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4. e-Learning with the TradingMasteryHub - Risk Management 1x1🚀 Welcome to the TradingMasteryHub Education Series! 📚 Are you looking to level up your trading game? Join us for the next 10 lessons as we dive deep into essential trading concepts that will help you grow your knowledge and sharpen your skills. Whether you're a beginner or looking to refine your strategy, these lessons are designed to guide you on your journey to better understand the markets. 📊 Manage Your Risk with These Three Simple Methods! In trading, managing risk effectively is crucial to long-term success. Even the best strategies can fail if risk management is ignored. In this session, we'll explore three key methods that every trader should master to protect their capital and stay consistently profitable. 1. Position Sizing: Trade Smart, Trade Safe Position sizing is the foundation of risk management. I always set a daily and weekly stop-loss limit to ensure that I can recover mentally and financially from any losses. My daily stop-loss is capped at 5-10% of my entire trading account, and I never risk more than 30% of that daily limit on a single trade. Each trade's risk allocation depends on the quality of the opportunity: - 5-star setups: Up to 30% of the daily stop-loss. - 4-star setups: Up to 15% of the daily stop-loss. - 3-star setups: Up to 5% of the daily stop-loss. I only trade 4-star setups and above to avoid overtrading and the temptation to jump into random market opportunities. This disciplined approach ensures that I’m only putting my capital at risk when the odds are strongly in my favor. 2. Stop-Loss Orders: Protect Your Trades with Precision When setting stop-losses, I place them at strategic points highlighted by the market, such as significant support or resistance levels. To avoid premature stop-outs due to market noise, I set my stop-loss beyond the spread and the market’s natural fluctuations. For example, if the FDAX is in an uptrend with the last higher low at 17,000 points and the spread is 15 points, I would set my stop-loss at 16,967 points (17,000 - 15 - 17). This ensures that my risk/reward ratio (R/R-ratio) is correctly calculated. Before entering any trade, I carefully assess whether the potential upside justifies the risk. If the R/R-ratio isn’t favorable, even for a 5-star setup, I might avoid the trade to protect my capital. 3. Diversification: Tailor Your Strategy to Your Comfort Level Diversification is another critical aspect of risk management. As a trader, you can choose to focus on a handful of ticker symbols or spread your risk across a broader range of assets. The first approach, trading a few instruments, is easier to manage and ideal for strategies like market profile trading in FX or indices. Alternatively, you might opt for a more diversified portfolio, trading up to 50 different stocks at once. In this strategy, each trade only represents a small fraction of your total risk capital—such as your daily stop-loss. This minimizes the emotional strain of trading, as each individual trade carries a smaller risk. With a solid strategy, you can manage all trades effectively, spreading your approach across calls, puts, different markets, industries, and volatility levels. However, this approach is typically better suited for larger accounts, where spread costs won’t significantly impact your profits. 🔚 Conclusion and Recommendation Risk management isn’t just about protecting your capital; it’s about maintaining the psychological stability needed to trade consistently. By mastering position sizing, setting precise stop-loss orders, and choosing the right diversification strategy, you can navigate the markets with confidence and discipline. Remember, successful trading isn’t just about finding the right opportunities—it’s about managing those opportunities wisely to ensure long-term profitability. By focusing on high-quality trade setups, calculating your risks accurately, and diversifying appropriately, you’ll find that you can maintain your composure even during losing streaks. This approach not only protects your account but also keeps your mind clear and your emotions in check, paving the way for sustained success. --- 🔥 Can’t Get Enough? Don't Miss Out! Subscribe, share, and engage with us in the comments. This is the start of a supportive trading community—built by traders, for traders! 🚀 Join us on the journey to market mastery, where we grow, learn, and succeed together. 💪 💡 What You'll Learn: - The fundamentals of trading - Key technical and sentiment indicators - Risk management strategies - And much more!... Best wishes, TradingMasteryHub
NASDAQ:AMDEducation
by TradingMasteryHub
Backtesting Settings For the Logical Trading Indicator V.1Since creating the Logical Trading Indicator, my trading game has changed in a big and positive way. But I have been curious as to how I can make an automated strategy with it and how much it makes. The Logical Trading Indicator has many different signals and alerts that you can use to create your own trading strategies that work best for your trading plan. Over the weekend, I have been tinkering around with the base strategy of buy when I get a buy signal and sell when i get a sell signal. I have played around with both a long and short strategy mainly focusing on the BTCUSD pairing. I am really doing this to help me find the best settings possible for each time frame and letting the strategy do the backtesting for me. This really helps me to figure out how it does over the past year or so. So far, at least for BTC, a LONG only strategy has yielded the best results. Mainly because I couldn't get it to fire shorts the way I wanted it to. This is where machines still need some human guidance, as well as your trades, haha. Dialing It In What I am doing is going into different timeframes and finding the best settings for the ATR multiple and length in combination with basis length and the long period moving average. I have been recording the results primarily on the 5 minute as well as the 1 HR and 4 HR time frames because those are the main time frames I focus on. I have played around with different variations of functions, but TradingView can't seem to get things to fire on the strategy the same way I can get the main indicator to fire. But based on this, I set the strategy to a simple LONG only strategy where it buys when you get a BUY signal and then closes when you get a SELL signal, with the addition of a stop loss function that let's me set a stop loss percentage to provide some additional risk management to help with the drawdown percentage. In this backtest, the strategy was not taking the 'Take Profit' signals into account, or when I tried to include them in the logic, they weren't firing properly, so I kept it simple with just the BUY and SELL signals with a stop loss. If you used the built in take profit signals, you can do even better than these results. On the 5 minute time frame, the most profitable settings ended up being: ATR Multiple: 3 ATR Length: 1 Basis Length: 15 EMA Long Period Moving Average: 50 SMA These settings yielded over 100% profit for the backtesting period, which is about a year. For the 1 HR time frame, the winning settings were: ATR Multiple: 3 ATR Length: 6 Basis Length: 20 EMA Long Period Moving Average: 100 SMA These settings yielded over 200% profit for the backtesting period with almost 60% win rate! Again, you could maximize this even more by utilizing the take profit signals and using short trades when the trend is right and if you are trading on a futures exchange. I have been doing more spot trading on DEXs lately, so I have been trading long only lately. The Importance of Backtesting I cannot stress this enough, you have to back test your strategies to make sure they are going to be profitable. This can be done manually by going back in time on the charts and finding all of your signals and seeing if it was profitable, or you can create your own strategy like this using TradingView's Pinescript and let the program do the backtesting for you. However you do your backtesting, just make sure it gets done! You don't want to just think an indicator or a strategy works, you want to KNOW it works! If not, you could be throwing your money down the drain. This is Only A Test- But Great For Info Gathering I am only using this strategy for my own backtesting purposes, not publishing it. I simply used one part of the strategy that is built into the Logical Trading Indicator, and it honestly doesn't properly utilize multiple options for exits as far as the automated strategy goes. I know that if I use these settings, but also use my built in take profit signals, I can do much better than these results are showing. What is great about this is you can see the performance and find trades that you wouldn't have taken in the first place, or entries and exits that could have been done better by trading manually. For example, after looking at the list of trades, I saw several trades I would have either gotten out of for better profit using the take profit signals, or trades I wouldn't have taken in the first place due to consolidation or accounting for the larger trend. When trying to program some of the other functions from the main indicator, TradingView would freak out on me a bit and not want to provide any results, or results that just didn't make any sense. But that is all a part of the process. It helps you figure out that the machines don't always have it right, and that having just a bit of 'human' in your trades can make your performance even better than the strategy suggests! Living That Trader Life This is the life of a good trader, at least in my opinion. Based on my trading plan, I do not trade on the weekends, even though the crypto markets are open, it isn't always the best time to trade. I like to take this time to go over my trading journal to see where I can improve, perfect my strategies, and hone in on the things I need to work on to get better. What this development work does for me is show me that automated trading is great, but with the combination of a great indicator that can produce trading alerts, and my own trader's intuition, I can give the markets a serious beating and come out with some amazing gains, as long as I stick to the plan, as well as trade manually with the signals! This helps me keep the emotions out of the game and let's me use the data with the correct settings to make the best decisions possible in my trades for the biggest gains! So get out there and do some backtesting on your favorite strategies to see if you really are trading logically!
