An email arrives from one my 4DFX members…
When looking over the figures he has achieved from his trades over the last month he comments “such a profit situation does not seem to make sense to me.”
So I thought I’d use the stats he sent in to illustrate precisely why you don’t need to fire-off trades like a machine gun in order to make money…
Why you should avoid being seduced by the deceitful glamour of ‘high strike rates’…
Congratulate him for the results he has actually achieved…
And hopefully bring some sense and order to the profit situation we have in place here.
Here’s what he says:
“The statistics from my one month trial period are as follows:-
Total number of trades suggested = 157.
Total number of trades not triggered = 139.
Total number of trades hitting their profit target = 9 [4% reward].
Total number trades hitting their stop loss = 9 [2% risk].”
So the way 4DFX works is we put 5 or 6 resting orders to work ahead of each trading session. It takes just a couple of minutes to set them up. We then lie in wait at our strategic locations and we only get triggered into a trade if the market moves to one of our high-probability price levels.
It all runs on autopilot once you’ve put the orders in and it’s a bit like fishing: we cast out 4 or 5 lines at a time and wait for a bite.
We might get one or two trades ‘bite’ on any given day or sometimes none at all. We then reel-in our lines and cast them out again ahead of the next trading session (I’d expect to get around 5 bites during a typical week).
It’s all very ‘hands-off’ and simple to run. No high-adrenaline scalping or anything like that.
So… as you can see from the above, over the space of a month this trader had 18 trades trigger.
9 of them were winners and 9 of them were losers: a 50% strike rate.
That doesn’t sound too thrilling, right?
But hang on a minute… because the winners made twice as much as the losers cost!
So let’s say the losers cost £50 each for a total loss of £450.
And the winners made £100 each for a total win of £900.
That’s a £450 gross profit for the month!
It’s exactly like betting on the flip of a coin (a 50:50 outcome) where you win twice as much as you lose on any flip – you have a MASSIVE edge in probability and you’d surely bet on that coin flip every single time.
Now, risking £50 a trade may be too big for your account or it may be too small. I don’t know the size of your trading bank.
So let’s look at it in terms of % returns…
I suggest each trade risks a MAXIMUM of 2% of your overall account size.
So in this case the gross % return on account for the month would be 18%
(9 winners of 4% each minus 9 losers of 2% each.)
And an 18% return on a £2,000 trading bank would be £360 for the month.
Not bad for a few minutes at the computer.
18% return on £5,000 account = £900
18% return on £10,000 account = £1,1800
And I’ve kept the maths simple here. This is without rolling wins into the next set of trades which would have a compounding effect and bring higher returns.
Now I don’t know about you but I’d snatch someone’s hand off for a passive 18% monthly return.
But you’d need to look beyond the misleading metrics of strike rates and ‘pip-hauls’ to see the reality of this situation.
When you’re evaluating trading results try to cut through the smoke and mirrors and track what matters: the returns you are getting in cold hard cash.
And if you’d like to see how a strategy like 4DFX might help you reach your own monthly trading goals you can get the full details of your risk-free trial here: [current 4DFX offer link goes here]