So You Wanna Be a Millionaire?
Everyone knows that show by now right. It used to be hosted by Regis and now someone new. It is a good game as far as I am concerned because it tests something that very few people take the time to do.
Your expanded knowledge base.
It is almost impossible to win the million but every now and then someone does it. It basically separates the wheat from the chafe so to speak. Sure there is an element of luck but it comes down to how hard you have worked or how good you are at being well rounded in all areas. Trading is really no different if you want to be able to get better than average returns over the course of your investing life.
The key elements in the game show are prevalent in trading too. Preparation, knowledge and a bit of luck over time. Each question gets a little bit harder and that is how your account grows too. When it is miniscule like say 100.00 you can get some astronomical returns but when you have 50,000 it is not so easy to do the same. It is called the "law of diminishing returns" and it plays a role in your account as it gets larger.
So let's look at the chart below. Is it possible to consistently bank moves like the one you see below? It is but over time those opportunities will become less and less as your account grows. Risk management becomes more and more important once your account is at a certain size. That is why you see all these one hit wonders who make a lucky fortune and why very few can replicate it. It either simply stops working or when everyone else is executing the same trades in the same direction it makes it much easier for the larger pro traders or market makers to crush the trade and the account.
That is why it is so important to either scale in or scale out if you are swing trading or swinging for the fences. Do you take the same off your trades as you do when you take partial profits with a profitable position? If you don't you are making a huge mistake. It is the same as taking a large loss and small wins. That will eventually over time make you poor.
Do you look for a high win percentage like some of these rooms brag about? No one likes to lose do they, but that is precisely how you make it as a pro. Say you are going to use a tight stop and you get stopped out three times in a row. So you are down say 21 ticks. Are you still looking for a trade that holds the possibility of 21 ticks or are you still looking for your seven tick profit trade where you take two off and let the third contract run? Do you do that?
Well if you do you are making a big mistake. You are not banking 21 ticks as you think when you let your runner run because you took three losses at 3 contracts each. If you do the math there that is 21 x 3 because you are using three contracts correct?
So what is your tick total?
Right! 63 ticks in losses.
So lets say that you get in a good trade where you take 2 contracts off at seven ticks. That becomes fourteen ticks profit right.
How many ticks does your runner have to get to before you break even?
Ahhhh...now you are beginning to see why ticks don't matter but rather ROI that matters. If you picked any other number other than 61 ticks you need to do the math again.
You say "hold it" I got 49 ticks.
Yes you did but you didn't take into account your commission on each contract did you which is basically a tick. 4 x 3 is 12. Remember you got stopped three times before. Then you executed your fourth trade using the same amount of contracts which has been three right.
I rest my case.
I would bet not one in 1000 rooms trades this way. In fact I even wonder if the profitable ones do their math this way. If they don't then you are NOT getting the true Performance.
Let me ask you do you ever see their live accounts? Probably not.
I knew that the place I picked on the chart to reverse was where the stops were cleared. I knew from the 1 hour chat where that was.
Did I use order flow?
No. The order flow you see doesn't move the market.
If you want to learn to see the market for what it is you owe it to yourself to trade with us.
Cheers!
Your expanded knowledge base.
It is almost impossible to win the million but every now and then someone does it. It basically separates the wheat from the chafe so to speak. Sure there is an element of luck but it comes down to how hard you have worked or how good you are at being well rounded in all areas. Trading is really no different if you want to be able to get better than average returns over the course of your investing life.
The key elements in the game show are prevalent in trading too. Preparation, knowledge and a bit of luck over time. Each question gets a little bit harder and that is how your account grows too. When it is miniscule like say 100.00 you can get some astronomical returns but when you have 50,000 it is not so easy to do the same. It is called the "law of diminishing returns" and it plays a role in your account as it gets larger.
So let's look at the chart below. Is it possible to consistently bank moves like the one you see below? It is but over time those opportunities will become less and less as your account grows. Risk management becomes more and more important once your account is at a certain size. That is why you see all these one hit wonders who make a lucky fortune and why very few can replicate it. It either simply stops working or when everyone else is executing the same trades in the same direction it makes it much easier for the larger pro traders or market makers to crush the trade and the account.
That is why it is so important to either scale in or scale out if you are swing trading or swinging for the fences. Do you take the same off your trades as you do when you take partial profits with a profitable position? If you don't you are making a huge mistake. It is the same as taking a large loss and small wins. That will eventually over time make you poor.
Do you look for a high win percentage like some of these rooms brag about? No one likes to lose do they, but that is precisely how you make it as a pro. Say you are going to use a tight stop and you get stopped out three times in a row. So you are down say 21 ticks. Are you still looking for a trade that holds the possibility of 21 ticks or are you still looking for your seven tick profit trade where you take two off and let the third contract run? Do you do that?
Well if you do you are making a big mistake. You are not banking 21 ticks as you think when you let your runner run because you took three losses at 3 contracts each. If you do the math there that is 21 x 3 because you are using three contracts correct?
So what is your tick total?
Right! 63 ticks in losses.
So lets say that you get in a good trade where you take 2 contracts off at seven ticks. That becomes fourteen ticks profit right.
How many ticks does your runner have to get to before you break even?
Ahhhh...now you are beginning to see why ticks don't matter but rather ROI that matters. If you picked any other number other than 61 ticks you need to do the math again.
You say "hold it" I got 49 ticks.
Yes you did but you didn't take into account your commission on each contract did you which is basically a tick. 4 x 3 is 12. Remember you got stopped three times before. Then you executed your fourth trade using the same amount of contracts which has been three right.
I rest my case.
I would bet not one in 1000 rooms trades this way. In fact I even wonder if the profitable ones do their math this way. If they don't then you are NOT getting the true Performance.
Let me ask you do you ever see their live accounts? Probably not.
I knew that the place I picked on the chart to reverse was where the stops were cleared. I knew from the 1 hour chat where that was.
Did I use order flow?
No. The order flow you see doesn't move the market.
If you want to learn to see the market for what it is you owe it to yourself to trade with us.
Cheers!
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