One question the students in my seminars or trainings always ask each other is, “What’s your winning percentage?”
But out of all the statistics to measure performance, winning percentage doesn’t always tell the true measure of a trader.
I’ll show you what I’m talking about…
Trader A has a winning percentage on his trades of 70%, while Trader B has a 40% wining percentage on her trades. Which trader do you think is more successful?
I’m guessing most of you picked Trader A.
But what if I told you that Trader A has a return on his money of -25% and Trader B has a positive return of 30%? Trader A wins better than 50% of the time but loses money overall, while and Trader B wins less than 50% of the time but her trades are far more profitable.
Does that change your vote? I would hope so!
You see, a trader can win a large percentage of his or her trades, but what good does that do when the small number of losses outweigh the large number of winners?
So what’s the true measure of a trader’s success?
On Tuesday, I told that two of the most important things you can do as a trader is to build a plan for every trader, and to stick with that plan through the end of the trade.
But before you can build an effective trade plan, you have to make sure you have one thing in place.
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