If you have followed our work for any length of time…
then you understand that we have one core philosophy.
A philosophy that trumps all others.
That philosophy is….
Cut the Losers Short and Let the Winners Run
It is within this one sentence that the power of what we do is realized.
In the following paragraphs I am going to show you exactly how this simple approach
played out in the month of September.
September Trading Conditions (Analysis)
The following analysis is focused on our primary instrument…the CL (after all we are the Oil Trading Group) 🙂
Yearly Price Range Analysis
As day traders…
and more specifically “intra-day” traders…
we like a market that moves.
It really doesn’t matter if the market is long or short…we just want it to be moving.
In other words, choppy to sideways price action is not easy to trade.
Why am I telling you this?
Because since 2014 price has been in an increasingly narrowing range…
and 2017 has been the narrowest range in the last 3 years.
Let’s take a look.
2014 to 2017 Price Range Comparison
Note from the chart above just how dramatically the ranges have decreased since 2014.
In 2014 the price moved 5,580 ticks…in 2017 price has only moved 1,288 ticks…
WOW! That is a dramatic difference…
Now let’s take a closer look at this month (September 2017).
There were 20 available trading days this month…
of which 16 of these days had an average trading range of 58 ticks.
So, in other words…
80% of the trading days in September were choppy, difficult to trade days.
and because it “happens” it is all the more reason why it is so important…
that we try and take full advantage of those days when the market is moving.
September 2017 Performance Review
back at the top of this post we talked about the one strategy we employ…
this strategy is the overriding aspect of everything we do…
Cut the Losers Short and Let the Winners Run
This simple strategy is so powerful….
it is the strategy that is employed by the world’s most successful traders.
It is this simple philosophy that kept me afloat in the month of September.
One Last Thought Before We Get to the Numbers
Asymmetrical returns (see video above)…
gives you the opportunity to be wrong A LOT…and still be “right”.
In other words, if you are properly managing your risk…
(cutting your losers short)
and properly managing your reward
(letting your winners run)
you are afforded the opportunity to be wrong A LOT and still be “right”
Let that sink in…and penetrate the philosophy that is espoused by trading educators…
educators who want to sell you on their high win rate…
but conveniently forget to tell you that one losing trade wipes out all of the wins.
To be honest, high win percentages are flashy and sell trading programs…
but if they are wiping it all out in one or two trades….what does it matter?
30% Win Rate Nets 200+ Ticks in September
Before we get to the numbers…
remember earlier in this post we discussed the choppy trading conditions in September?
It is important to view these numbers through the lens of those conditions.
A few items to note:
- Win percentage was 30.7%.
- Losing and breakeven percentage was a combined 69.3%.
- Average winning trade was 2 times greater than the average losing trade.
- Largest winning trade ($1,700) was 5 times greater than largest losing trade ($340).
- Winning trades were held 3.3 times longer than the losing trades.
- Average daily gain / loss was $108.
Despite the fact that I was at a very low win rate of 30%, I was still positive an average of $108 per trading day. When reviewing the winning trades vs. losing trades, you can clearly see that I was holding on the winners 3.3 times longer than the losers (cut the losers short) and my winning trades were 2 times greater than the losers (let the winners run). Also, I had a single winning trade that was 5 times bigger than my largest losing trade. The bottom line here is that despite the fact that I didn’t win very much in these choppy conditions, my simple philosophy of cutting the losers short and letting the winners run saved the month for me.
A Deeper Dive: Winning Days vs. Losing Days
Ok…so let’s take a deeper look into my winning days vs. losing days.
- I won 42% of the days traded in September.
- My winning days were about 2 times greater than my losing days.
- Winning days averaged $1,066 and losing days averaged $588.
- Winning Days: Win rate = 56% and hold time is 1 hour.
- Losing Days: Win rate = 21.5% and hold time for winners was 40 minutes.
- Largest gain on losing days and winning days was still greater than largest loss.
So, despite the fact that I only won 42% of the days traded, I was able to survive because I am cutting the losers short and letting the winners run. There is no better evidence of that philosophy in action that in the month of September.
One Final Thought
We have all heard the adage…
Trading is a marathon and not a sprint.
Trading performance isn’t measured on a day to day basis.
In fact, day to day performance measurements are useless.
You need to step back and see the bigger picture…
Here is what I mean.
Combined August and September Performance
If you just look at the September performance alone…
you may leave unimpressed…but when combined with August it is a different story.
The bottom line here is this…
despite the fact that trading conditions in September were choppy and difficult,
I managed to salvage the month because of our core trading philosophy.
A Question Only You Can Answer
In reality, cutting losing trades short leads to a lot of losing trades.
Because the very nature of it is that if it isn’t going in your favor…
you get out…
And letting winning trades run also has it nerve racking moments as well.
Watching trades go in your favor only to come back to break even is hard to do.
So, here is the final question that only you can answer.
Are you willing to deal with the losing trades / days to know that in the end you can be successful if you are cutting losers short and letting winners run?
Because let’s face it…you don’t get paid on win rate..you get paid on net results.
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