COINBASE:BTCUSDEducation
by thelogicaldude
Educational: The issue with high risk to reward🔶 Introduction A high win rate—that is, the proportion of trades that result in profits—is appealing to many traders. They might believe that being lucrative requires a high win rate, or that it will increase their self-assurance and lessen their tension. A trader's performance may be negatively impacted over time if they have a high win rate, which is not a guarantee that they will be profitable. We will discuss the problem with high risk to reward and win rates in trading in this publication and why they are not the best measures of success. 🔶 Risk to reward and win rate Two ideas that are frequently used to gauge the effectiveness of a trading system or strategy are the risk to reward ratio and win rate. The risk to reward ratio calculates how much a trader is prepared to lose in exchange for a possible gain. A trader's risk to reward ratio, for instance, is 1:2 if they stake $100 in order to gain $200. The win rate calculates the percentage of trades that a trader wins out of all the trades they place. For instance, a trader's win rate is 80% if they win 80 out of every 100 trades. 🔶 Inverse Relationship between Risk to Reward Ratio and Win Rate One would believe that a successful trader should have a high win rate together with a high risk to reward ratio. This isn't always the case, though. In fact, the risk to reward ratio and win rate have an inverse connection, which means that when one goes up, the other goes down. This is due to the fact that the likelihood of achieving a reward decreases as it increases in potential, and vice versa. For example, if a trader aims for a 10:1 risk to reward ratio, they will have to find a very rare opportunity where they can risk $100 to make $1000, which is unlikely to happen often. On the other hand, if a trader aims for a 1:1 risk to reward ratio, they will have more chances of finding trades where they can risk $100 to make $100, but they will also have to win more than half of their trades to be profitable. 🔶 Importance of Positive Expectation Therefore, unless a trader also has a positive expectation, which is the average amount of money they gain or lose every deal, having a high win rate does not necessarily indicate that they are a profitable trader. The risk to reward ratio is multiplied by the win rate, and the loss rate—which equals 1 less than the win rate—is subtracted to determine the expectation. For instance, a trader's expectation is as follows if they have a 2:1 risk to reward ratio and a 60% win rate: Expectancy = (2 x 0.6) - (1 x 0.4) = 0.8 This indicates that they profit by $0.8 every trade on average. However, if their win rate remains at 60% and their risk to reward ratio falls to 1:1, their anticipation changes to: Expectancy = (1 x 0.6) - (1 x 0.4) = 0.2 This means that on average, they make only $0.2 per trade. As you can see, having a high win rate does not guarantee profitability, unless it is accompanied by a high enough risk to reward ratio. 🔶 The Limitations of High Risk-to-Reward Ratio and Win Rate High win rates can also be problematic because they might make traders overconfident and complacent. They might neglect the risks and uncertainties associated with trading because they believe they have discovered a perfect technique or plan that will always work in their favor. A second possibility is that they grow emotionally attached to their winning streaks and worry about losing them, which can lead them to stray from their trading strategy or take unwarranted risks. Furthermore, a high success rate may make traders more susceptible to cognitive errors like confirmation bias and hindsight bias, which can skew their judgment. 🔶 Conclusion It may not be as desirable as it may seem to have a high risk-to-reward ratio and win rate when trading. It does not necessarily imply that a trader is successful or profitable, and it may also have some negatives that adversely impact their performance. For long-term trading success, traders should pay more attention to other elements than only these indicators, such as expectancy, consistency, risk management, and emotional control.
COINBASE:ETHUSDEducation
by ChristopherDownie
3
⚠️ Risk:Reward & Win-Rate CheatsheetThe reward to risk ratio (RRR, or reward risk ratio) is maybe the most important metric in trading and a trader who understands the RRR can improve his chances of becoming profitable. Basically, the reward risk ratio measures the distance from your entry to your stop loss and your take profit order and then compares the two distances. Traders who understand this connection can quickly see that you neither need an extremely high winrate nor a large reward:risk ratio to make money as a trader. As long as your reward:risk ratio and your historical winrate match, your trading will provide a positive expectancy. 🔷 Calculating the RRR Let’s say the distance between your entry and stop loss is 50 points and the distance between the entry and your take profit is 100 points . Then the reward risk ratio is 2:1 because 100/50 = 2. Reward Risk Ratio Formula RRR = (Take Profit – Entry ) / (Entry – Stop loss) 🔷 Minimum Winrate When you know the reward:risk ratio for your trade, you can easily calculate the minimum required winrate (see formula below). Why is this important? Because if you take trades that have a small RRR you will lose money over the long term, even if you think you find good trades. Minimum Winrate Formula Minimum Winrate = 1 / (1 + Reward:Risk) 👤 @AlgoBuddy 📅 Daily Ideas about market update, psychology & indicators ❤️ If you appreciate our work, please like, comment and follow ❤️
Editors' picks
Education
by QuantVue
8
Risk-to-Reward > Win RateWe have mentioned it in a list of our previous educational posts and we will state it again: your risk-reward plan is much more important than your win rate. You can have a 90% win rate and still be losing in the long-run. On the contrary, you only need a 35% win rate to be a consistently profitable trader on the longer term. Beginners mainly focus on winning as many trades as possible and it is totally understandable, because we have all been there. "The more trades I enter, the more money I will make" principle has destroyed many trading careers. The explanation to the "Why?" question is pretty simple: when we are new to trading, every win gives us euphoria and makes us think we are the rulers of the market. Guess what happens next, the market hits back, puts us in a position where we are stuck in a losing streak, and humbles us enough to quit trading and think it does not work. As we get more experienced, we lean towards the "Less is more" principle and believe that quality will always be over quantity. As an instance, we have orchestrated 2 scenarios on the graph. The example on the upper side of the screen shows how our trader has a 80% win rate but has yet failed to remain in profits due to the fact that he does not have a solid risk management plan. On the opposite side of the road, we have Trader B who is able to remain in consistent profits by winning only 20% of the executed transactions. All those minor losses that he made got covered by one big win, and as long as he keeps following the current risk management policy and strategy of his, he is sure that he will be consistently profitable in the long run.
