Home Trading Strategies Why You Should Not Focus On Your Profits (Do This Instead)

Why You Should Not Focus On Your Profits (Do This Instead)

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Why You Should Not Focus On Your Profits (Do This Instead)

hey hey what’s up my friends so in today’s episode right i want to talk about why you shouldn’t focus on the profits right but instead you should do this right because here’s the thing right when many people get involved with trading the only thing that they look at is their profits you know how much money did i make but here’s the thing right by focusing on your profits it doesn’t make you a better trader and let me explain why in trading right we are dealing with probabilities and what this means is that in the short run your results are random i know that might sound weird what what rainer in the short run my results are random so let me prove this to you imagine that you have a coin in your hand a 50 cents coin and you can agree right there the coin there is a 50 probability of it coming up hits or 50 chance coming up tills if you toss the coin let’s say six times what do you think will happen will you get three heads and three tails not quite right sometimes you might get four hit and two tails sometimes you might get five hits and one tail or even six hits and you know zero tails now at this point are you going to claim that the coin is flawed it’s a gimmick right now you know isn’t the coin supposed to be a 50 chance of coming up heads 50 chance coming up tails what’s happening well it’s simple it’s something called the law of large number it’s because you only toss the coin six times it’s a small sample size that’s why you won’t get near you know 50 hits or 50 tails but if you were to toss the coin a thousand times now you’re gonna get much closer to 50 hits and 50 tails and this is the same as trading because you’re dealing with probabilities so what this means is that in the short run a small sample size of trades your results will be random and this has huge implication on your trading especially if you’re just focusing on your profits because what this means is that you can actually make money on poor trading decisions like you know averaging into your losers widening widening your stop-loss yes you might get away with it a few times and actually make a profit on those trades but eventually when the law of large number catch up with you right you will suffer losses and you might you know even blow up your trading account so that’s a huge implication and at the same time you might even make the right decisions but lose money making the right decisions because remember in the short run your results are random so bear this in mind so this is why i don’t want you to focus on your profits because in the short run it’s random so if you want to get better at trading you should focus on this instead and focus right on the process focus right on executing the right traits over and over again focus on traits that actually make you money and avoid the ones that you know cause you to lose money now you might be wondering so right now how how do i find you know find out what works and what don’t for me and this is where your trading journal comes into play so let me just briefly right give you the big picture overview of how your trading journal will help you with your trading so first thing first when you have your trading journal you want to record down a few things number one is your trading setup are you trading a trend trading setup a breakout setup a pullback setup come to trend et cetera write it down then state down your entry your targets and your stop loss these are just you know uh basic matrix that you will have whenever you put on a trade and finally the key thing to also put down is your r multiple on the trade let me repeat right you are multiple on the trade so your r simply means right that if you risk one dollar and you make five dollars that is a profit of five r you made five times your initial rate so you put down five hour if the trade hits your stop loss there’s a loss of one hour assuming no slippage so you just put negative one hour so journal down your trades right you know uh you know when you take your 50 trades 100 trades 200 trades then what you want to do is to review those trades and find out which setups are the ones that actually make you money okay so remember in the short run your trading results are random so don’t review your trades just based on four trades five trades six trades or seven trades it’s the sample size is too small to come up with anything conclusive my suggestion is to have a sample size of at least 100 trades this way your sample size is much larger and you know possibly there could be something behind it if there’s a results to show for it okay so sample size of at least 100 trades find out which setups are the ones that are actually making you money and focus on those setups those are the ones that are clearly working for you and then also look at your losers right and find out which setups are the ones that are you know causing you to lose money might it be those come to trend rates all right find out which setups are those and then avoid taking those trades right this way your trading right will gradually improve step by step there is work involved definitely right but if you want to be serious about trading right this is the steps involved right to get better results okay so let’s do a quick recap number one in the short run your trading results are random so don’t focus on the profits because it’s misleading doesn’t really mean a thing number two what you want to do instead is to you know journal down your trades have a sample size of trades at least 100 and focus on those setups that actually make you money and avoid those setups that are actually costing you money sounds good so with that said i wish you good luck and good trading i will talk to you soon you

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