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Protected: How to be a Consistently Profitable Trader? 

Last Updated: July 13, 2022

By Rayner Teo

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  • Thanks’s big rayner, this article help’s a lot, please i want to ask if there is recording for yesterday webinar because i’m not around at that time, it pain me that i miss it. Than’ks again for the article, SAVE TRADING.

  • Under the ‘Consistency’ heading you give example of 3 types of traders based on the frequency of their trades : HFT, day trader, swing trader. Under none of them does your calculation allow for the possibility of down years, which unfortunately is a reality of trading.

    • Hi Vlad,

      You make a good point. Yes I should have mentioned that consistency will result in draw downs no matter how good a trader is.

      Thanks!

      Rayner

  • Hi Rayner:

    In your formula:

    Expectancy = (Winning % * Average win) โ€“ (Losing % * Average loss) โ€“ (Commission + slippage)

    What do you mean by โ€œslippageโ€?

    Also, I think โ€œ(commission + slippage)โ€ is actually โ€œ(Average commission + Average slippage)โ€. Right?

    Thank you!

    Eugene

      • Hi Eugene,

        Slippage means that you get filled at a price that is unfavorable to you.

        E.g. you want to go long at $100 but got filled at $100.50 instead.

        Rayner

        • Thanks Rayner:

          I knew what slippage was; but didnt include it in my expectancy calculation.

          I think it is unnecessary, because slippage is already included in the P/L.

          When a position is closed, it has a profit or loss, regard lee of the slippage it might have

          Say:

          I opened a position, which got filled without slippage, then I closed it with $100 profit.

          Or I opened a position, which was filled with -50 pips slippage (during news trading), then I closed it with $100 profit.

          In both cases, I only need a single data ($100) to compute my expectancy.

          So my first question:

          Why should (and how could) you include the slippage to calculate the expectancy?

          And a second question:

          I believe it is necessary to include rollover to calculate expectancy (in fact, I do it in my own formula).

          What do you think?

          Thanks!

          Engene

          • Hi Eugene,

            1) Slippage can also be factored in when you exited your trades at a unfavorable price. E.g. You stop loss is at $100 and got filled at $99.50, that is a slippage of $0.50.

            This would matter in terms of R, as you’d lose more than 1R due to unforeseen slippages.

            So if after a number of trades, you’d realize you’re losing more than 1R on your trades due to bad slippages, it’s a sign something can be improved on.

            I’d still use the same formula for it. But it would be the average slippage.

            2) Roll over can be used as well.

            Rayner

      • Hi Rayner:

        This is the first time I find someone includes slippage in expectancy calculation!

        I donโ€™t care about slippage, since I got very few slippages in currency trading. Maybe you get more slippage when trading commodity, so it is important to you?

        BTW, this is my formula for expectancy, factoring rollover, not slippage:

        Expectancy = (total profit โ€“ total loss โ€“ total commission – total negative rollover + total positive roller) / total number of trades

        This formula is simpler and requires fewer steps of calculation (donโ€™t need to calculate % and average first), and yields exactly the same result as other formulas using % and average.

        Eugene

        • Hello Eugene,

          Yes you formula would make sense if you’re solely trading the forex markets.

          But for stocks and futures, the expectancy formula would need a little tweak due to the way transactions cost are incurred.

          Thanks for sharing you formula! ๐Ÿ™‚

          Rayner

  • Hi Rayner,

    Please update your links to your proprietary trading spreadsheet and the trading checklists. I cannot go there and always back to this blog instead.

    Thank you.

  • Hi Rayner,

    Please update your links to your proprietary trading spreadsheet and the trading checklists. I cannot go there and I always go back to this blog instead.

    Thank you.

    • Hi Hardie,

      Apologies for the inconvenience. The link should be working fine now.

      If you still can’t get it to work, do drop me an email at the contact page and I’ll send you a copy personally.

      Rayner

  • Hi Rayner

    waw…thats look like complete explanation. Thanks .
    Its give me an idea how trading works…thanks a again Rayner
    I will follow and close look on your site and guidance.

    thanks

    enjoy n cheers

  • Rayner sir, thanks a lot for giving such information. I am from india and trading in indian equities since last about seven years. till date, I have no plan what to do and I am entering into trade with a trading plan. now will prepare a trading plan accordingly and take steps thereon accordingly. I wish to god that you wil continue with such information/videos for ever.

    thank you so much.

    • Hi Sanjay,

      A trading plan is a big stepping stone, where losing traders start becoming profitable.

      Don’t hesitate to let me know if you’ve got any questions, I’ll be glad to help.

      Rayner

  • Rayner,

    Your article confirms what I’ve been reading on investopedia.com – how itโ€™s imperative you have a trading plan before you begin trading. And I also now understand the main elements that go into one from swingtradesystems.com (which you list above as well: conditions of trading setup, risk management, etc…) These sites, yours included donโ€™t go into too much detail, just give an overview. Or, at least I’m looking for more detail!

    Do you have or know of a trading plan template of sorts that would get into more specifics? Iโ€™m especially interested in how you would weed through the 7000 or so stocks in the US exchanges, and what exactly I should be looking for. And how to exit your trades. I hear that’s the most difficult part of trading.

    I’ve submitted my email address. Just please don’t give it out, as I get way too much email as it is!

    John G.

    • Hi John,

      The trading plan template I used is what I shared with you in the post earlier.

      I don’t trade stocks but mainly the futures product. So I look at about 60 markets.

      If you want to learn how to exit your trades, you can check out this post here.

      I respect your privacy and your email is kept confidential. You can unsubscribe anytime.

      Rayner

  • Hi Rayner thks fr the beautiful guidance. Can u pls advise what wuld be an ideal max drawdown size in % terms viz a viz one’s trading capital considering the fact that one is either day trading or swing or positional trading, to define a good trading system.

    • Hey Deepak,

      Drawdown is a function of how much you’re risking on each trade, and not the trading method itself.

      If you risk more per trade, then the drawdown will be steeper.

      Rayner

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