BITSTAMP:BTCUSDEducation
by Investroy
11
Learn Risk-Reward Ratio | Risk Management For Beginners 📚The risk-reward ratio (or risk return ratio) measures how much your potential reward (or return) is, for every dollar you risk. 📚For example: If you have a risk-reward ratio of 1:3, it means you’re risking $1 to potentially make $3. If you have a risk-reward ratio of 1:5, it means you’re risking $1 to potentially make $5. You get my point. ⚠️Now, here’s the biggest lie you’ve been told about the risk reward ratio: “You need a minimum of 1:2 risk reward ratio.” This statement is incorrect! Because the risk-reward ratio is meaningless on its own. 📚Here’s an example: Let’s say you have a risk reward ratio of 1:2 (for every trade you win, you make $2). But, your winning rate is 20%. So out of 10 trades, you have 8 losing trades and 2 winners. Let’s do the math… Total Loss = $1 * 8 = -$8 Total Gain = $2 * 2 = $4 Net loss = -$4 By now I hope you understand the risk reward ratio by itself is a meaningless metric. Instead, you must combine your risk-reward ratio with your winning rate to know whether you’ll make money in the long run (otherwise known as your expectancy). 📍THEREFORE: The key to success is the combination of the RR and Win Rate in such a fashion that yields a positive return. 📙Example: 🔘If your RR is 1:1 then you start making money with 51% win rate and above. 🔘If your RR is 1:1,5 then you start making money with 41% Win rate and above. 🔘If your RR is 1:2 then you start making money with 34% win rate and above. 🔴The higher the RR the lower is the breakeven Win Rate! Like, comment and subscribe to boost your trading! Hey traders, let me know what subject do you want to dive in in the next post?
Editors' picks
OANDA:XAUUSDEducation
by TopTradingSignals
80
❗️THE BIGGEST LIE ABOUT RISK REWARD RATIO❗️ What is risk-reward ratio — and the biggest lie you’ve been told: 📚The risk-reward ratio (or risk return ratio) measures how much your potential reward (or return) is, for every dollar you risk. 📚For example: If you have a risk-reward ratio of 1:3, it means you’re risking $1 to potentially make $3. If you have a risk-reward ratio of 1:5, it means you’re risking $1 to potentially make $5. You get my point. ⚠️Now, here’s the biggest lie you’ve been told about the risk reward ratio: “You need a minimum of 1:2 risk reward ratio.” This statement is incorrect! Because the risk-reward ratio is meaningless on its own. 📚Here’s an example: Let’s say you have a risk reward ratio of 1:2 (for every trade you win, you make $2). But, your winning rate is 20%. So out of 10 trades, you have 8 losing trades and 2 winners. Let’s do the math… Total Loss = $1 * 8 = -$8 Total Gain = $2 * 2 = $4 Net loss = -$4 By now I hope you understand the risk reward ratio by itself is a meaningless metric. Instead, you must combine your risk-reward ratio with your winning rate to know whether you’ll make money in the long run (otherwise known as your expectancy). 📍THEREFORE: The key to success is the combination of the RR and Win Rate in such a fashion that yields a positive return. 📙Example: 🔘If your RR is 1:1 then you start making money with 51% win rate and above. 🔘If your RR is 1:1,5 then you start making money with 41% Win rate and above. 🔘If your RR is 1:2 then you start making money with 34% win rate and above. 🔴The higher the RR the lower is the breakeven Win Rate! Hope You get the idea, guys. Thanks for your time, see you in the next article😉
BITSTAMP:BTCUSDEducation
by SignalProvider
4
Risk:Reward Ratio. What is it?Risk to reward ratio. What is it? What does it mean and how do we use it? Now, if you made it to the point where you're here on TradingView, there's a good chance that you have heard about Risk to Reward ratio. Today, I want to dive into what it really means and how to actually utilize it. I see so many beginners missing out on huge profits and opportunities because of their risk reward ratio and I want to share my knowledge of this tool and how to actually use it in the future. Firstly, let's dive into what is the risk/reward ratio? The RR ratio is a tool that can accurately predict by expected returns based off of previous results. This tool measures how much reward you are estimated to gain based off of the dollar amount you risk. For example, if you have a risk to reward ratio of 1:3, it means for every $1 you risk, you will gain a return of $3 in the event of a positive trade. Using the same example in the FX market, let's say you're risking 10 pips on EURUSD, your take profit is at 30 pips. This means you gain 30 pips in the event of a win, lose 10 pips in the event of a loss, giving you a 1:3 risk/reward ratio. This is a very powerful tool because compared with the win rate and in correlation, you can actually predict based off of your previous results, you're expected returns on investment. Being able to predict what you're expected returns are are great way of giving you milestone targets, but also when you're looking at getting funded with prop firms, you also know what you are actually able to achieve in what time frame. Now, it goes without saying, the higher your risk to reward ratio, the less you need to win in order to maintain profitability. The opposite, the lower your risk reward ratio, the higher win rate is required to maintain profitability. But this is where we get into where I find beginners struggle. A lot of people will base their strategies on their risk/reward ratios, which is understandable if you're building the strategy from scratch. If you're using a prebuilt strategy or something that doesn't really correlate with risk/reward ratio. Then it makes it obsolete and just confusing. Going back to my first point, risk to reward ratio is a tool that you can use to estimate future potential returns based off of previous results. Let's say you have 100 trades worth of data. You can accurately have a look at what is your risk to reward ratio is and compare that with your win rate. From there you can make a decision whether or not that is a profitable strategy. On top of that, you can then start to look to improve either your win rate and risk to reward ratio, knowing that that is an area that needs improvement. When it comes to improving your risk to reward ratio, one thing that always grinds my gears with traders, is when they enter a trade, they'll set their stop loss and take profits based on their risk to reward ratio not based on the actual analytics of the trade. While I understand this and with some strategies, this can work. For most, they end up setting those take profits in areas that is just realistically is going to be really hard for the price to get to. What professionals do when trying to improve the risks of reward ratio is only take those setups where a good take profit is viable around that level of risk to reward. For example, in this chart, we are looking at buying the USDCAD over the next couple of weeks. We like this setup. We've had our entry signal and we're going to place a stop loss below that recent low, which was created early last week. We are not happy with our risk to reward ratio. We think we're leaving too much profit on the table and want to increase our overall results. So I'm only taking trades that have close to a three to one risk to reward ratio. But as you can see by this chart that dotted lines are areas of resistance which we are going to have to break in order to achieve that level of profitability. There are 5 different zones we are going to have to get through in order for my take profit to be hit, it is fair to say the odds are not in my favor. Now a beginner Trader will still enter this trade with the same take profit and the same stop loss and just hold on. The reason they'll do that is because they want the 1:3 risk reward ratio. They don't care where the profit target is. What matters is it is 3 times worth what they're risking. On the other hand, A professional trader will actually either let this trade go and not enter it, or look for another entry point later on on smaller timeframes to where you can fit that risk to reward ratio and you're not going to hit the high levels of resistance. To sum up what my point is, risk to reward ratio is a very powerful tool to understand what you are capable of the trader and also where you can improve. It is not a valid take profit selection strategy. Yes, it can definitely help with guidelines on where to set your take profit, but it should not be the sole reason your take profit is set at a certain price just because it is X amount whatever you are risking. Have a look at what the chart is telling you and what your analysis is telling you. Then, only take the trades which coincide with the risk to reward ratio. You want to achieve. I hope you enjoyed this insight and I hope it was beneficial to you. I recommend highly diving into your previous trading data. Have a look at your win rate. Have a look at your risk reward ratio and understand what your profitability expectation really is and base your future decisions off of that data. Have a fantastic trading we can I look forward to seeing your comments. - Jordon
