Coach Mike Rykse wrote this article for one of our print newsletters and it remains one of the most important trading concepts we’ve introduced for the active trader. In fact, in literally dozens of trading plans, over thousands of trades using a Power of Quitting 1 or 2 has easily outpaced virtually any other approach. In fact, we are finding more times than not the Power of Quitting = 1 win is proving to be best. Only testing the plan can tell you for sure. Why is this so powerful? All you need to do is enter the day with the objective of 1 winner + Positive Result = Done for the Day. If you your result is still negative (you started with a loss for example) you keep going until you have 1+ winners and Positive Result.
Make sure you have a Time Circuit Breaker as well. Most markets are best for 2-3 hours in the morning. If you reach the end of that time – you quit regardless of outcome.
Finally, you might consider having a circuit breaker on max losses. Usually we find 2 or 3 is ideal. Here’s the rest from Mike…
If you have been around the NetPicks products for any length of time, you are familiar with the term Power of Quitting. It is the idea of getting in, getting out, and getting done. We do this by setting a goal for ourselves each day. For example, on many markets we aim for 2 wins and a positive result and then we are done. This could take 10 minutes or it could take 4 hours. In this case we would be looking for 2 winners and a positive result. According https://dash-digital.co.uk this could mean we start out with 1 winner followed by a loser and then a second winner. Or it could mean we get 2 wins right out of the starting gate. As long as we have 2 wins and we are positive then we are done for the day. It all depends on what the markets are doing that day.
In working with hundreds of traders over the years the topic of Power of Quitting is one that comes up most frequently. It’s difficult for traders to get their minds around the idea of quitting after a few trades. A common response that I get is, if your system were proven to produce a positive edge, then why wouldn’t you want to trade it all day? You could make even more money. There are many problems with this statement.
First, more time in front of the computer can lead to mistakes being made. If you can’t execute your system and trade plan flawlessly then how can you take advantage of the system’s edge? It’s much better to be focused for a defined block of time each day instead of spending hours on end staring at the charts. We all know how stressful trading can be. Taking steps to limit this stress will lead to you becoming a better trader. Power of Quitting does just that.
Second, there are costs that add up very quickly when trading all day. Even though commissions are very inexpensive, these days they can add up very quickly if you are trading all day long. This is true of any market you trade including forex. I know a common marketing practice is to advertise forex as a commission free market but keep in mind you are paying the spread on every buy order that you place. Keep track of your trade costs throughout the year and you will be able to see how important it is to limit your trades as much as possible.
Last but certainly not least is the profitability of Power of Quitting. When first introduced to Power of Quitting in my own trading I was skeptical. I was worried that I was leaving profits on the table. However, as I dove in and back tested many different markets I was amazed to see that in just about every case my results were improved by using a Power of Quitting approach. What is the point of trading all day when you can maximize your profits in just a few trades each day? All you are going to end up doing in the long run is racking up commissions.
So how do you get started with this approach? It is very important to test each market that you are interested in. This is important to see what Power of Quitting approach is best. You really need to record at least 100 trades in order to see reliable patterns developing. Analyze your data set to see the difference in your results by taking just a few trades each day compared to taking every trade all day long. In most cases you will find the 2 wins and positive approach to work best. However, you might find through testing that stopping after 1 win is best. Let your test results determine which approach is best. The final option is to trade a block of time. You might find through your testing that the first 30 minutes of the trading session produce the best results. In that case trade the first 30 minutes and then shut things down.
While it is tempting to trade all day long and make thousands of dollars each day, it is just not realistic to do so. You will be much better off to limit your trading with a Power of Quitting approach. Book your profits and then move on with your day. Go play golf, go spend time with your family, or just relax by the pool. Whatever it is that you do it will sure beat spending hours staring at your charts all day. This will limit your costs, your stress, and as you will see it will lead to a better bottom line.