Original subtitles

So when you track your results, you've got all this data, you know, as far as your trades, and can

we use that in a way to kind of give ourselves like a grade.

Right.

Or or a measurable number that we can look at to see if we're improving or how well we're doing and

how much we can expect to make on each trade.

And you can it's a very important measure, simple to calculate, called the expectancy ratio.

And that's we're going to talk about here in your expectancy ratio is based on a set of indicators you're

using.

I mean, that's your trading indicator plan.

So you're using it with your plan.

And the whole goal, the expectancy ratio is you want to see how much you can expect to make on each

trade.

You know, if you do 50 trades, you would know how much you would make on average on each of those

50 trades.

Some of those trades are winners.

Some of those trades might not have worked out as well.

Either way, you're going to have they'll go into a calculation, the expectancy ratio, so you can

kind of get a feel for how well you're doing.

And the expectancy ratio is simply looking at your average profit.

You know how much you make per winning trade.

You know, times you're winning trade percentage.

Right.

How much percent of the time are you winning or profitable?

And then you subtract out of that the average loss per losing trade.

That's where your stop losses can help stop loss orders, can help minimize that times you're losing

trade percentage.

Right.

So a pretty simple calculation.

So if we looked at let's say you're using an indicator as an example, we'll call it indicator set one

here.

So this is you're in a carrier you're using.

It could be whatever combination of indicators.

We're just going to call it your primary secondary.

Let's say there's a third as well.

But that's your indicator set one that you're using and you really committed to.

And let's say, again, whatever currency you use to submit different numbers I'm using here.

But let's say that your average profit per month in trade is eight hundred dollars.

That's pretty good.

That's OK.

Times thirty five percent.

You're winning trade percentages.

Thirty five percent.

Well, that's not great, you know, so you would love to be about 50 percent.

So you can only see already.

See, this might not be so good for us, but if we can minimize our losses, maybe it won't be so bad

and we do.

Our losses are only four hundred dollars per hour.

Winds are eight hundred dollars.

Our losses are four hundred dollars.

So that's a good sign, though.

We do have more losses in this indicator that we're using.

Sixty five percent against going to Africa.

One hundred percent.

Sixty five percent is our losses.

So you do the math and you see 280 minus to and you get twenty dollars.

So what you can expect to make per trade is twenty units or twenty dollars.

And you may say yourself, well that's not that great.

I could do better, you know, maybe you're looking at that.

So this is where you want to adjust your indicators, track those results and then try a different set

of indicators on that.

So let's say we did that and we now have indicators set.

Number two, we're not using number one anymore.

We're trying a different set of indicators and we're tracking it separately to see how well we're doing.

We want to get to that expectancy ratio.

How much can we expect to make penetrate?

So let's say in this case, we are using a different set of indicators.

Maybe we're being a little more conservative on the on the profit side.

And so we're making less profit per trade.

We're making only six hundred dollars.

And so that eight hundred dollars.

But you see our winning percentage in this example went up, went up significantly.

Now we're at fifty five percent.

You know that's that's not going to fall apart but that's pretty good.

So we're above 50 percent at least and then we're still minimizing our losses.

In fact we actually reduced our losses a little bit to three hundred dollars per trade and our percentage

is down there too.

So then you do the math, you can see three thirty minus one thirty five and we come up to expectancy

ratio of one ninety five, much, much better.

Right now we're making one hundred ninety five per trade and you can keep adjusting your indicator sets

or keep tweaking this a little bit until you can get to, you know, expectancy ratio that's working

for you.

And you can kind of repeat this over and over is the idea.

But right now, let's say at one ninety five, that's if I was to make one hundred trades over, however,

time period, a month or two months, how are often you trade maybe a day if you're, you know, fast

doing lots of trades you can expect to make, you know, nineteen thousand five hundred.

Right.

So that's one hundred times you're expecting this ratio of one ninety five nineteen thousand five hundred.

That's when I get to three hundred trades.

I'm going to be at fifty eight thousand five hundred, you know.

So again, you're going to have some wins and you're going to have some losses.

But the when you look at the difference between them, including their expectancy ratio, you know,

then you can kind of see what your expected, your potential profits would be.

And see if you're doing that now, you can make that number even better.

Of course.

I mean, if you increase your win percentage right near, you're winning more trades or the amount per

trade that you're putting in, especially on those winning trades, is higher.

You know, you can increase those amounts.

You know, note, you know, it goes the opposite way.

If you're loss percentage increases or you decrease the amount committed portrayed, then it would you

know, it's all mathematical at this point as far as your expectancy ratio.

And a reminder, too, that if you like that, you say I can do even better and you change to a third

indicator, said, well, then everything changes.

Now you need to start tracking separately under indicators set number three.

And let's say your indicator set number three does great greater does two fifty expectancy ratio.

Well, now you've got a new indicator said.

But if you do your indicator set and you give enough time to show whether it's working or not and it's

doing less than that one ninety five, well, then the smart move would be to go back to that indicator.

Set number two, as far as you know, certainly maximizing your profits around that.

So hopefully you can see here how powerful it is to know your expectancy ratio, you know your wins,

your losses, you know your scorecard, and you know that every time you make a trade, if you're so

sure about a trade, you can say, well, I expect to make this much more trade.

I know I'll lose some.

I know I'll win some.

They'll go well above, let's say, the one ninety five in our example.

But in the end, I know in using this example again, I know that if I use this indicators that I put

together my primary, my secondary, maybe some other ones with it, and I can expect to make as the

example, one ninety five per trade.

Well that's a powerful kind of confidence boost, but also it's a great money management way to say

stay on track or off track.

Or if I start changing my indicators, what impact is that?

So understanding your expectancy ratio, tracking results, how can I expect and trade show can be very,

very powerful and I would certainly encourage you to do it.