AT #28: $500 to $74,580 Challenge Week 12

Read time: 3 minutes

Are you one of those traders strutting around about your 80% win rate? Let me tell you something, you’re focusing on the wrong statistic.

In the real world of trading R-squared reigns supreme. And no, I’m not talking about Einstein’s E=mc².

In todays article I want to go over the stats for the week and r-squared, and why it’s your north star to being a profitable trader.

In this Email

• Stats for the week
• The north star of R-squared

Stats of the week

• Number of trades: 5
• Profit: +$1,781.00 PT
• PnL %: 0%
• Account value: $121
• Position size per trade: $500
• Cash position: $2,611
• Tickers: $QQQ | $SPX

Like I said last week, I will continue to paper trade until the end of the month. And during this time I will continue to journal my trades, dissect my losses, and rewind the charts like an athlete reviews game tape.

Next year, is going to be a better year, and I intend on making this dream becoming a reality, and I want to take you on this journey.

So what happen this week?

Nothing interesting happened until Thursday. Only 2 days of trading.

The goal is to not take every mediocre trade, and every 50 cent move we find. My goal between now and the next year is to find quality trades. Trades that yield your first trim at 100%.

On Thursday and Friday, my high reward setups presented themselves to me, and I pounced on them.

​

• 5 trades
• 1 loss
• 5 winners
• 2 mediocre wins
• 2 outstanding trades

2 trades mediocre? How can a 70 to 90% return be a mediocre trade?

I’m here to make money, and risking $1 to make $0.70 is not a sustainable business in the long run.

Let me explain…

R-Multiple

What if I told you that you can have a 33% win rate and still breakeven?

Think about that, anything above 33% can make you profitable. How? Trading is a math game, so let me give you some numbers.

Let’s say you have $900 in your trading account, and you risk $100 for 9 trades.

Let’s say you lose 6 of those and win 3. But these 3 wins net you a realized multiple (r-multiple) of 1:2.

This means, you go in with $100 in a trade and come out with $300, with $200 being profit.

3 x ($100 + $200) = $900 BREAKEVEN

When I started adopting this framework, it stopped me from taking every mediocre trade that was thrown in my face.

The phrase “see green take green,” is phrase that should be look down upon, and is an insult to real traders.

Why would a trader risk so much to make so little?

The next step I advice you to do is to find high return setups, and only take those. Slowly work your way to +1R and then to +2R.

That’s it for today. See you next week.

PS: What’s the #1 thing that made you want to check out this newsletter?

Reply and let us know. I read every reply.