FOREXCOM:XAUUSDEducation
by the5erstrading
5
Winning rate (Course #1)The goal of this page is that you understand winning rate and how it works. Your win rate is how many trades are winning trades out of all the trades. This is fairly easy and straightforward. Did you know that you don’t need to win 100% of the time? As a matter of a fact, I found that algos with a VERY HIGH win rate (98-99%) are the worse ones, because the 1-2 % of losing trades represent a loss that is usually equal or bigger than all the gains altogether. See below one of my very first profitable algo. I never got that major loss with this algo, but I knew it would come. I got lucky because I stopped the algo right before a big move against me, which would have caused a liquidation event (similar to what happened to me with the PSAR bot from Swing Trade Pros, see the introduction post). This is basically 769 trades with no loss whatsoever. June July Mid August 2021. This is great right? Yes, but I never slept well because I knew my strategy had a flaw and I could get liquidated at anytime. This algo is one of the algo I run side by side with my hands free algo. I just turn it off when I know that I am at risk of being liquidated. Or, I turn it on when I am rather confident of the direction of the market overall. So what is the point of having a 99% win rate if the 1% loss can erase the 99% profits? In reality you will find that most traders or strategies varies between 25% and 45% win rate. You might think how come you can be profitable if you win only 25% of the time? Hang on I will prove it to you below. My best strategy has a 45% win rate approximately. I have great strategies with 25% win rate also. Most manual traders (no algo) are at about 30 to 35% win rate. Some of these guys on Twitter (very rare) have over 50% win rates, same as Market Cipher Crypto Face, he’s got a higher than 50% win rate I think. He is a very good trader, and this is why he’s very wealthy, because he knows how to manually trade. This benchmark should give you a good idea of what to expect. Another thing – the higher the time frame you use, the higher your win rate. For example, Bitcoin has a tendency to go up only – at least on the macro level, let’s say on the daily time frame. So right there you have what we call an edge, this is an advantage over the market. The advantage is a higher probability to go up than to go down. Because of that, you can easily develop an EMA crossover strategy that will win more than 50% of the time! EASY! Now if you trade on the 5 min timeframe, you literally have a 50% chance for the price to go in either direction. You can try to play the trends here and there, check the momentum, whatever, but if you have traded Bitcoin for long enough, you should know as much as me that ANYTHING can happen at ANYTIME – and even if you were over the 200 EMA, even if Market Cipher showed a bullish divergence and even if you were at a major horizontal support, ANYONE can dump the market (e.g. a whale – or Elon tweeting) and go against all the odds. Because anything can happen, it is much harder to have a really high win rate. So how can you make money if you win only 30% of the time? Check out the example : out of 10 trades, only 3 of them are in profit (3/10 = 30%) Does the order of the trades change the final profit? I shuffled the order of the trades – we can see that it doesn’t matter whether you have a losing strike or more losses before the wins, the results at the end is totally the same. So YES you can make money and lose the majority of the time. It doesn’t take anyone a Master’s degree to understand that this is due to the relative size of the wins to the losses. This also introduces the concept of R multiple, which I cover in Tutorial 5. Take a look below at the 10% win rate strategy. Personally I would love to have this strategy with a 10% win rate! Imagine this is 1 day worth of trades, you end up making 2.314% ! If you do this everyday, you can almost double your money in 1 month! This is true! This is also because of compounding, which I will cover in Tutorial 2. On this example, you can see the winner in relation to the losses, is much larger. 12% win is 12 times bigger than the average loss. What if I don’t compound at each trade? Well in this case, you would get 3% return overall. Before I jump into the conclusion, I want to talk about my 99% win rate strategy. Now that we have covered some examples, thing about a strategy that has a 1% win rate? QFL Luc is a great trader and in one of his videos, he talks about this guy who basically has a trading system with almost a 1% win rate. The thing is, each losses is super small. But 1 time out of 100, he gets right at a bottom or a top, and the trade goes in his favor, and he makes a huge gain, which covers for all his losses! Cool right! Conclusion: Most algos and manual traders have win rates in the 30-40% range. The profitability is the result of the size of my winners as compared to the size of my losers. “Keep your losses small and let your winners run”.
Education
by Maddrix_club
Beating the rake - Know your trading feesLet’s talk about trading fees. This is an area that most people who trade don’t put enough thought into, but it can make a huge difference to your bottom line. This is especially the case when dealing with percentage based commissions in combination with leverage. Many people, especially those who mainly trade crypto, will be using services that charge percentage based commissions, with fees that can be as high as 0.5% ! But even if you’re trading at one of the more trader-friendly exchanges you’re likely to be paying in the region of 0.1% taker fees for spot trading and 0.04 - 0.06 % taker fees on futures. That sounds pretty cheap, right? 0.06% fee on a trade sounds almost negligible, which is why most casual traders don’t pay too much attention to it. Firstly though, you need to remember that this is the fee for both buying and selling, so for a round trip (buy and sell, assuming taker fee of 0.06% for each) you’re paying 0.12% Suddenly that starts to look a bit more significant, especially for short term intraday traders and scalpers. Let’s take a quick example. Let’s say you’re an intraday trader paying 0.06% taker fees on futures, and your typical Risk/Reward is aiming for a 1% gain and a 0.5% loss for an R of 2. The breakeven rate with an R of 2 is a 33.33% win rate, which is why many traders aim to trade this way. If they can achieve a win rate in the region of 50% they can be highly successful. But then we take your trading fees into account. That 1% average win becomes 0.88 % after your 0.12% round trip of taker fees. And your 0.5% average loss becomes 0.62 % after your round trip to fee-town. So now with an average win of 0.88% and average loss of 0.62% your R is down to 1.42! That means your breakeven win rate has changed from 33.33% to 41.33%! What if you’re aiming to catch even smaller percentage moves? If you were aiming for 0.5% average wins and 0.25% average losses for Risk/Reward of 2, but without considering fees, you might be in for a nasty surprise. Your average win would now be 0.38% and your average loss would be 0.37% after accounting for 0.12% round trip fees on all trades. The 2 R you were aiming for to require a 33.33% win rate actually becomes 1.02 R, requiring a 49.33% win rate to break even! And as a last example, let’s say you take a different approach. Perhaps you’re the type of trader aiming to take equal sized wins and losses but aiming for a 60 - 70% win rate to make your money. At 1% average win and loss (1 R), your wins become 0.88% and your losses become 1.12% after fees. Instead of a 50% break even rate you now require a 56% win rate just to break even! And if you aim for 0.5% average win and loss (1 R) your average wins become 0.38% and your losses become 0.62% after fees, requiring a 62% win rate to break even! Can you overcome those odds? The key takeaway here is that factoring trading fees into your trading plan is absolutely vital to understanding your risk/reward. The smaller the trading fees are as a percentage of your average trade, the less impactful the fees will be on your bottom line. To keep your trading fees small as a percentage of your average wins and losses, the simplest way is obviously to trade for larger average wins and losses, taking a swing trading approach with smaller position sizing. Alternatively, most exchanges/brokers will offer cheaper trading fees for “makers” using limit orders, as opposed to “takers” using market prices. This discount for maker fees will usually slash your fees by 50% - 80%. Many will also offer additional discounts for using a specific token for paying fees (e.g. BNB or KCS) or various discounts for VIP levels/tiers. Do not underestimate the value of these discounts, they can have a very substantial impact on your bottom line, especially if you are a short term intraday trader or scalper. Just a 50% saving on fees could be enough to turn a short term trader from a breakeven trader to a winning one.
