BPA trading room Q&A: May 8, 2015
How many points would you say a beginner should shoot for in a day and in a month? On average, how many are you able to make in a month, looking at what is realistic?
[Slang info: To “make your nut” is to break even, anything beyond that is profit. Historically, the ‘nut’ is thought to refer to the wheels of a wagon or carriage; when a carnival or circus set up in a town, officials would take a nut from the carriage wheel to prevent the performers from leaving without settling outstanding bills.]
Audio duration: 4min 34sec — Scroll down for image
Going for points vs structured good trades
I don’t look at it in terms of that. We hear traders sometimes talk about my nut – what is my nut? Did I make my nut today? Traders know what an average day for them is, and every trader is different. And for some traders, it might be two or three points; other traders, it might be 10 points; some traders, it might be 15 or 20 points. And everybody has a different expectation of what average is for them. And if you’re starting out, I would never be thinking about points because points is another word for money, and if you’re thinking about money, you’re gonna mess up and you’re gonna lose money.
What I would be thinking about as a beginner is “Did I take a trade that made sense? Did I manage it properly? What would I have done differently? Did I get out too early? Did I get in too early? Did I get out too late?” Those would be the things that I would be thinking about. I would not be thinking about “Do I really need to make three points today?” Because if you start focusing in on profit targets and goals, you’ll be so consumed by making a certain amount of money that you’ll end up missing trades that you should be taking, you’ll end up taking trades that you should not be taking, and you’ll lose money.
I think that it’s much better to focus on doing the right thing. You can pretty much buy or sell anytime during the day. Ninety percent of the bars of the day are in channels or in a trading range. And when that’s the case, you can buy or sell if you could scale in and manage your trades correctly. Ten percent of the bars of the day look like this: a strong break up. You have a strong break out here, and then we have a strong break out here. So of the 81 bars that we look at right here, we have three or four strong break out bars, and then 75 trading range or channel bars.
With trading range and channel bars, you have a lot of flexibility if you manage your trade correctly. You can pretty much buy or sell — at any time — if you manage your trade correctly. And even if you sold down here [bar 8] and sold more up here [bar 30], you would have gotten out with a small profit. Even if you bought up here [bar 29/30] and bought more down here [bar 60-62], you would have gotten out with a profit. So to me, the focus should be much more on how do I structure a trade, and then once I’m in the trade, how I manage the trade. And that should be your only thought all day long. And never look back and say, “Oh, I messed up or lost money. I got to make up that lost money.” No, you — you don’t do that. You just try to stay calm, stay peaceful, be respectful of yourself, accept that you’re not perfect, that you’re going to make mistakes, and that’s just part of trading, and don’t dwell on it. Just accept that it’s going to happen, and just try to make yourself better.
It’s just like how you should be in life in general. You should always be trying to make yourself better in every way, try to become a better person. And you’ll be happier. The people around you will be happier. With trading – same thing – just focus on doing the right thing and don’t have any regrets. As long as you’re trying hard, you should expect nothing more than just trying to be good – just trying to do the right thing.
How many points a day?
So, in terms of the number of points, really good traders, a lot of times, think about points in terms of an average day’s range. So one trader might take more swings and fewer trades, might say, “Okay, the average range is 12 points. I usually try to make about half of an average day’s range in a day.” Another trader might say, “I scalp like crazy and the average day’s range is 12 points — I usually try to make one-and-a-half to two times the average day’s range in a day.”
And I think a trader could be thinking about it anywhere in that range. However, as I said, I don’t know of any successful trader who’s thinking, “Oh, my gosh, I got to make $3,000 today, or I got to make $5,000 today.” Traders — all they think about is “Did I manage that trade correctly?” and that should be the focus. “Where is my stop? Where is a reasonable target? If it’s not performing the way that I want it to perform, how do I get out? Do I get out now? Do I give it more time?” And you never know with certainty, at any time, whether or not what you’re doing is right, but you just rely on your read, you trust your read, and you don’t worry if you lose money. The reality is you’re going to lose money. Some of the time, you read wrong or the market takes a low probability path. You are right in your read that it most likely was going to do X and instead it did Y, and that’s okay. That’s just part of trading.