In our trading questions mailbox this past week…. An easy formula to calculate your trading wins and losses; Four ways to build your confidence in Trading
Q. ”In May I joined Global Macro Trader and I must say I’m loving the simplicity of the emails and the high number of profits so far. Please can you clarify a formula to calculate the trading gain and loss percentage?”
A. Thanks H. Glad to hear you’re enjoying the service! Let’s use one of my recent trades I sent out… Here are the specifics for the trade.
Type: Long (buy)
Market: JP Morgan
Instrument: CFDs
Entry: $194.50
Stop loss: $182.50
Take profit: $208.70
Margin: $20 per CFD (minimum trade size 10 CFDs)
Now, let’s first calculate what the loss percentage on what you put in would be, if the CFD trade hit the stop loss.
Here’s the calculation to use:
Loss percentage on margin
= (Entry – Stop loss) / Margin
= (194.50 – 182.50) / 20
= 60% on Margin
This means you would have lost 60% on what you deposited if the price hit the stop loss…
For example. If you took the minimum trade size of 10 CFD contracts, and the trade hit the stop loss, you would have taken a $120 loss ($200×60%).
But the trade hit our take profit. So, here’s how to calculate the gain percentage on our initial deposit.
Gain percentage on margin
= (Take profit – Entry) / Margin
= (208.70 – 194.50) / 20
= 71%
This means you would have banked 71% (excluding costs) on what you deposited when the price hit the take profit level…
For example. If you deposited $200 into the JP Morgan trade you would have banked a $142 gain (71% X $200).
***
Four ways to build your confidence in Trading
First: Stop procrastinating
No more weak excuses about why you cannot take action…
Oh I’m too busy at work.
I don’t feel like trading today, I’ll come back tomorrow.
Listen, the markets are moving with or without you.
If you’re not being consistent and looking at the market daily, you’ll miss the next profit opportunity.
The best trades come along to those who are consistent and ready to act.
The more you actually see the opportunities the more often you will start to take them… but if you don’t watch the market on a regular basis then you won’t be confident to act and you will simply never trade.
So, be consistent and when your trading plan fires a signal – hit FIRE!
Second: Hold onto your winners longer
You enter into your trade, and the market price moves up a touch.
You’re in the profits (just).
And now you want to close out your trade to lock in a tiny profit.
This is when you need the confidence to back the trade you are in and keep going!
Plus…A whole lot of Patience.
The key to successful trading is to limit your losses and ride your winners.
The more you do this the more confidence you will gain with each trade you take.
Third: You’ve got to learn to earn
I’ll tell you. There is nothing that makes you feel more confident as a trader than one who knows their s#&t.
Think about it…
You log onto your trading platform and charting platform and all you see are numbers, colours, charts and indicators.
The more you know, the more confident you’ll feel to get into the trading battle, attack and win.
Be consistent read and follow everything you can on
Financial markets
Market dynamics
Trading instruments
World market environments
Technical analysis (chart analysis)
Fundamental analysis (news analysis)
Fourth: Your secret weapon is your strategy
The biggest confidence builder I can think of, is your secret weapon in war.
I’m talking about your trading strategy.
The financial markets are dynamic and dangerous. And if you enter it blindly, you’ll be wiped out before you can say “I surrender”.
You need your trading strategy to give you all the criteria and rules to enter and exit your trades with strict money management principles.
If you don’t have a strategy, DON’T go into the trading War Room yet!
Instead, if you want to see how it’s done, then you can follow me for a while, I’ve put in the legwork… the hours of back-testing, reading hundreds of books and immersing myself in the markets 24/7.
You can see how I apply my strategy, ride my winners, cut my losers and hang in for my target prices in Global Macro Trader. We’ve had a blinding winning streak over the last few months, you can find out how to follow me here.
It’s a great opportunity to develop your own confidence to trade and profit.
