the percentage of The Good within any sample of trades. And to increase the profit they provide.
  • The Bad – We want less of these. Always be aiming to decrease the percentage of The Bad within any sample of trades. And to reduce the damage they do to P&L.
  • The Ugly – Ideally, we aim for NONE of these. That might be tough. But it's the goal.

 

It's a continual striving for improvement in skill and expertise.

And of course we drive our performance improvement through an effective review process:

The Good:

  • How can I ensure I take more of these in future? What signs were there pre-trade to suggest this could be one of The Good? Consider both the market structure and the way that price was moving.
  • How could I have have performed even better? Was there any way to have increased size (assuming you scale in and out)? Was there any time or place at which I could have added to the position? Was there reason to extend the targets even further?
  • Were there any non-technical factors present which may have assisted with my decision making? How was my physical state? How was my mental state? How was my emotional state? How was my trading environment?

 

The Bad:

  • In what way did I underperform with this trade?
  • Why did this occur?
  • How can I ensure I do less of this in future?
  • Were there any non-technical factors present which impacted upon my decision making? How was my physical state? How was my mental state? How was my emotional state? How was my trading environment?

 

The Ugly:

  • How can I ensure I avoid these trades in future? What signs were there pre-trade to suggest this WAS NOT A VALID TRADE? Consider both the market structure and the way that price was moving.
  • Why was I not aware of this at the time?
  • Were there any non-technical factors present which may have assisted with my decision making? How was my physical state? How was my mental state? How was my emotional state? How was my trading environment?

 

In last week's article we reviewed on trade which I classified as one of "The Good" (click here to see the trade review again).

Now let's go on with one of "The Bad".

The Bad

The Bad

The Bad

So technically, we had a sideways trend and I should be looking only for opportunity LONG off the lower range support and SHORT off the upper range resistance.

But here's where it gets a little more difficult.

In discussing the trend definition, the YTC Price Action Trader talks about subjectively over-riding the trend definition when we sense it as being wrong.

The fact is that all trend definitions break down at and around the points of transition from one trend-type to another.

And often, you'll see (or feel) something that is not yet visible in the chart.

I was sensing the rollover of price, transitioning from the sideways trend to a downtrend, effectively forming the rounded top that we saw earlier.

So I pre-empted the change. Price is not yet showing a downtrend. But I'll be operating as if it was about to make that change.

If I'm wrong, price will let me know. But if I'm right, I can get a nice and early entry into the new trending move.

The Bad

The Bad

The Bad

The Bad

The Bad

The Bad

The Bad

Let's review the definition for one of "The Bad".

  • The Bad – Trade ideas which DID have edge but were either poorly entered or poorly managed.

 

Poorly managed!!!

"Poorly managed" includes failure to re-enter.

The Bad

The Bad

The Bad

Let it go. Move on. There are more trades coming and they need my full attention!

Trading is not a game of perfection.

But rather a game of managing my imperfection, within an environment of uncertainty.

So… just quickly… what about one of The Ugly trades?

These are the ones that, with the benefit of hindsight, just have no edge.

They're the ones that should never have been taken.

Like this…

The Ugly

The Ugly

The Ugly

The Ugly

The Bad and The Ugly… they happen.

It's a part of trading.

But while we accept that, we should always be striving for improvement in skill and expertise.

  • The Good – We want more of these. Always be aiming to increase the percentage of The Good within any sample of trades. And to increase the profit they provide.
  • The Bad – We want less of these. Always be aiming to decrease the percentage of The Bad within any sample of trades. And to reduce the damage they do to P&L.
  • The Ugly – Ideally, we aim for NONE of these. That might be tough. But it's the goal.

 

Best of luck, 

Lance Beggs

 


 

The Good, The Bad and The Ugly!

 

Here is another way to track and review trades… with a classification system that makes it a little bit of fun!

During your post-session review you classify them into one of three categories:

  • The Good – Trade ideas which DID have edge and were well managed.
  • The Bad – Trade ideas which DID have edge but were either poorly entered or poorly managed.
  • The Ugly – Trade ideas which DID NOT have edge.

 

Some clarification:

  1. "Trade ideas which DID have edge" – I need to do some more work on teaching this in the future. For now, consider them to be trades in which your hindsight review says, "Yes, taking this trade was the right decision". This does not necessarily mean it profited. You might have taken a loss. But without any doubt, it meets all your trading plan criteria and it's one you were right to have taken.
  2. "Trade ideas which DID NOT have edge" – Those trades which are clearly not a part of your trading plan. You had no right to be in that trade. This doesn't mean it lost. It may well have profited, but was still a poor trade (for example… a revenge trade that works!).
  3. Feel free to vary the definitions in any way that makes more sense to you. But keep them in three classifications – The Good, The Bad and The Ugly!