BINANCE:BTCUSD.PEducation
by HayeTrading
1
Winrate improvement: Avoiding trades with resistance until TGTHey. I recently wrote "Where to target and what to do once there?". I am now looking at targets again, but not the "target" target. The "targets" that are in the way. I call them resistances, regardless of them being above or below, since they resist me making money, they resist my position, the price going further. We want to make money, so we improve on every aspect, including winrate. And how do you improve winrate? By throwing away the bad setups, those with high uncertainty, and those with plenty of resistance in the way. When there is 1 ton of res clustered if the price breaks it usually is very powerful and goes far but this is an exception I won't cover in this article. Support is possibly more important as something that gets in your way when you are trying to hold a winner rather than a place to buy something. The main reason I see why support matters when you enter a position is because the price already tested that one, so that's 1 less obstacle, as well as you are as far away as humanly possible from the next one. Going to go over a dozen cherry picked examples Example 1 - Few resistances Example 2 - Much resistance Example 3 - The generational trade Example 4 - A long story Let's zoom in I can't see anything Let's clean a little And the conclusion How old were these resistances exactly? Example 5 - The round number Investing is not "simple" Educators with their laptops on their beach say: - Don't overcomplicate - Focus high winrate - Do indicators and only that - You can trade anything just the same, compost or rates, PA or TA is what matters - 2 schools: Full naked chart or full with indicators and 26 screens - You can spend 30 minutes a day on a laptop on the beach - Have very few rules and stick to that - Elliott Waves are magical and always work From this we can derive (and I can confirm true from my experience): - Overcomplicate! You won't compete with a 3 year old fischer price business plan. - Focus on low winrate, do NOT try to win very often (confirmed by George Soros, PTJ, WB, etc) - Avoid indicators, do everything else. Note: Moving averages that everyone looks at matter - You CANNOT trade anything just the same. Stupid claim. Makes my ears & eyes cry - Don't have a chart loaded with crap and don't take a trade from a "naked chart" (check res etc 1rst) - You can spend 12 hours a day with no holiday, from your office. Absolutely ridiculous "beach laptop" - Have many rules and change them when necessary: If you break them for no reason, because "muh feelings", then you do not need to "stick to your rules", you need to quit. Because you suck - Elliott Waves are stupid and never work. Perfect example of a guy creating a system that does not work and then changing it over and over and over, it's like with scientists in denial: "If the theory (EW overall) does not fit the data (EW rules) then change the data", Interlude - About round numbers Tech company Ilika (IKA) in a presentation where they talk about their solid-state battery tech plans (inclusing looking at prod costs etc) back in Dec 2019, they had a list of risks (Actually the investing bank Berenberg Bank wrote this for them I think, "normal people" didn't do this themselves, bank analysts did): Cost Risk #1 - Cobalt price increase is a major risk The presentation is online it is easy to find. Just type "Ilika Solid-state battery technology" and probably that's enough to find it. I really like it because you see how businesses conduct their business. So what happened to them? The hedgers buy low and sell high. The (profitable) speculators buy high and sell low, but they are not stupid, they avoid selling right on a multi-decade turning point (support). Example 6 - A stock Example 7 - Reaches Target but without you Example 8 - Falls like a rock Zooming in to check something Example 9 - Because hindsight works so well Example 10 - Ugliness attracts ugliness Example final - Something clean and pretty When you are actually "overcomplicating" your trading it's when you check every support for the last 10 years and draw them all. In this example after several years this "no resistance" area continues to show no resistance and the old res do provide resistance so...
Education
by MrRenev
1
Winrates required to breakeven relative to stop & target sizesTaking AUDUSD as an example here, the spread is not the smallest relative to ATR nor the largest. The formula to get a breakeven winrate is 1/(1+reward/risk). Because we want winrate*reward = loserate*risk <=> winrate*reward = (1-winrate)*risk <=> winrate*reward + winrate*risk = risk (never 0) <=> winrate = 1/(1+reward/risk) For example with a 20 pip stop, base risk to reward of 1 to 5, and 2 point spread, reward or winners = 98 pips, risk or losers = 22 pips. So the reward/risk = 98/22 = 4.4545454545... So the breakeven winrate will be 1/5.4545454545 = 18.33% That is just the breakeven winrate. Profitability will of course depend on: - Frequency: How many trades you are able to take - Winrate: How much higher than the breakeven winrate it is - Position size: Profitability does not go up the higher it goes If a strategy or trader only gets a couple of trades a year and his winrate is barely above breakeven, he will not be very profitable, and it will be very easy to lose all profits. And as the stops & targets in pips go down, the hit rates needed to actually make money go up exponentially up to a point where the trader needs to own a crystal ball and be able to predict the future. Take costs into consideration with any strategy and before placing any trade. And 1 other thing to keep in mind is spreads can also fluctuate, depending on the broker, at certain hours they can go up 3 fold, sometimes more, it can really hurt. A cool thing you may notice is with a stop of 20 pips, the spread/stop = 10% and also the winrate to breakeven is increased by 10% for both risk to rewards. Same thing with the 5 pips stop. And so on. The required winrate to breakeven increases by 100*(spread/stop)%. Easy to quickly calculate when you are considering trades.
Education
by MrRenev
FALSE Trading Expectations #3... Win Rate (continued) I lose a lot of the time. A large amount of my trades are stopped-out for a loss. This does not make me a bad trader, it actually makes me a real trader! Most profitable traders are right only 40%-65% of the time. A lot of traders understand that there will be losing trades. What they don't understand is that there will be consecutive losing trades. Even a strategy that has a win rate of 65%, could have 10 consecutive losing trades, maybe even more! This does not make the strategy unprofitable or not worth using. Conclusion... Expect a lower win rate. A win rate of around 50% is ideal. Expect to have consecutive losing trades. Also expect to have consecutive winning trades.
Education
by Samuel_Morton_Trader
FALSE Trading Expectations #2... Win RateForex trading is not a 'get rich quick' scheme. It can make you rich, but it will do this slowly. In order to make large returns, a trader may have to take large risks. High risk trading guarantees greater emotional and psychological challenges. This may lead to quick short-term profits but it will also lead to discouraging long-term losses. Too many traders expect far too much far too quickly. They review their performance and results on a daily or weekly basis, this can lead to discouragement and disappointment. Profitable traders review their results much more longer-term. Conclusion... Trading can make you rich, but it will make you rich slowly. To make trading work long-term, you need to risk a minimum. Expect to be patient. Review profits once a quarter or once a year.
Education
by Samuel_Morton_Trader
2
Win rate. How to stay if profit zone...This painting is quite simple, but many novices can't use it because they don't have the patience. So, they close their profitable positions with 1/1 or 1/2 risk/reward ratio. But hold losses for a long time. Hope this post will save your money and time. You can be in profits even with low persentage of successfull trades but as you see only with 1/5 ratio! Keep calm! Use predictable ratio! Become better every day! Push like and write your comments. Thanks for your support!
