Today was a little tricky as the market traded sharply down the first 15 minutes after the open, and then turned strongly up around 11:30. It managed to get one R out of me on a short of NDAQ below the 10am candle. My best trade was NTRI, which only gave me about 1.2R in profit:

Inspired by a dehtrader post, which I saw from taleofthetape, I have decided to post the actual dollars for this trade in hopes that it will be easier to understand. I was alerted to NTRI when it broke above its 11am inside candle. With a purchase at $52.50 and a stop below the 11am candle at $51.83, the amount risked (R) was 67 cents. Based on the amount of money I have decided to risk on this trade, I could only buy 500 shares, which gave me a risk of $335. I sold for an average price of $52.30, for a profit of $400 or 1.19R. I made more than I risked, but I don’t consider it a successful trade unless I make 2R or better.
The main reason I never post in terms of dollars and cents is because 1) it doesn’t matter, and 2) I am embarrassed to show everyone how small my trades are and how little I make. It’s kind of a personal thing, like asking someone what their salary is or how much they have in the bank. But most of all, from a trading perspective, it doesn’t really matter. The successful trader is the one who makes a lot in comparison to what they risk. Dollar amounts mean nothing because you need something to compare it to. Even percentages fail to demonstrate the success of a trader, because a trader can bet it all on a coin toss and make %100 – they may have made 100%, but they also risked 100%. In this way, even making 100% doesn’t show that you are a successful trader. By looking at your trades in terms of R, you can see a sort of “barometer” of your trading success.

This entry was posted on Tuesday, September 5th, 2006 at 5:56 pm and is filed under trading. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.