The monthly S&P500 Emini futures candlestick chart has not had a pullback in 14 months. This has...
How Do You Stack up Against Other Traders? (Part 1)
07/27/2009 10:02 am EST
Let's be honest, if you are a trader on your own, trading your account, it is lonely and confusing out there. You are bombarded with advertising claims that assure you “Anyone can be a successful trader,” crazy claims offering to teach you how to “Turn $200 into $27,521 in six months trading forex!” and offers to sell you “Secrets the pros don't want you know!” Unless you have totally isolated yourself from every trading magazine, forum, and Internet site, you are pushed and pulled by all the “Too good to be true” claims.
I've written several articles on MoneyShow.com about realistic expectations, but this topic still remains on the top of my list of concepts I want to cover again when I see a useful example for a new article. This week, one of the students in my one-on-one mentoring program graduated. He will continue to attend group mentoring sessions, but our one-on-one work is finished for now. As a part of the last session, we went over his month-by-month statistical analysis and after we had finished, it dawned on me that if he would allow me to use his numbers, I had a basis for an interesting article. To make this example even more interesting, I approached two of my other students and both agreed to allow me to include their numbers as well. I'll be able to contrast the progress of three very different retail traders for you, and you'll be able to see how their monthly statistics stack up against your own, assuming you keep your own statistics.
You don't keep monthly statistics? If you don't, how do you evaluate your progress at the end of each month? I teach each of my students to have a “shareholders” meeting at the end of each month. They look at the results of their current month and compare and contrast the results with those from prior months. This comparison allows them to:
- Measure their progress or lack of progress
- Dig deeper into their trade-by-trade numbers if they see an anomaly in the statistics
- Make an informed decision about their respective futures as traders. Is there enough progress over some periods of months for them to continue to trade? Traders who consistently lose money are spending a great deal of emotional and monetary capital on a hobby, not a living.
- Make an informed decision about how much capital to invest in the upcoming month. Should they keep their position size the same or change it? Traders who consistently make money should put in place a position sizing plan to grow the size of their account.
But if you are on your own, with no guidance from an experienced trader or educator you can trust, you may not know what statistics to keep, and once you start keeping them, you may not know what the statistics are telling you. And chances are, you haven't seen any actual monthly statistics from people trying to learn to be consistently profitable. You may have seen the statistics of a professional trader or educator, and while comparing your statistics to them may give you a goal to shoot for, wouldn't it be nice to be able to see how your stats stack up compared to some people in your shoes?
With the generous help of three of my students, let's see if we can offer you a glimpse into the stats of people like you who are trying to be consistently profitable traders. Before I go any further, none of these trading statistics are being presented as “audited results.” They were presented to me by each of my students as actual results and they are meant to be representative of each of the three traders’ progress.
Let's call the first trader Albert. Albert first met me at a Traders Expo, where he took a free educational session sponsored by the CME Group on currency trading. After speaking to me in person, he e-mailed me several times and then attended my Market Maps basic seminar. He has been trading for a bit under two years, and before he took my seminar, his results were mixed. Some months he made money and some months he lost money. His account was not growing, though it was not shrinking by a great deal either. I think it's fair to say that Albert was surviving, but not flourishing as a trader.
Let's look at Albert's monthly statistics:
Looking at Albert's monthly numbers after two and three months of one-on-one mentoring gives us a good measure of how his trading is evolving. It generally takes me three or four weeks to get a measure of where a student is, what he or she is capable of, and to identify any major faults in their trading.
|More tomorrow in Part 2.||Read Part 2 | Read Part 3 | Read Part 4 | Read Part 5|
Related Articles on STRATEGIES
Matthew Kerkhoff, options expert and editor of Dow Theory Letters, continues his 14-part educational...
Profit from a market by capturing a trend. Money management is key. The battle is often from within,...
Has Mr. Market (S&P 500/Equities) priced into too much positivity, while inflation remains at ba...