Feedback from a recent article has been so incredibly positive, with a number of emails coming through saying that this was EXACTLY what these people needed to hear right now. It seems one of the most popular articles of the last 12 months.
Check it out here if you missed it – Are You Closer To Profitability Than You Thought?
So let's explore an idea expressed in my favourite line of the article.
And that's the following:
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"… right now it's time to end the mediocrity. It's time to fight to get to the next level."
There are various levels to pass through on the way to consistent and increasing profitability.
For most of us, there are no short cuts!
There are no Game Cheats that can jump you straight to the end goal.
It's a step by step process of growth and development.
Progress will be slowed (or completely non-existent) if you're plan for progression is unstructured and random.
Here's how to provide some structure.
(1) Find where you currently reside on the above pathway.
Look at results over a recent sample of trades. What you did three years ago is irrelevant. We want to see what you're achieving NOW.
Take a recent sample… 20 trades minimum. And look at the P&L. Where does that place you on the above pathway? (Note: the sample chosen must also represent "typical" current results. If you fluked a massive winner through poor practice (and if you're honest with yourself you'll know if you did that) then exclude that trade. You'll only be cheating yourself if you include it.)
Wherever you are… accept it. There's no point denying it. This is your starting place. You build from here.
(2) Determine the Win%, Loss%, Average Win and Average Loss stats for your most recent trades (20 trade group… minimum).
If you don't have sufficient stats to determine these… you need to keep better stats. Start again with a new 20 trade group and keep better stats.
(3) Identify the next level you hope to achieve.
This is the very next level on the list. It's not the end point.
There is no point aiming for $100,000 days if you can't consistently achieve breakeven.
Identify the next level.
(4) Determine how your step (2) stats will need to change in order to place you within the next level of the pathway.
This may require improvement to one particular statistic. It may require improvement to multiple stats.
Expectancy = (Win% x Average Win) – (Loss% x Average Loss)
What needs to improve? By how much? And remember… we're just targeting the NEXT level on the pathway.
If you have multiple stats failing to achieve required targets, pick one to focus on first.
(5) Immerse yourself into a review of the trades making up your most recent sample, to identify the reasons for failing to achieve the required statistical outcome, and the changes necessary to take you to that next level.
Do you need to change something in strategy? In your processes, procedures or routines? In your level of knowledge? In your level of skill? In your mindset? In the attitude to which you approach the game?
You have almost complete freedom to change your business in any way you need. So you MUST keep this structured. Focus ONLY on that which will help you bridge the gap from where you are now to where you need to be at the next level.
Can you add something to your business?
Can you improve something?
Or do you need to subtract something, as we talked about in the previous article.
(6) Implement the changes and apply them as you trade your next group of trades (20 trade group… minimum).
You know what you've got to do.
Now do it.
(7) Repeat
Back to step 1. What level are we at? Where is the next level? How close are we? What do we need to do to get to that next level?
Progression comes through filling the gap between where you are now and where you want to be next. The key is to make "where you want to be next" close… just the next level.
Don't try to jump straight to the end goal.
Every step up the ladder is a fight.
Some may come easily. Most won't.
But you can't shortcut the process.
And in fact you reasonably need to expect that some levels of advancement will require MULTIPLE attempts before you can stick there with some consistency.
You need to learn to walk before you can run with the professionals. And learning to walk will involve falling down many times. Get back up. Keep walking.
If you want this, you've got to fight to get to the next level.
This is the ONLY way I know of to get to the ultimate goal of consistent success as a professional trader.
Get started today… step 1.
You can do it!
Happy trading,
Lance Beggs
What an article!!!!! Thanks for this Lance.. 🙂
Thanks! 🙂
Hi Lance,
I’m curious as to whether the TJS app that you recommend in your article allows to do the following.
I like to periodically (once a week) track the profit factor of my trades, and I integrate my journaling process into this: for each trade I made I keep track of the profit/loss achieved in points, and upgrade a profit factor for the journal entry associated with the trade as follows: {Profit factor for Journal entry} = {cumulative gain for journal entry} / {cumulative loss for journal entry}. I hope my explanation is clear enough.
