Perfect example of why Size matters.....

Hi Everybody,

Here is a perfect example of why I keep on stressing that it is not the “number” but the “size” of your winners than counts

3 trades here on the 3min DAX, 2 losses and 1 winner. BUT the winner is approx 4.4x larger than the losses, so even with 2 losses at just -1R each, you are up overall, because the 1 winner was much much bigger at +4.4R (ignoring slippage and commission).

In this Industry Size does matter :)

Small losses and Big profits (not the number) is the key to successful long term trading.............

Thanks, Steve

3min ES

As you can see, the 3min ES DP sell that was taken as OK as it was also at 15min DP resistance, but it resulted in a -1R loss.

It is amazing how many emails I get when a trader does all the analysis, and all seems OK, then a loss unfolds. They seem to think that they made a mistake, but this is not the case. You can do all the correct analysis and then a loss unfold. That is OK, because the loss is kept small. A -1R loss is far far far smaller than most of the profits MTP was making just a few days ago. Small losses and Big profits, that is what makes money over time.

There are just too many amateur traders who seem to think that they can analyze the market and be right 100% of the time. This is rubbish, no trader can do this. The reason we do analysis is to put the probabilities on our side, but yes, there will always be losses. But the tick is keeping them small.

Truly accepting this is probably the biggest hurdle most amateurs traders have to get by before they can become a successful professional.....

Thanks, Steve

15min ES

To show you what I mean let’s take a look at the ES yesterday, starting with the 15min larger degree trend.

As you can see the 15min ES was at DP resistance so it was OK to look for sell setups on the 3min chart later in the day.

Thanks, Steve

Cyclical Nature of Trading

Hi Everybody,

Before I start today’s posts I would like to remind you all of the post I made a few days ago on the Cyclical Nature of Trading. Some amateurs except that trading will be the same each day and as such will be easy. This is the rubbish that is banded round by the non trading software vendors who don’t have a clue about how the markets work in the real-world. In the real world there will be easy trades, but there will also be hard times when the trend is unclear and when losses do unfold. This is just a fact of trading life, and one that you must accept to become a successful professional trader.

That is why I alerted you a few days ago that we were probably overdue for a few harder days because we had just had a good run of huge profits. And guess what, this is exactly what is unfolding now, a few harder days...............

Thanks, Steve