What is the Barometer of success for a trader ? Any guesses…
There is only a single way you can define your success, By Counting your Real Profit.
Real Profit should never be confused with un realized gains or Unrealized loses as there are all on paper. Real Profit is the money which moves out of your trading account to Bank account. Its the money you spent on you and your family by taking them to dinner or going to vacation to an exotic location.
Today lets discuss they ways we can increase your profitability. Making minor adjustments in each of these areas will have massive results on your bottom line or profitability.
1. Increase your Winning Trades.
Increase the number of winning trades or your win/loss ratio, Do you maintain win/loss metric, If not start from today. The win/loss ratio is often the primary metric for beginning traders. Beginners are easy to spot because when I meet them they are quick to share this metric. It’s almost like a badge. While indeed this is an important metric, let’s not lose sight of the fact that you can trade accurately 99% of the time but still lose everything on the 1% that you’re wrong. Is your win/loss ratio an important element to track? Absolutely. Just don’t be deceived, it’s only 25% of the controls that impact our bottom line profit.
2. Increase you Profits.
Most of traders will exit trade as soon as they see profit but will hold on to the trade in case of loss. This is how human mind is wired, but as trader you need to train your mind to ride on to your profit. Get into the habbit of putting trailing stop loss and partial profit booking.Increasing profitability on your winning trades is one of the main marks of a professional trader. I’m not suggesting you try to eke out a couple extra points on individual trades. That’s reckless trading. Rather, use solid analysis principles and limit yourself to entering only those trades that have outstanding reward potential. You don’t increase ROI by trading through your targets, but rather finding trades that have exceptional targets to begin with.
3. Cut down losses ASAP
Losses are like cancer, Cancer is curable at an early stage but in later stage it eats your whole body. On the similar grounds a Big loss can make your trading account go haywire. Decrease your losses on losing trades, or the all-important risk management. Managing risk appropriately is another mark of a professional. Any successful trader you observe will put more emphasis on this. As a trader you need to control your emotions when you see losses. You need to train your mind by keep reminding, “I need to stay in the market”
4. Reduce Overhead charges in terms of brokerage and commissions
Decrease your overhead and that includes commissions and taxes.Commissions and taxes are the only two operating expenses in the business of trading, and as such should be consistently tracked. Commissions in particular can often skyrocket when an individual is over-trading. Keep a tap on your brokerage also, I have seen many traders who are still paying 100 Rs as brokerage for trading 1 lot of Nifty Future. This needs to control, talk and negotiate with your brokers to contain your overhead cost.
Successful traders are constantly tracking and working to improve each of these four metrics. Remember, “Where your focus goes, profit flows.” Choose to focus on the real results of these four levers and leave the unrealized gains for the other guys to focus on.
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