1. Winrate

What rate of trading do you expect to make profitable? You can still make a profit even with the winrate less than 50% of your winning trades are much larger than the losing trades. Therefore, winrate is for reference only, not to say anything, but it is a number we need to keep in mind when it comes to a good enough trading system.

2. Longest chain of losses expected

What is the maximum number of trades you are expected to lose in a row? Most trading systems can have up to 10 consecutive losing trades per year, can you survive based on the size of your current position?

If you fall into these situations, you often lose your temper and can lead to wrong decisions. To solve this problem, you can refer to the following steps:

  • Suspend transaction.
  • Review the transactions you have made and find the cause.
  • Keep your emotions in control.
  • Refine your trading system.

3. Multiple "R" / risk per trading

This is the amount you risk losing if your judgment about the trade is wrong. Mentally and physically, will you be okay at how much money when you're wrong?

In addition, a Multiple R also helps you to determine how much profit you need to earn before the amount you accept the risk to be able to achieve a net profit. For example, if the risk: reward is 1: 2, that is, 2 lose 1, then each match wins, you get 2R, each loss losing 1R. If you only have a winrate of 33%, you break even, so you just need to reach a winrate higher than 33% to make sure you have a profit.


4. Percentage risk per trade out of your total capital

This is the percentage of your total trading account - the amount of capital that you are willing to risk per trade if you are wrong. Risk of 1-2% of total capital in each trade through proper position size and stop loss prevents the trader from blowing his account away.

The art of trading is not about how much to eat but how much to lose. By controlling losses, like controlling the cost of doing business, you can withstand difficult market times and be willing to make a profit during times when the market is favorable for you. That's why the 2% rule is so popular and important in trading!

5. Risk/reward ratio

Risk / reward ratio = (Distance from entry point to TP) / (Distance from entry point to SL).

How much risk do you risk if your trade loses compared to the amount you expected to make from a winning trade? A 1: 3 R: R ratio is very good because you can still make a profit even if the winrate is less than 50% (like I said before).

From the ratio R: R, we can calculate the minimum winrate: Minimum winrate = 1 / (1 + reward: risk)

Keep in mind that minimum winrate and R: R ratio is always inversely proportional to each other!


6. Expectation for the maximum drawdown

This is the percentage of your maximum capital that you are expected to decline from your maximum capital at any given time.


Example: In 2016, you started with an investment of 10,000 USD. You grow this capital to $ 16,000 and lose $ 8,000, then end the year at $ 12,000. Thus, the highest peak of your capital in 2016 is 16,000 and the lowest low is 8,000, so the amount your account has lost in the 2016 period is 16,000 - 8,000 = 8,000 USD. The calculated drawdown rate is 8,000 / 16,000 = 50%.

The lower the drawdown, the less stressful it is to rebuild the lost capital. Getting back "form" after suffering a drawdown is very difficult because, with a drawdown of 20%, you must have a profit of 25% to return to breakeven, and if the drawdown you bear is 50% then you must have a 100% yield to get back to the original finish line.

Because loss is always a part of the investment, we must control it closely. Drawdown as little as possible!

7. Annual expected return

What annual profit are you aiming for? The higher the target return, the higher the risk, and the higher the return. Remember, the world's top capital managers only make an average of 20% a year over the long term, and the best traders in history, on average, make 50-60% a year over the years. the best. I say that so you know that having a reasonable and realistic goal is very important in navigating your trading to that expectation.

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