How to Increase Trading Profitability with the MaxR Metric
Email Ryan Mallory Trying to find the right trading strategy that will help increase your profits is incredibly important. Maximizing your stock market profits is how to increase profitability in trading by minimizing the risk whenever and wherever you can. These two elements of trading go hand-in-hand. This is such an overlooked aspect of trading but did you know, that you can actually increase your profits, simply by losing less on your losing trades?
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Well of course when I write that, it sounds painfully obvious. But is it really that obvious? I mean, think about how to increase profitability in trading a second If you are not looking at it from the latter perspective, you are in big trouble!
No worries though, because, this post focuses entirely on your trading strategy and what it takes to increase your profits in the stock market and your collective trades as a whole.
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There is a handy Risk-Reward Table that will help you with increasing those profits - so be sure to want to download as well from my free resource library. When we get out of a stock, what do we do? We watch the stock trade for a couple more days, may a couple more months, to make sure we get out at the high tick.
Do yourself a favor: Stop trying to get out at the top! I mean seriously, do you know how utterly stupid that is? Instead, ask yourself whether the chart is starting to breakdown here or whether it is still valid. If it is valid, fine, raise your stop and stay in the trade.
You follow me so far? It is a slippery slope for individual trades, when you want to get out at the top. All traders want to get out at the top, but the real profits come when you protect the majority of what you have, get out with a profit and can move on to the next trading opportunity. You have to know this stuff.
First off, calculate the percentage of winning trades that you have had over the last three years.
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Once you have done that, then go ahead and calculate what is your average losing trade. That is simply not good enough. That means, the flaw in your trading is that you are losing too much on your losing trades and that alone is what is keeping you from having a profitable trading strategy.
It has nothing to do with your winning trades. So adjust the risk and stop-losses accordingly. To help you with this important aspect of trading I've put together an extremely helpful spreadsheet that will help you to identify how much you should be risking on each individual trade.
Increasing Your Stock Market Profits 3: Identify Resistance Overhead It drives me nuts how people will buy a stock simply because it is bouncing while totally ignoring huge levels of resistance that is clearly marked overhead. For example let's say that part of your trading strategy is identifying inverse head and shoulders patterns following large sell-offs.
That is a legit trade setup, and one that I personally really like.
So be mindful of the resistance overhead. It comes in all shapes and sizes and it also goes for shorting stocks too. Support and Resistance are real obstacles when they stand in the way of the direction you want a stock to take.
When that happens, just move on to the next trade - there is no shame in it. What it will really come down to, is put income you are managing the risk of a trade and what you are doing to minimize the risk impact to your profits.
In the end, risk eats away at your profits. Keeping risk to a minimum will all you to maximize your profits on your winning trades. Those winning trades take a lot of hard work.
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Why then would you let it get eroded away, by risking equal amounts of risk compared to what you are bringing in on the profit side? That's why what I am telling you here makes sense and as a result you should thoroughly vet your trading results. So, tell me, what are you doing to minimize your risk on your individual trades?