Track Record Elliottwave India

Track Record Elliottwave India :

This is what it finally boils down to. Whether the trade setups work out or not.  One of our viewers suggested we track our posts and see whether they worked and how many worked.  Since we're traders ourselves, it was easy to go back till site inception and track our trades.

Is it better to be a good analyst or risk manager.  I vote the latter.  Allow me to show you :

Most important for each trade is the risk : reward ratio.  We only take trades which are 1 : 3 or more (i.e. profit potential is 3 times loss potential).  Sometimes if the setup is too good to pass but risk is higher, we may, just may, go to 1 : 2 ratio.

So lets say, for the sake of discussion i invest 1 lakh per trade and take 10 trades - but get only 30% correct, and 70% hit the stop loss.  Pretty awful huh ? But if my risk to reward ratio is 1:3 - how much do i lose ?

Assume the capital invested, profit potential and stop loss is same across all trades :  (100,000 per trade, 5% loss potential, 15% profit potential).

3 successful trades x 15,000 profit each = 45,000

7 bad trades x Rs 5,000 loss = Rs 35,000 loss

So profit is Rs 10,000.  Even with such a poor record one is able to remain profitable if one is disciplined with stop losses.

Some of the best traders in the world have a success rate of 70%, and very few even reach 80% correct calls.  What would they make in percentage terms following the 1:3 rule of risk : reward ?

7 successful trades x Rs 15,000 profit  = Rs 105,000

3 bad trades x Rs 5,000 loss = Rs 15,000

Return of 90,000 i.e. 90%

Further, most trades are not equal.  Some trade setups are better than others, and traders tend to allocate greater funds to those. This skews performance further in their direction.

We have a section called Track Record as a suggestion from one of our viewers.  Click here to go to that menu item.  Once inside, click on the google link that will take you to the google sheets page.

Or click here directly to go to the google sheets page.

Posted in Elliottwave India.