TVC:GOLDEducation
by Yuriy_Bishko
17
Which method is the most profitable?Same strategy. 4 options on how to manage trades. Can use anything from a really tight stop and win very often but small to a very wide one and rarely win but win big. Which method really makes the most money? Let's look at the numbers after 100 trades: Strat 1 with a ridiculous winrate and profit factor => 1 RR 95 Wins 5 Losses => Get 90R out! Strat 2 with very high winrate and profit factor => 2 RR 80 Wins 20 Losses => 160 - 20 = 140! Strat 3 with a 50/50 winrate and high PF & RR => 4 RR 50 Wins 50 Losses => 200 - 50 = 150R! I think you see where this is going... Strat 4 with a rather low 1/3 winrate and high PF & very high RR => 8 RR 33 Wins 67 Losses => 264 - 67 = 197R / 200R! If you picked the one with the highest risk-to-reward as the most profitable congratulations, you fell for the bait :D Tihi Strat 5 with a very low winrate no one wants and ordinary PF => 16 RR 16 Wins 84 Losses => 256 - 84 = 172R The best strategy is the one that makes the most profit over the years, with the least risk. Another factor is how long it takes. Every market has its specificities. In the world of forex which is my specialty the realistic risk to rewards we get are in the 3 to 7 area. Less than 3 is not that great, and above 7 does not happen without big pullbacks (that take time). A reward to risk of above 10 is really not realistic. With crypto and stocks maybe, but with Forex no. With FX the time scale I prefer and think is best is 2 days to 2 weeks. The best moves with least noise happen on this one. Crypto and stocks holding times are also much longer (you could get 20 to 50R or even more with BTC in 2016-2017 but it's a holding period not of a couple of days no it's a couple of months instead). Commodities (Oil Gold Metals Grains) are close to FX I think. Of course as with everything else the best risk-to-reward and TF is the one you do best with. Typical FX strong moves: What day traders and signal providers do: And that's a really wide stop... Can you imagine? It's so stupid to day trade for so many reasons xd Horrible trends with big pullbacks, missing out on big wins, noise all the time, wasting one's time, gambling what will happen during a few hours, awful risk to rewards no matter what, a small spread decimates them. Lmao. Bitcoin. You won't get much out of Bitcoin swingtrading (and day trading is a joke) And then stocks And then Warren Buffet If you bought Ko with 10% of your money and risked 3.3% You can still trade with 96.7% (can use leverage to pretend it is 100%), and in 10 years you get a profit of 115% + dividends. Pretty nice! I don't think trading stocks for a few days or weeks makes sense with all the gaps there are, even if you participate in pre and post markets it still gaps alot between them. Once a decade stocks go absolutely vertical George Soros said it's not about how often you win, it's about how much you make when you win. Strat 1 "always win I am a legend" (I doubt anyone wins that often with a RR of 1) => 90R Strat 4 (PF of 4) => 200R (about twice as much) And if you risk 1% each time? Strat 1 = 144.7% profit Strat 4 = 546% profit xd Not twice as much. Lots as much! GG Compare strat 2 & 4 Strat 2 80% WR & RR 2 After 100 trades we make 140 R Strat 3 50% WR & RR 4 After 100 trades we make 150 R / 7% more 1% risk => Strat 2 = 299% profit (twice as much as 1 btw) Strat 3 = 330% profit / 10% more One more reason higher RR is better. This does not mean one should be obssessed with it and then get stopped all the time and blow up. It's just that first start with whatever strategy and it's ok to have a RR of 1.5 to 2 maybe, and then when improving it over time the most important goal is to try and increase the payout. Increasing the winrate is harder and pays less. If possible ok but not the main focus. Nothing increases profit more than improving the RR. And keep in mind while trailing a stop you are doing the same as if you closed your trade and are opening a new one (so if the stop is very wide it is like having a poor risk to reward on a new trade).
Education
by MrRenev
3
I think I just wrote a book. PF, RR, WR, etc.Intro, you can skip this part but I think it would be interesting for you to take a quick look: Statistics estimates and formulas? Trading is mostly about emotions, not statistics estimates and formulas. Most people do not need all of those formulas, they don't need to make plenty of stats and estimates, but just focus on discipline and emotion control. I got this quote: "The key to trading success is emotional discipline. If intelligence were the key, there would be a lot more people making money trading." I agree. Analysis of broker data has shown over and over that over a couple of years 90% or more clients lost money, and often all of their money. So no point doing stats & formulas for 90% of people that will lose anyway. What they need most is discipline, to not lose all of their money, but rather just some of their money, and emotional control, to not blow their brains out once they lose everything. I can make a few quotes too: Checking a thing quickly... Stanley Druckenmiller was 46 when he did something stupid with the dot com bubble. George Soros started at 29 and his biggest (known) mistake was Stanley Druckenmiller. Oh this one is interesting.... Alot of profitable ones that got really confident after a few years of winning and got wiped out or made huge losses or missed on much returns (Buffet says BRK cost him 200 billion, he'd be way above Jeff Besos). I see alot of late 20s to early 30s. But even older than this after decades, it's never safe, never let your guard down. But most typical is the ~30 yo guy that made lots of money for years and laughs hysterically at noobs (retail traders mostly) and was warned of dangers by people trying to scare them away but proved every one wrong, knew he was at the top, one of the best in the world, so got really arrogant, dropped his guard down, and then boom. By the way, totally unrelated, should I all in short USO? It's losing money over time and already so many idiots "invested" in it. There can't possibly be more morons that would buy this dead crap right? Lmao USO investors, what a bunch of brainlets. I refuse to lose against idiots just by being outnumbered. All in no SL. 😁 How do I start a show so I can do literal pump and dumps legally like Joseph Granville? Good. Now that we got this out of the way. 1- Winrate Pretty simple here. All this shows is what percentage of bets are winners. Doesn't really account for breakeven, doesn't differentiate between small wins big wins. Pretty useless on its own. Implicitly means that every win and loss have the same size, like putting rigid entry target SL, and never touching it. 2- Reward/Risk How big is the average or expected win, compared to the typical loss. How much are you willing to risk and how much do you expect to make? Most "educators" repeat how important the risk to reward ratio is, and it kinda is, because it is one of the best predictor of success. FXCM published some data where they show that over the 3/1/2014 to 3/31/2015 period (1 year), 53% of their clients with a RR of 1 or more were in the green, while only 17% of those without were. 47% of RR >= 1 lose money. 83% of RR < 1 lose more. Their typical win % over a quarter is 25%, and the typical global win % over a year is around 20%. I would be willing to bet that profitability goes up significantly with reward to risk. Some of it would of course be simply because people that end up with a huge win on their hands balloon the high RR stats. That said, I doubt just flipping a coin, just randomly buying with a tight stop and a far away target would work. Althought... The top myfxbook systems are almost all automated garbage systems with an average win 0.20 times the average loss, that were really lucky over a long period (3 std dev of a normal statistical distribution = 0.3% 3/1000, just pick any trash system with high WR and run a binomial probability calculator find the odds of it making profit over 100 rolls). Hey I'll do this later in this idea. And as I was saying, perfect transition, flipping a coin isn't a viable strategy, the reward to risk alone doesn't say it all, even if traders using a high reward to risk ratio greatly outperform those that don't. If you make 10 times what you lose, but you lose 99% of the time, emm how to say... And this is why we must look at the profit factor. 3- The profit factor. Oh yes Pf = (W*R)/(1-W) I have seen reports with a gross PF of almost 3, and net of barely 1.1. If you design a strategy you count spreads in it... It's obvious. Day trading sucks and every analysis of day traders data shows about 1% or less make money, and don't make much. Probably the only ones making anything are level 2 scalpers, and 'experts' selling day trading robots, or signals, or courses. First a disclaimer! The argument of day trading having terrible profit factors applies to 95% of the time. When the average move per unit of time goes way way up (spreads & commissions usually don't especially if volume goes up too), and you get in 5 hours what you usually get in 2 weeks, then obviously it's different. I focus my argument on 95% of the time, when volatility is "normal" (within 2 st dev basically, and in particular within 1 - ~70% of the time) And I have been really nice here. Getting an idea of what good profit factors are... If I participated I would take a single bet with huge leverage and hope to get lucky, easy win once every couple of events, but I doubt they allow this. Lol on the worldcupchampionship site (ran by the CME I think), there are categories, Futures traders at the top have massive returns, way above Forex. Previous year winners with futures have bigger returns than FX, but this year is just stupid. maybe they blow up soon. Top 5 FX participants as of May 14 have 40% to 97% returns. Top 5 with futures are already at 200-800%! In 2018 futures winner made 250% FX winner made 200%, sometimes futures traders make huge gains. The gap is already so big lol. Anything to do with NatGas & Oil? 