Trading 101, Part 4: Improving Your Results

Part 4: Putting it All Together

Welcome to part four of Trading 101, a series on the essential mathematics of successful trading. The goal of this series is to explain in the simplest possible terms the only math you really need to become a successful trader.

In parts one and two of this series we looked at the two fundamental concepts of successful trading, return on investment (ROI) and win rate, and saw how these ideas were related to one another. In part three we applied these ideas to our own trading records and calculated the breakeven ROI we need given our actual win rates.

In part four we’re going to put all this together and look at a concrete example of how to improve your trading results.

An Assessment

Imagine you’re just starting out as a trader. It’s been tough going. You’ve made a few dozen trades and despite the occasional win your account balance is steadily declining. You’ve been reading up on fundamental and technical analysis, but the fundamental approach doesn’t really fit your time frame and the technical approach seems like ambiguous guesswork. You’re becoming frustrated, which isn’t helping your trades, and you aren’t sure what concrete steps you can take to improve your results.