 

Our aim is to seek constant improvement in our stats. When analysing the stats associated with larger groups of trades (20 minimum), we look for the following:

  • The Good – We want more of these. Always be aiming to increase the percentage of The Good within any sample of trades. And to increase the profit they provide.
  • The Bad – We want less of these. Always be aiming to decrease the percentage of The Bad within any sample of trades. And to reduce the damage they do to P&L.
  • The Ugly – Ideally, we aim for NONE of these. That might be tough. But it's the goal.

 

It's a continual striving for improvement in skill and expertise.

And of course we drive our performance improvement through an effective review process:

The Good:

  • How can I ensure I take more of these in future? What signs were there pre-trade to suggest this could be one of The Good? Consider both the market structure and the way that price was moving.
  • How could I have have performed even better? Was there any way to have increased size (assuming you scale in and out)? Was there any time or place at which I could have added to the position? Was there reason to extend the targets even further?
  • Were there any non-technical factors present which may have assisted with my decision making? How was my physical state? How was my mental state? How was my emotional state? How was my trading environment?

 

The Bad:

  • In what way did I underperform with this trade?
  • Why did this occur?

  • How can I ensure I do less of this in future?
  • Were there any non-technical factors present which impacted upon my decision making? How was my physical state? How was my mental state? How was my emotional state? How was my trading environment?

 

The Ugly:

  • How can I ensure I avoid these trades in future? What signs were there pre-trade to suggest this WAS NOT A VALID TRADE? Consider both the market structure and the way that price was moving.
  • Why was I not aware of this at the time?
  • Were there any non-technical factors present which may have assisted with my decision making? How was my physical state? How was my mental state? How was my emotional state? How was my trading environment?

 

The Good

The Good

The Good

The Good

The Good

The Good

The Good

The Good

The Good

So… given that it's now closer to 4:30am… how about we come back next week with part two. We'll look at the earlier trade from this same sequence (The Bad). And I'll see if I can find you one of The Ugly ones as well.

Happy trading,

Lance Beggs

 


 

A 50% Win Rate IS Enough

 

I love this recent email exchange with a new trader…

Email received: (We'll come in mid-stream as the earlier conversation is not relevant to this article!)

Great Lance, thanks for responding and giving me all this information.

I plan on trading highly liquid stocks and probably the intraday with the occasional swing trade. I've been out of the market for a while so I am going through some of the reads you have recommended. Come Into My Trading Room is excellent.

My problem is that I need to fine tune my studies because what I think works ends up not 50% of the time.

I love how you explain things and looking forward to buying your strategies. Your emails are great also. Thanks Lance.

 

My response:

Thanks. I'm glad you're finding value in my writing.

You said, "My problem is that I need to fine tune my studies because what I think works ends up not 50% of the time."

Obviously I don't have an real insight into how you're trading. But here is a different way of thinking of the problem…

What if 50% winners was enough? What if you could work to capture more of the move in those that did win. And cut the losses quickly on those that lost.

That is, accepting 50/50 and profiting from a higher win/loss size ratio.

Seriously… 50% can be enough.

See here also: http://yourtradingcoach.com/trading-process-and-strategy/stop-hoping-your-trade-will-win/

 

His response:

I have never thought of it in that way but now I will!!

 

Awesome! This is one of the many important breakthroughs that we need to achieve along our path to professional trading.

It's such a simple concept. But it's hard to see. In some ways it goes against our natural desire to win. And we're bombarded daily with advertising copy promoting high win percentage strategies.

But the fact is that long-term profitability is not just a function of our win rate. Just as important is the Win/Loss Size Ratio (WLSR).

  • WLSR = Average Win / Average Loss

 

If you achieve a 50% win rate across a series of trades you can still profit provided your average win is greater than your average loss.

In my own trading, the win rate is the least important of these trade statistics.

In a 20 trade sample I expect to achieve a win rate anywhere between 40 to 70 percent. But I aim to profit by keeping the average win greater than the average loss.

Yes… 50% can be enough.

50% winners across a whole month can be profitable, provided your average win is greater than your average loss.

50% winners across a whole year can be profitable, provided your average win is greater than your average loss.

50% winners across your career can be profitable, provided your average win is greater than your average loss.

Let's look at a few trades. Obviously eight trades are too small a sample size to really concern ourselves with the stats.

But it's eight trades that provided four wins and four losses.

And yet it profited.

Because the average win was greater than the average loss.