😆 www.worldcupchampionships.com Looking at a "war of traders" results. 27 days... Not sure what their leaderboard is. Looks like a great way to get suckers to deposit money and pay fees asap. First place has a PF of 44%, I assume this means 1.44, second place 160% I assume it means 2.6. Followed by 1.3, 1.05, 1.13, 1.26, 6.85, 1.11.... Prob easier to get a higher PF with commodity futures where they are so much hedgers, much fewer care about hedging FX risk, plus central banks use it to manipulate everything, more people trying to make money. Sometimes the sharpe ratio is mentionned. Quick definition: The Sharpe ratio measures the performance of an investment compared to a risk-free asset, after adjusting for its risk. It is defined as the difference between the returns of the investment and the risk-free return, divided by the standard deviation of the investment. I looked at some hedge funds reports a while ago, since they diversify and hedge alot PF isn't as high. Warren Buffet has a PF of what? 100? He makes one trade every 10 years. It's basically impossible to find those numbers, unless you work at a brokerage, and apart from your own, with the exception of the few times a broker releases some data. You have to take into account how many opportunities you get also, and more but alot if implicit. I would say that a PF too low is bad, because when conditions change you will take long to notice with certainty and you will also lose way faster! If you had a PF of 1.1 you spent 5 years to grow, and that can be lost very fast AND it takes you longer to realize it is not working anyway. A high PF has a high margin for error, profits grow fast enough so drawdowns don't eliminate years of progress, and going from 2.5 to 0.75 over a period kinda is extreme. I think typically for operations that target 1 to 5 daily ATR, (days to weeks holding period), and you get more than something like 1 single bet a year, good profit factors are in the 1.5-2.5 range. Lower than this gets a little dangerous, more than this is the holy grail. A 25% winrate 5R system has a PF of 1.67. 4- Max Drawdown & risk per operation & max risk Here you use a binomial probability calculator. Plenty on the internet. Winrate 25%, Reward/Risk 5, PF 1.67 ==> After 60 bets, on average you should get 15 wins 45 losses. The odds of getting more than 15 wins (P: 16 or more out of 60) are 43%. The odds of getting less than 5 wins (55 or more losses) are 0,0956%. 1/1000. 10k account. Flat $100 risk per bet. 55 loss 5 wins = $5500 in loss, $2500 in wins, down $3000. 60 loss 0 wins = $6000 in loss, $ZERO in wins, down $6000 (rekt.) So every 1000 trades you should expect something like this right? Even with a very decently profitable strategy it will happen. You have to decide at what point you consider the odds of it just being bad luck to be too high, and you just want to drop it. Smaller drawdowns are going to happen absolutely all the time. If you are risking 1% every time and adjusting, 55L 5W would be a 27% rekt, and 60L would be a 46% rekt. The odds of losing 18 or more out of 20 are greater than 9% (9/100). Will happen ALL THE TIME. With 1% risk, drawdown of 8 to 18%. Expect it very often. Some clients use funds to diversify, to get returns with low risk. Some expect less risk and volatility than the stock market, but expect better returns. Cute. 5- Expected returns after 100 bets Say you got a system like the one I used in my example (that you backtested + used over a great number, or just used over a greater number of operations). Winrate 25%, Reward/Risk 5, PF 1.67 If you do not care about eating 20% punches in the face, and risk 1% per trade, on AVERAGE, after 100 gambles, then your results will be as such: 75 Losses, 25 wins (0.99^75)*(1.05^25) = 1.6. Up 60%. If you risk 1% of your 20 years life saving, you would get 20% drawdowns on a regular basis, meaning you worked for free 4 years. You can play around with calculators and notepad to estimate how big drawdowns you'll get, how often etc. With a 2% risk: (0.98^75)*(1.1^25) = 2.38. Up 138%. And regular drawdowns not of 8-18% but 23.3%-33.3%. And once in a while drawdowns of 60% to 70%. And a few times in a lifetime of 80% to .... What is the max drawdown before divorce + jump off a cliff? 6- Expected returns after 1 year And here we are... Traders should have a vague idea to start with but mostly look at all of this after running a strategy correctly and with some profits, over a "significant" amount of time, kek can't give a number. First of all what is the amplitude of moves you manage to catch? So the first limit is obviously the number of waves / moves. No matter what sytem you have you will not be able to join more waves than they are waves in the first place! And then... how many you can catch, is much, MUCH, lower than how many there are. Duh! Anyone with half a brain should be able to understand all of this at some point... Someone that manages to be profitable and doesn't blow up should make 5 to 40% I guess. That's that. It's exponentially harder, but also exponentially more profitable. I think I should build a new income stream writting books...
Education
by MrRenev
10
How can 90% fail? Delusional and lacking a pair.You might have heard stories of people that were looking for really bad traders so they could do the exact opposite. There was some guy that had a bot that would look at twitter bets and come up with a rr and wr, he was trying to sell that to a quant fund a few years ago. There sometimes are some people crying about really awful signal providers, something like .2 RR and 60% winrate. I just do not understand, they're pretty dense. I hear something like this my first reaction is to run to this guy and "SHUT UP AND TAKE MY MONEY". You're looking at a 5 RR and 40% winrate! Just take my money man. Imagine you could find the worse trader in the world, world's biggest twat. You just found the holy grail. Just fingers crossed he doesn't improve. I keep coming across this story... A few years ago (Data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015) a broker looked at 43 million trades. What they found really makes you wonder... On all 15 pairs, their noobs have over 50% winrate, with the lowest AUDJPY with barely over 50% and the highest EURAUD with a little over 60% winrate (euro pairs had 61% on average). And you guessed it, all of their losers are significantly bigger than their winners. Eyeballing it I'd say they are all between 50% and 100% bigger. Their average wins and losses are all something like half a daily ATR, so OF COURSE, the majority of these **** HAD to be daytraders. Go figure. For example, on the gbpusd, their winrate was 59%, they made an average 43 pip profit on each winner and lost 83 pips on losing trades. So a rr of 0,518. You see where this is going :D Let's flip it! Say that including spread = they lose 45 and make 81. RR = 1,8. And winrate is 41%. The breakeven point is (as long as the risk is low enough...) 35.7% winrate. The average day trading loser, well not loser, the average period, is 15% above breakeven. This is not even the average for losers, it is counting winners. So they are doing even worse/better. If they weren't such **** and went for bigger timeframes, with everything else kept same (they probably follow some dumb mecanical strategy they found from an internet troll), as so the stats are the same but spreads are insignificant; Then we would be looking, flipped, at a RR of 84/42 = 2. With 41% WR. 41/33.33 = 23% better. Quite an edge! They wouldn't even need to make much of an effort. They already have a big edge. Just flipping what they do, no hard research required, no sweat. EASY. Crazy. No to say bigger winners than losers is the only way to go, but in this case... clearly they could be very profitable just by doing the exact opposite of what they usually do... Why aren't all these losers becoming winners? I'll tell you why I think it's not happening, other than because they are stupid of course. 1- They are greedy and want to grow fast from day 1, so they blow up and never are in long enough to get any feedback or learn anything. 2- They are lazy and so don't look back on their trades. They just can't be bothered holding a journal, backtesting strategies, nothing. 3- They care what other clowns on twitter and crypto forums think, and need to grow a pair. So you see, it's pretty much IMPOSSIBLE not to be profitable if you really want to. IMPOSSIBLE. If you are at breakeven and think "I am almost there" I am sorry but I have bad news for you... It's easier to go from consistently losing trader (if you are able to do what it takes), than breakeven where there is no edge (unless you just practice self sabotage). I've heard of absolute clowns, that were surprised when someone threw their own numbers back at them showing that they were losing more than winning. If I was training someone at a firm or whatever I'd get fired because when I'd see someone that is not even aware he lost money in the past 6 months I'd just slap the ****. I am actually surprised how big the edge is... Pleasantly surprised, especially by the fact that anyone could make it but they are too lazy and too weak. Also, it is common to hear that in prop firms, every one gets the same equipement and training and learn the exact same strategies when they start and still 5-10% make it and the rest fails. Strategies can stop working, and it is worrying, but what makes a difference is YOU, as a person. Your edge is YOU, not your strategy or screens. That's an investment for life. As long as you get good, and can adapt, you will almost certainly always be able to extract money from markets.
