Our philosophy incorporates the following principles:
1. Every trader can be a successful business owners but they must take responsibility for their business and actions.
We believe that every trader must identify and accept responsibility for their own actions. This means every trader is tracking each trade and identifying what they did before, during and after their trade. After identifying their own actions that prevented them from achieving the desired result, they take steps to overcome these actions in the future. Relying on others to initiate your trades is not the path to becoming an independent business owner. Instead, the business will be a franchise.
2. Every trader can transform from a world of chaos and doubt, to one of order and skillful execution.
A world of order is achieved by incorporating a plan that outlines entries and exits. These plans should outline specific entries, not in general; outline specific exits, not in general; identify warning signs that prevent entries or warrant early exits.
Skillful execution is achieved by knowing how to operate the equipment needed to get the job done. If a trader is unable to operate their equipment, then they become frustrated, chaos creeps in, and they lag in entries and exits. Once chaos is allowed into the business, then doubts begin, and a spiral out of control is inevitable.
3. Every trader must protect their account from substantial loss during the drawdown periods.
Every trader will suffer a period of losses, also known as a drawdown. This can be from a trader that is "out of touch" with the market or from the market changing. While these changes can be identified in hindsight, they cannot be identified on the live edge of the market. Therefore, the first thing to consider before entry, what is the risk on this trade? How much will I lose if I take this entry? If I lose this amount, what will it do to my account? It is easier to take a 2 point loss than a 6 point loss, which will wipe out the previous winning trades.
4. Every trader must take profits in a manner that overcomes their losses.
Losses are inevitable in trading. Most traders will take 2 points of profits while risking 3 or 4 points. We believe the results can be devastating, especially for new traders. Therefore, we use a 2:1 reward to risk ratio. This means that if we are willing to risk $1 then we expect a minimum of $2 profit.
We believe that the success of a trader is directly correlated with their stops and profit targets. We focus on trading only in the direction of the trend using low risk entries points (less < 8 ticks).
In the past, we sent out an article explaining the direct correlation of your stop to your profit target (to view this article click here). A few of our clients were nice enough to provide us with the same analysis on Spot Forex. The tables below show the effect on your trading account using the following parameters:
Trading One Contract Example
(stops & targets are simple examples, you can change it according to your trading plan)
Table 1 -- 50 pip stop and 30 pip profit target
Table 2 -- 50 pip stop and 50 pip profit target
Table 3 -- 50 pip stop and 100 pip profit target
P/L is the total Profit or Loss after all trades.
As you can see below, by setting your profit target to double your stop value, you can have an accuracy rate (accuracy defined below) as low as 40% and still increase your account.
Trade # |
70% |
50% |
40% |
30% |
1 |
30 |
30 |
30 |
30 |
2 |
30 |
30 |
30 |
30 |
3 |
30 |
30 |
30 |
30 |
4 |
30 |
30 |
30 |
-50 |
5 |
30 |
30 |
-50 |
-50 |
6 |
30 |
-50 |
-50 |
-50 |
7 |
30 |
-50 |
-50 |
-50 |
8 |
-50 |
-50 |
-50 |
-50 |
9 |
-50 |
-50 |
-50 |
-50 |
10 |
-50 |
-50 |
-50 |
-50 |
P/L |
60 |
-100 |
-180 |
-260 |
|
|
|
|
|
Trade # |
70% |
50% |
40% |
30% |
1 |
50 |
50 |
50 |
50 |
2 |
50 |
50 |
50 |
50 |
3 |
50 |
50 |
50 |
50 |
4 |
50 |
50 |
50 |
-50 |
5 |
50 |
50 |
-50 |
-50 |
6 |
50 |
-50 |
-50 |
-50 |
7 |
50 |
-50 |
-50 |
-50 |
8 |
-50 |
-50 |
-50 |
-50 |
9 |
-50 |
-50 |
-50 |
-50 |
10 |
-50 |
-50 |
-50 |
-50 |
P/L |
200 |
0 |
-100 |
-200 |
|
|
|
|
|
Trade # |
70% |
50% |
40% |
30% |
1 |
100 |
100 |
100 |
100 |
2 |
100 |
100 |
100 |
100 |
3 |
100 |
100 |
100 |
100 |
4 |
100 |
100 |
100 |
-50 |
5 |
100 |
100 |
-50 |
-50 |
6 |
100 |
-50 |
-50 |
-50 |
7 |
100 |
-50 |
-50 |
-50 |
8 |
-50 |
-50 |
-50 |
-50 |
9 |
-50 |
-50 |
-50 |
-50 |
10 |
-50 |
-50 |
-50 |
-50 |
P/L |
550 |
250 |
100 |
-50 |