A 50 percent win rate is enough

A 50 percent win rate is enough

A 50 percent win rate is enough

A 50 percent win rate is enough

A 50 percent win rate is enough

A 50 percent win rate is enough

A 50 percent win rate is enough

A 50 percent win rate is enough

 

By all means, aim for as high a win rate as you can achieve.

But seriously… 50% can be enough.

Happy trading,

Lance Beggs

 

PS. Note: This discussion has excluded consideration of commissions and other business expenses, as they will vary from trader to trader. Obviously while a series of trades may well be profitable in and of themselves, a business profit is only achieved if these trade profits are sufficient to overcome commissions and other expenses. But the fact remains, a 50% win rate will still be sufficient. You'll just need a slightly higher WLSR to cover these costs.

 


 

Trade Less; Review More!

 

Day Traders

If you're not currently profitable, or achieving the level of success you wish to achieve…

Is your current situation something like this?

Trade Less Review More

WRONG! WRONG! WRONG!

I know there is a LOT to be learnt through live trading. But it's the review process which drives growth and development.

You'll see things during a review session, after the fact and away from the emotion, which were not visible in the live market.

You'll discover things within your stats, which were not visible in the live market.

If you want to progress, time for an effective review session is NOT negotiable.

You must make a choice.

You either HAVE TO cut something from the time outside of trading, to allow for an effective review session and ongoing learning.

Trade Less Review More

Or you have to cut your trading…

Trade Less Review More

Trade Less Review More

Longer Timeframe Traders

The same applies to you.

If you're not currently profitable, or achieving the level of success that you wish to achieve…

Is your current situation something like this?

Trade Less Review More

If you want to progress, time for an effective review sessions is NOT negotiable.

You must make a choice.

You either HAVE TO cut something from the time outside of trading, to allow for an effective review session and ongoing learning.

Trade Less Review More

Or you have to cut your trading…

Trade Less Review More

We all want to trade more.

But if you're not yet consistently profitable, or not yet achieving the standards of success you believe you are capable of achieving, then your priority must be ensuring an effective review process as well as time for learning, testing and development.

You can always trade full-time again in the future.

But for now, less is more.

Trade less. Review more.

Happy trading,

Lance Beggs

 


 

Review and Improve

 

You might like to consider your review process as the vehicle which drives your trading business to its ultimate destination.

Whether that destination is ongoing improvement and eventual success… or continued mediocrity, frustration and failure… is completely up to you.

If you've got nothing in place, here is a simple process to get you started.

Once you're comfortable with this, there is great scope to expand it to new areas of review. It doesn't solve everything.

But again, if you've got nothing in place, consider implementing this process RIGHT NOW.

Review and Improve

Look at your last 20 trades. Study them with the benefit of hindsight.

Examine 50 if you prefer. Or 100. Find the right compromise for sample size, which is large enough to be statistically significant and small enough to ensure your review process occurs on a regular basis. But not less than 20. I would suggest that is the absolutely minimum.

Once you've gathered all the trade data and charts, let's check the quality of the setups.

How many of your trade ideas were in chart areas which DID offer potential for multiple-R profits (2R minimum)?

It doesn't matter whether you actually managed to profit, or not.

We're checking the general concept. The trade idea.

We're making sure you're trading in the right areas of the chart.

Did price move from the setup area a sufficient distance to provide multiple-R returns?

Take note of all the trades within the sample which achieved this goal. And now let's check the quality of trade entry.

Now consider those trades that were in good multiple-R setup areas. How many were you able to enter at a place and time which offered good potential to catch those multiple-R profits?

Again, it doesn't matter if you achieved a profit or a loss.

With the benefit of hindsight, given where you entered, is it reasonable to expect that a successful trader could manage that position to achieve multiple-R profits?

How many of these trades would you classify as having a good entry?

Take note of them… and let's move on to check the trade management.

Now consider those trades that were in good setup areas and which were entered well. How many of these were successfully held from entry to the first target level?

How many were you able to hold open to the initial target point, avoiding all temptation to scratch the position early?

And then…

Of those which did achieve the initial target, how many of these were held to a further "hindsight perfect" exit point?

Again, take note of how many achieved this aim.

And now let's use this information to drive our business forward.

Looking at these figures, which area do you need to improve when trading the next sample?

It's important that we focus on one area at a time.

And that we work in order.

Get the setups right first. Are you happy with the number of trade ideas that are actually providing multiple-R profit potential? If not… focus on improving the quality of your trade ideas.

Then work on entry.

Then initial management.

And then ongoing management.

Find the first area that disappoints you. Examine why. Determine a course of action for the next 20 trade sample.

And repeat.

Happy trading,

Lance Beggs