Education
by MrRenev
4
So what is the secret? Part 2. Going from begginer to pro.Hello, so first of all I mentionned in this idea what I think are the most important rules to keep in mind, and a guideline on how to build a system / a career: In this idea I would like to show what I think is the end goal, and how I would advice someone getting there. I saw a nice chart on the internet "How traders think versus How trading actually works", I modified it a bit, this is my view on the subject: I would not know how to explain to a complete beginner, but I think I understand the beginners that already read a bit about all this. Let me explain what is in this pie: About the watching the markets... some... people... still deposit money to cryptopia. Exchange went bankrupt. "It's just FUD", "don't look at the news they might convince you not to H0DL". Crypto community is the perfect example of what not to do, just unbelievable. Complete bunch of idiots. People that deposit money to a broker/exhange that went down have nothing to do in this business, stick to watching tv. If I had to guide someone I think going throught these steps would be what I would choose: 0- If they are eager to buy and sell with real money, go on a small account and sizes as small as possible. If they are already not able to control themselves, no point even trying. Cannot advance they have to be able to control themselves first. 1- Start just reading, watching videos. There is alot of nonsense, trolling, and just dumb ignorant people that give their opinion. So do not take anything for granted and absorb it all. There are some warning signs. Kid that went huge leverage and made 10,000% returns at once and starts calling himself the legend, the master of charts... Most people can tell this is dumb, right? I am not sure to be honest. Well at least 1/3 can I imagine. If you can't, go to step -1 and build your understanding of the world, common sense, some mathematics too especially probabilities. 2- I would make a feedback on what the person knows, I do this myself all the time. Re-learn everything make sure the foundations are solid and that it is all natural don't need to overthink it. But with experience it will really become natural. Decide what you like more (this will change with time) and start going in that direction. Also check if what you like (catching the falling knife bottom right before the trend reverses and riding it to the top) is possible (no) or just silly (yes). 2- Write a plan or a set of rules. How do you want to do this? Any system can do. Have a system that tells you what to look for and then detail it a bit. Say the rules are 1- Define the trend 2- Find out what is driving it and where it could end 3- Risk factors 4- Should I hop on & when? 5- How to set stop loss 6- Exit For each number from 1 to 6 you write how you do this. Does not have to be perfect. 3- I would suggest starting with a risk reward ratio not too high I just do not think it is a good idea to have a reward much greater than risk at this point. Try being right about the trend as much as possible, avoiding the really bad days, not to gamble, not to chase losers, understanding more how markets move. Stick to 1 or 2 (2 may be preferable to not get bad habits) markets. Maybe Bitcoin (and some alts) since it is very popular and also very educational, as well as gold, or indices if you prefer. Indices good. I think this is what I learned the first. Story time I remember (I think) the first chart I analysed was Bitcoin in 2014. It had no support till 100 to 250$ yikes. I was already a bear before I was a trader back in 2014. First markets I learned about and watched were the stock markets. Every one was always super serious about how many points were up or down and afraid of a big crisis, even when I was 8 or so I was thinking "oh calm down dude". 4- Time for a break. Might as well do that after a lose spree. 5- Review past trades. What was good? What went wrong? What happened that day? Why? Why did the price go up? Down? Following people on various sites helps for this rather than just being isolated, well I think it does, but careful there are plenty of idiots let's call them that, that just attribute price action to the dumbest things. When you start breathing talking finance, it becomes easier. At that point you may be 1 year in, you should start to get a feel of the markets and understand better how they move. Focus on working on your strong points weak points average points :p 6- You should have refined your trading, and try having a profitable or at least break even strategy over a great enough number of trade that you know it is probably not just a lucky - on unlucky - run. Being non delusional is important. If you kept winning in a raging bull market, be aware of that. You are on your own and there is no one to tell you that. Well there is MrRenev but people do not listen. I think now you should focus on avoiding really risky trades such as have the potential for massive slippage or just ahead of some important report, weed out the bad ones. Also, you get better at holding when you should hold, and exiting when you should exit. 7- Now is the time to increase that risk to reward ratio. The best, the really top trades, they all have high risk to reward ratios. It is broken. It is like hacking. You can get very profitable this way. There are some opportunities where the odds are high even thought the risk to reward is big. One of the reason why I do not recommend this earlier is you lose 5 in a row you do not know if you made a mistake or it is all normal. Better have plenty of winners and try looking "ok so did I enter too early or not how far did they go" etc. You just have more to work with. I don't think going high reward/risk from the start is really a good idea. Once you are good at picking winners, and weeding out the really bad ones, you can focus on raising your RR while trying to maintain a decent winrate. If you manage to get a high RR, above 5, then maybe you can focus on increasing winrate a bit again. It might be time to start looking at a new market too, if you are comfortable with the 1/2 you started with. 8- Permanent learning improving, adjusting to new conditions. At that point you know what to do and it gets more specific. * You can use an indicator if you like it, but chill out with the indicators my gawd. Most of them don't even tell anything you cannot see on the chart for yourself when you have some screen time.
TVC:USOILEducation
by MrRenev
2
Money Management 101SELF DEVELOPMENT/METHODOLOGY/PSYCHOLOGY Money Management 101 Are you receiving a win-rate of more then 60% and still loosing money?? Money Management may be an area that you need to focus on. It is an essential element in becoming a professional trader. Listed below are 4 Simple Steps To Evaluate Your Financial Health; 1. Position Sizing A portfolio of $... and I decide to only risk 2% on a trading strategy 2. Capital - How much? A portfolio of $.... 3. Loss - How much? I must be right more then 50% of the time, but win more money on winning trades versus losing trades. I will use stops and limits to enforce a risk/reward ratio of 1:2 or higher 4. Profits - What? A profit/loss ratio refers to the size of the average profit compares to the size of the average loss per trade. For example, if your expected profit is $1500 and your expected loss is $500, the P/L ratio is 3:1 Please let me know if you have any questions :) Happy Trading "The simpler it is, the better i like it" Peter Lynch
TVC:GOLDEducation
by SMPTrader