I received an email recently from trader MK which I want to share, as it contains a few good lessons.
MK has kindly provided permission to share his session review. (His words… “You can use the email and the charts, that is why I sent them. It is important for traders to know that if you put the time in you will get to a point where you will trust your skills are up to the task.”)
Here is a picture of where I am at on one of my better days. I am constantly working on my weaknesses but they are now finally in a minority of sessions.
Thanks for all your help and guidance over the past. wow, almost 5 years. Your weekly insights and of course your Ebook (Read the first three sections more times than I can count) have been instrumental in my development as a trader.
You Lance are, the “Real Deal” and I would highly recommend YTC for anyone who aspires to be a trader.
2 Things I learned from Lance that helped a ton.
1. Forgive your self for your mistakes, you will make many, and move on.
2. If you can not do it on the simulator you will never do it in the real world.
(NB. Click on the images to open a full-size copy in your browser!)
This is great. I really like how MK has traded here.
This is what I really like about this session…
(a) The Average Win is greater than the Average Loss
This is a theme I’ve covered recently via some YTC Facebook posts. I’ll copy the post images below this article for you to view once you’ve finished reading.
I’ve also touched on the idea so many times via newsletter articles. Here are just some of those that I recall:
In my opinion, your win/loss size ratio is much more important than your win% (although both combine together to define your edge)!
Let’s look at MK’s stats from this series of trades:
Wins: +19 +24 +18 +18
Losses: -10 -10
Breakevens (or thereabouts): +2
Total wins: 79 ticks
Average win: 19.75 ticks
Total losses: -20 ticks
Average loss: -10 ticks
Acknowledging that this is a small sample size, the stats for this session are good.
Win Rate: 57%
Win/Loss Size Ratio: 2:1
Well done MK!
You’ve produced approximately 6R profits in this session (assuming 1R is the 10 ticks as shown in your two losses).
(b) The Stop & Reverse from trade 3 to 4
One of the things I absolutely LOVE to see is when a trader takes a wrong position against the market bias, takes the small loss, and then flips to the correct direction.
That is something that is difficult to do as a novice – to know the right time to do this and the right time to avoid it. It requires quite a bit of skill in market analysis and trade management. It requires confidence in your strategy. It requires confidence in your ability to read the market. It requires confidence in your ability to manage risk. It is the sign of someone who is a real trader.
MK did that beautifully from trade 3 to 4. It’s a shame the market moved so quick that he couldn’t adjust the target further away.
(c) These good results were achieved in a rather difficult environment.
Don’t be deceived by the overall directional nature of the market. This was a tough environment. The trend was not smooth, but instead worked lower in a stair-step fashion – strong drive, long pause sideways, strong drive, long pause sideways.
MK showed great patience in sitting out of the market during the sideways consolidations and assessing the right time to enter.
And even more so… he showed great confidence in his analysis when stopping and re-entering from trades 5&6 to trade 7.
Areas to Improve:
Accepting that I have a very small sample size to work from and I’m making assumption that this is typical of MK’s trading, the following is the only improvement I can suggest. And it’s one that he’s well aware of as well, as identified in his own review notes.
While the Win/Loss Size Ratio was a good 2:1, much more was available.
More work needs to be done on extending part two targets when the market offers great potential for directional movement.
Trade 4… I accept that it moved fast and you didn’t have time to move the target. That happens.
Trade 7 though… and especially when it’s late in your session and the market has been directional and you’re sitting on a good session profit… let it run!
You need to be killing it when provided with a directional market.
(Of course, I’m not one to talk here as I always underperform in these markets! 🙂
This is a job for the Market Structure Journal – find numerous examples of strong follow-through from trade areas and develop a set of rules or guidelines for when you will extend your target and hold your trade for a larger win.
Lessons for Others:
(a) If you don’t have a strategy yet, see here.
(b) Learn from the above points.
(c) Work to achieve similar stats, where the average win is greater than the average loss, for those sessions where the market is favourable and you have a good read on the price flow.
(d) Work to ensure that unfavourable or poorly traded sessions have an “average session loss” smaller than the “average session win” of these favourable sessions.
(e) Quite likely at this point… assuming a reasonable win rate… you can call yourself a trader.
I hope you found this useful,
The earlier YTC Facebook Posts (as mentioned above):
The following are two recent YTC Facebook posts dealing with a common theme – taking a longer term perspective on your trading, looking at it as a series of trades rather than individual trades, and expecting individual losses but aiming to ensure that the average win is greater than the average loss.
Email feedback from MK:
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Thanks for taking the time to give me some feed back. I thought you would mention two things,
1. The TST was below any potential support but was actually a BPB as Identified. I always look at the 15 & 30 min charts and look at the pullbacks and reversals and had it in the back of my mind that price could reverse direction somewhere in this area. That preconceived idea was wrong. Just follow the price action.
2. I missed a couple of nice pullback entries (getting tea for the princess). 5 am start here in the Pacific time zone.
Thanks again Lance for all your help and guidance over the years. I continue to look forward to your weekly input.
The further down this road I get the more I love this trading game.
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I have no problems with the TST at all. I can clearly see what you were seeing. Given the extended duration of the pullback and the fact that it created a nice breakout short, I’m not sure that I would have taken the entry due to concerns over sell stop orderflow. But had the pullback been of a shorter duration, I quite possibly would have been buying in this same area, along with your entry. (Let me know if you can’t follow that bit and I’ll mark it on a chart).
So no, the fact that you went long there doesn’t worry me at all. It’s a valid trade location. What would have concerned me, and led to further comment, would be if you didn’t contain the loss. And you did that just fine. In fact, you reversed to short which is even better!
Likewise with missed trades. They don’t concern me. The fact is that we often miss trades. It’s just part of the game. The important thing is to not let that lead to frustration and revenge-trading. So yes, while there were a few other trade areas I could have marked up, again it’s no real concern to me that you didn’t trade them.
Almost all sessions will underperform what was potentially available, to some degree. What is important is how we manage those opportunities that we do get.
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