Basically this associates a profitability metric to each of my journal entries; it is a bit time-consuming, but I find it extremely useful – what do you think of this, by the way? 🙂
Do you know if there is some way to do this using the TJS app you linked?
Thanks,
Michael
Michael,
I’m not sure I understand correctly. Are you determining this profit factor after every trade or just once a week? And if you’re doing this for every trade, is that reset to zero each week so that you only see the cumulative profit factor for trades from that week?
Sorry for my confusion. Can you clarify this for me?
Thanks,
Lance.
Hi Lance,
I’m sorry for the confusion, I should not have mentioned the “once a week” bit… Too much information! 🙂 I’ll try to explain better what I do, please disregard for the moment the fact that I perform the update once a week.
Each trade I make is based on a situation that I deem similar to some past journal entry; the way I like to see it, each of my journal entries “generates” a portion of my trading decisions.
The profit factor I mention is calculated by taking the cumulative total gains from the winning trades generated by the journal entry, divided by the cumulative total losses from the losing trades generated by the journal entry. No resets.
The above gives me a long term expected value for the profit factor of each of my journal entries; since I’m the one ultimately making decisions, this profit factor measures directly my performance as a trader, in that specific situation.
I like to do this once a week, because this way I can also calculate my profit factor on each relevant journal entry for the week and compare that to the expected value. This tells me how I performed compared to expectation in each specific situation, and it also allows me to zero in precisely on problem areas.
Hopefully I managed to clarify things a little! Again I’m sorry for the confusion, I’m definitely the “anti-Lance” when it comes to clarity… 🙂
Thanks,
Michael
Hi Michael,
Sorry… I’m still not getting it! 🙂
So a journal entry is not one trade, but more a summary of several trades of one type?????
Rather than continue back & forward here in the comments section, unrelated to the article, I’ll outline in quick summary form how TJS is used. Maybe that will answer your question. If not, can we continue this via email: support (at) yourtradingcoach (dot) com.
Data is entered into the TJS trading log worksheet for every trade, either manually or via the import function (using your platforms trade data export file).
Additional data is entered (again for each individual trade) beyond what is provided by your broker. This allows you to categorise the trade according to whatever Performance Tracking Categories you wish to monitor. These allow you to break the data into subsets, to compare performance of different setups, or entry triggers, or… well any subset of the data you want to track.
The Analysis worksheet tracks stats for the full sample of all trades – P&L, Win%, Payoff Ratio (ave win/ave loss), Expectancy.
It also allows you to filter these by year/month.
And it provides stats for each of the subsets determined by your Performance Tracking Criteria. So it will give P&L, Win%, Payoff Ratio and Expectancy for Long vs short, each different instrument, each different setup type, each different (whatever you choose to track via the Performance Tracking Criteria).
Please note that the Payoff Ratio is measured differently to your Profit Factor, but I expect both can be used for the same function.
Hopefully this helps. There are some videos and worksheet images on the TJS website, which will probably give you a whole lot better explanation for how this works, and will help to determine whether or not this suits your needs.
Cheers,
Lance
If you are a swing trader is a sample size of 10 acceptable ?
We need to find a nice balance between (a) having enough trades to ensure our sample size is statistically significant, and (b) occurring often enough that we get regular feedback.
I tend to feel that 20 is the absolute minimum I can accept before causing real problems with part (a).
I mean, it’s quite possible to get 4 or 5 losses in a row, despite them all being good trade ideas which have edge. If you trade only 10 trade groups, this only leaves 5-6 other trades to make up for the drawdown. Poor results (which are quite likely in this case) risk being misinterpreted as a “problem” with the strategy or your trading. A 20 trade grouping though is much more able to absorb any “statistically normal” sequences of poor results, due (if for no other reason) than it’s more likely to extend across different trade environments.
By all means try groups of 10 if you feel that this better suits your trade frequency. Just be aware of this downside and manage the results accordingly.
Good luck.
Great answer and thanks for the response.