I want to start by asking a question;
If your strategy delivered at just below +10R winning setup, would you be able to let a trade of that size actually get to target? Would you have the discipline and the patience and the belief in your edge to let that trade play out? Because we all know that markets don’t move in a straight line, don’t we.
I was originally writing this out for a mentoring client, but I wanted to share it with you because I think what we’ll talk about here will really help and will really add massive value for a lot of traders out there who still might be self-sabotaging their own profitability. Which in a way, it’s a good problem to have, because if you can just remove that self-sabotage, you’re profitable.
And this is why so many of the traders who come to me and learn my strategies actually gain profitability, because in many cases, the only thing standing between them and profitability is their own actions i.e. exiting early, executing late, missing or skipping trades due to fear, mis-sizing positions, not managing risk correctly. And today, hopefully I’ll be able to help you solve those problems once and for all. And when you can do that, profitability is waiting on the other side.
So let’s get to it.
The reason I started by asking that question, “Could you hold such a large winning trade to target?” is because on the face of it, I’m sure most people would say, “Yes, no problem. Will, give me a strategy that brings in wins of that size, just below +10R, and you better believe I’ll take those trades and bank that profit”.
But let’s say that I hand you a strategy that does just that. Today, I hand over my Price Reversion strategy and you’re presented with a just below +10R trade, like we were yesterday…
Let’s say you’re risking £100 pounds per trade, and you take the trade, completely comfortable with being stopped out if necessary, and in that case, losing your maximum risk, losing -£100 pounds. So far, so good. You have a huge setup in front of you, a massive winning trade on the table. You’ve managed risk and you take the trade.
Now, if you do get to target on this trade at £100 pounds risk, with this being a 9.2R trade on paper, that’s a £920 pound win. And I know that almost all of you with the Price Reversion strategy took just that yesterday by following and more importantly, sticking to the rules.
Imagine that. That, for many people, is the mortgage paid, the car loan paid, the week’s food shopping paid for and dinner out with the wife, so we’re nice, and some money leftover made in one day by awaiting a setup and pressing a button. If you take the trade and let it get to target, of course, and this is where things get itchy for some people. So let’s say you’re just taking the trade and if we skip forward, we can see that this happens. Price starts to instantly move in your direction and you’re at +1R and £100 pounds up.
Then you’re at +3R and you’re £300 pounds up. Then you’re at +6R and you’re £600 pounds up. Would you stick with the trade with this open profit and loss staring back at you? Would you actually let the trade move towards target and actually get to target?
On the face of it, I’m sure a lot of you are going to say, “Yes, no problem. All I need now is the strategy. And I’ll happily bank the next +10R, +15R trade that comes along, especially if all I have to do is await a setup, press a button and walk away.”
But I’ve had quite a few … well, I say quite a few. I’ve had two or three messages and emails from traders today saying, “Will, I took the trade. I saw price pause and begin moving sideways. And then coming back down and I snapped.
I took +4R, +5R and have now lost out on a half more and I’ve left £300 pounds or £400 pounds on the table. And I’m annoyed at myself. I’ve done it again. I’ve self-sabotaged my own results.” And across a year, even if you only miss out on let’s say +1R or +2R per-trade across 2 months, that can have a huge negative impact.
So I’ve had the conversation with these guys today and offered a few solutions. One of which is literally taking the trade and just not checking it whatsoever until the very next morning, when we begin trading. Again, a completely mechanical stop or target approach. And I wanted to put it back to you guys. I wanted to ask you all that question…
Imagine you had this strategy yesterday. You were presented with this huge setup that offered a just below +10R trade. You have the opportunity to 10X your money, 10X your risk. The strategy literally says, “Buy here, put your stop-loss here, put your target here and just go on. Just walk away. You’re done. There’s no need for any thought, any emotion, any analysis. Just take the trade and quite frankly, go away.” Could you do that?
And it’s just like the famous trader, Jesse Livermore, says in one of his books. It’s never the thinking that brings the money. It’s the executing with edge and just sitting tight. And I’ve built all of my strategies around that thesis, around that principle, completely removing emotion, completely removing self-sabotage and so on, if you can take the trades and just again, walk away, that is.
Now, for those that do struggle with this, I wanted to offer two things that might help. So firstly, again, take the trade and close the computer. Delete your broker’s app off your phone and do not check that trade whatsoever. Stop or target only.
Secondly, take a look at your risk because this may be the issue. If you’re risking, let’s say, £100 pounds, but £300 pounds is quite a substantial amount of money to you, you’re almost always going to snap when you see that or £400 pounds or more on the screen, because again, it’s a substantial amount of money to you, and that brings emotion into the picture. And from there, everything will fall apart.
So give both of those some thought and hopefully one of those will help.
– To your success.
Will, and team.