When’s the last time you’ve reflected honestly on your trading results?
If you haven’t started tracking and recording your trades, you’re missing out on so much information that could skyrocket your results.
I track every single trade I take to be as transparent as possible about the trading journey but also to reflect and refine trading error and skill.
I also record every trade and make it available to the live trading members.
Below is a screenshot of my results since late May.
At first glance, i’m sure the losses in red stood out the most. We’ve all been brainwashed by social media to believe there’s a way to mitigate taking any losses in trading and having a 100% win rate month over month.
Real trading is making sure your winners are much larger than your losers.
I hope that you’ve graduated from the naive amateur trader mindset by now to the logical trader focused on realistic, data-driven trading statistics.
We’re going to be dissecting these stats in 2 different ways.
First, we’ll calculate the Reward(R) that my winning trades produced then subtract from my losing positions.
This works out to be 58.7R
1% risk on $100k = $58,700 (58.7%)
.5% risk on $100k = $29,350 (29.35%)
These returns were achieved with a 35.4% win rate over the last 31 trades.
So, my question to you is have you been putting too much focus on win rate and not enough on the risk to reward and quality of trades?
In this interview, a trader speaks on receiving signals from a “guru” who promises a 90% win rate yet sets the first profit level at 5 pips which basically ensures he can promote the win while the stop loss could be around 50 pips.
This is the perfect example of how so many traders can get fooled on what true equity curves and return expectations should look like.
But hey, we’re also living through the generation that watched cryptos 10,000x in a short few years.
Our ego is what wants to brag and boast in online forums and discord chats about winning all of our trades and being better than the next.
What good is a high win rate if you only have a down-spiraling equity curve and blown accounts?
This is what I mean by being logical and realistic with your trading expectations.
Now let’s dissect my stats using the 3R profit-taking method.
I’m a huge advocate of at minimum taking profits at a 1 to 3 risk to reward. why?
Below, is a chart that explains what win rate percentage must be maintained based on the risk to reward you choose.
In order to be profitable with 1 to 3 RR, you only need to win 30% or 3 out of every 10 trades. This puts the odds in your favor that even if you face a period of drawdown you will be able to weather the storm.
So, let’s look at the trades I called only counting wins as 3R instead of the full target they reached.
This would yield 18.5R
1% risk on $100k = $18,500 (18.5%)
.5% risk on $100k = $9,250 (9.25%)
As you can see, even with only taking profits at 1 to 3, the results are still extremely profitable.
Again, this is all with a 35.4% win rate over the last 31 trades.
Now, even though i’m showing you actual proof of the profitability of the trades, it will still be hard for you to accept the fact that losses are inevitable.
This causes costly psychological effects.
Most trading mistakes are made to avoid pain. Most of the pain avoidance is from not trying to lose profit after It’s gained or living in the past and making current trade decisions based on previous setups that were taken. For example, your last trade was a loss and now instead of allowing your trade to fully play out, you close as soon as it covers the previous loss.
So instead of trading the markets you actually end up trading your feelings and memories of the markets. Trading is truly a journey.
I hope these insights can help make your journey to profitability much easier. In my first few years of trading, I wish I could’ve come across an article like this.
It would’ve saved me an immense amount of money, time, and energy.
Change your focus over to what truly matters, your Risk to Reward and ability to execute your trades with the least amount of error.
My main goal for the TGFX community and Live trading room is not to make profits (although it’s inevitable). My goal is to teach the habits and reality of trading for a living consistently and profitably.
