Set Conditions For Successful Trading By Being Like A UFC Fighter

Posted in: Trading Article

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Netpicks may be a leader in trading system development but we also pride ourselves with the level of trading education we provide.  One look through our trading tips blog and it’s obvious that you and your success is a priority for us.

That’s why our trading room is so popular.  While other trade rooms make trade calls and then silence, our trading room is always full of activity.  We take the time to explain, in detail, everything from the art of trading to mundane tasks such as back testing.

Here is a question that came up in the trade room and it deserves it’s own post:

“Should one back test every trade on every session or just back test the “power of quitting” trades?”

 

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The common power of quitting formula would be to trade your plan until you have two winning trades AND a positive result. Then you would be finished trading that trade plan for that particular session.

This can come in many forms:

  • You might get two winners with your first two trades in which case you would have reached your goals and be done for the session.
  • Or you might get a couple losses and then two winners.
  • Are you positive or negative?  If you’re positive you quit.  If you’re still negative you keep trading until you’re positive OR, you reach a predetermined ‘hard stopping time.’

A hard stop time is after 90 minutes, 2 hours (maybe more) of trading, or even, a plan to stop at noon, EST.  Whatever it is, one should limit their trading.

However many trades you need to take to get at least two winners and a positive result determines whether you continue trading or quit for the session.

 

POQ Goals Are Dynamic

I use a very successful trade system through our Netpicks Inner Circle and I require one of my winners to have at least hit its full target objective.

The pure POQ strategy does not require that.  One could literally get 2 winning partial trades, even just 1 tick or pip each, stopping out due to trade management rules, and be positive for the session, albeit, barely.

You would be done with your trading with a pure POQ – two wins and a positive result strategy.  I push the envelope a little harder and require one of my trades to hit it’s full target objective to qualify towards my own POQ goals.

It’s a personal decision based on my own knowledge and confidence level in my trade approach.  Two partial winners and a positive result is not good enough.  While it is a much bigger daily commitment to my trade plan, I require a full winning trade to get me to my POQ goals.

 

Knowledge And Confidence Comes From Your Back Test

Think of your back test as a type of “off-season” training.  During the off-season, you work on the fundamentals, fine tuning every aspect of your technique.  You discard what does not work and perfect those things that do.

The problem is that many people (and we know this to be true) are lazy when they back test their trading strategy.  There is no effort even though the more intense focus you put on your practice, the better you can be in the real situation.

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Rashad Evans – Former UFC Champion

If you want to trade with success, then you need to ‘practice your trading success.’  Backtest the way you intend to trade.  If you are going to incorporate a power of quitting style of goal setting, then back test it.  The results you derive will get you closer to a clearer vision of what you might expect if you can execute that very plan perfectly.

The next question though is, how do you know what the best POQ is?

  • Isn’t your back test supposed to help you get to the ‘trade plan?’
  • Back test to CREATE the trade plan?
  • Back test THE trade plan?

The answer is not too complicated.

Do Both.

Since you really can’t know one before the other, and both are necessary to achieve the other, here’s how you can remedy that dilemma:

  • Roll back your charts to some random place in time,
  • Click forward to the next day or the next Monday.
  • Proceed to enter every single trade til the end of the session for an entire week.  Manually!

Maybe I’ll even do that for an entire month.  It really depends on how many trade setups there are per session.  I’d like to have between 150 to 200 trades.

“Isn’t that a lot of work,”

It sure is It’s called sweat equity and it’s the type of equity that pays HUGE dividends.  It’s also a lot cheaper than blowing out your trading account because you were to lazy to put in the work.

Then I analyze those trades, study the win/loss column in my back test result and determine from that piece of information what kind of POQ approach I want to focus on.

I continue back testing from that point forward with my quitting goals in place. 

I begin to practice how I would like to play.

I’m not yet ready to practice HOW I want to play because I have to continue to see if my POQ idea will produce for me.  Keep at it.

Eventually you discover the quitting goals that will work best for YOU and you can then continue with your back testing, only now, you would be truly beginning to actually practice how you will play, as your trade plan has taken the form that will guide you to success as a trader.

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