TECHNIQUES

Traders both green and experienced have numerous

questions about trading success: How is it defined? How
do you measure it? When can you expect it? Here are
some answers.

10 ways to measure
trading success
BY JIM WYCKOFF

• What is trading progress?

A
t some point in nearly every- would agree that ultimate trading suc-
one's trading timeline, they cess is defined as being profitable, Beginning traders should not exjwct to
wonder how their trading suc- making more money than you lose. have immediate and ultimate success
cesses (or failures) compare There are other secondary factors that trading futures, SUKICS or forex markets.
with those of other traders. Wondering also define success in trading, such as What they can expect in the early going
just how well you stack up to others in finding a balance between trading and i.s to make steady progress through gain-
the industry is a natural curiasity and a other life activities. But it's being ing knowledge and experience. Even
human psychological tendency. profitable at trading that is the hench- veteran successful traders continue to
However, actually knowing rhe winning mark of defining success. make trading progress. Achieving and
and losing tendencies of others doesn't
do a lot to move you further down the
road to where you want to he regarding
trading success. Most traders also won-
IG SUCCES
10 hard questions to ask when evaluating your trading.
der about the success rates of the "pro-
fessional" traders, the ones who make 1. What is trading success?
their living solely hy the profits they
generate from trading. 1 will provide you 2. What is trading progress?
with an answer to this question at the 3. At what point should I expect to make money?
end of this feature. 4. How long will it take to go from neophyte to guru?
There are 10 questions all traders musr 5. When (if at all) should i throw in the towel?
ask themselves, the answers t>f which can 6. Am I still hungry for trading knowledge?
help measure trading progress and success
7. How many losing trades should 1 absorh before I change my
(see "Measuring success," right).
These questions should help you deter- plan of action?
mine where you stand in this challenging 8. How can I keep myself motivated?
field, st> lets take them one at a time. 9. How much should i listen to other traders?
10. What is the average success rate of the professional trader?
• What is trading success? This is a
hasic, hut difficult, question. Most

40 FUTURES I June 2005

 TRADERS who TRULY enjoy the PROGRESS and process
of trading have a SIGNIFICANT edge
maintaining trading success requires up speculation in retirement. 1 have a plan of action? This is a really tough
continual ;idvancement, namely, con- few students that have even taken up one t{) answer. Again, there is no single
tinuing to seek out trading and market trading past the age of 80. You can't be right answer. However, if you believe
knowledge. Traders who truly enjoy the too young or too old to learn about you have a well-founded and thorough-
"progress" and prtxiess of trading have a trading. A general rule would be for a ly researched trading plan, don't aban-
signifiamt edge over those who do not beginning trader not to expect sus- don it just because you are on a losing
enjoy learning and gaining experience. tained trading success within a few streak. All traders bave winning and
months. More likely, expect to have a losing streaks. That's a part of trading.
• At what point in my trading time- profit time frame of a few years before Traders enjoy the winning streaks and
line should I expect trading "success"? you achieve sustained trading success. don't enjoy the losing streaks, but dur-
Trading success (winning trades) can Now you see why money management ing tbe losing streaks tbey forge ahead,
come right away — even for the begin- is so important in futures trading. You knowing that their plan of action is still
ning traders. What is less likely for the have to survive before you can succeed! solid. Trading plans can certainly be
inexperienced trader is sustained trading tweaked, such as trading fewer con-
success. Eieginners can even run into a • When should I throw in the towel tracts or trading less frequently during a
"hot streak" that skews the overall reali- and admit that trading is not for me? losing streak. For most traders, a com-
ty of trading. Immediate, and likely If trading is making you miserable and plete overhaul of their trading plan
fleeting, success for a heginning futures creating other bad babits (kicking the is probably a last resort tbat demands
trader can do lor^^er-term psychological dog, sleepless nights), then it's time to considerable consideration.
harm if he does not fully recognize and quit, or at least take an extended hreak.
understand the hard work, discipline If you don't have the financial • How can I keep myself motivated
and perseverance required on the road resources to trade futures, then you on the winding road to ultimate suc-
to long-term profits. shouldn't participate. Futures trading cess? Traders who enjoy the entire pro-
Many times I get questions from less- should be conducted only witb money cess of trading don't really need a lot of
experienced traders that go something you can stand to lose, without impact- motivational help because tbey are
like this: "I've heen trading two years ing other more important obligations, already fascinated by what they are read-
and I've only heen ahle to about break such as grocery and rent money. Note ing and learning. But during a losing
even." My reply to them is that you that beginning futures traders who streak t)r some other "dry spell" in trad-
should be perfectly satisfied with "flame out" are usually the ones who ing — wben morale can slip — it is pru-
breakeven if you still consider yourself a did not have the financial resources to dent to read some trading btxiks that are
beginning trader. Many beginners don't trade futures in the first place. based less on specific methodologies and
break even for quite s<")mc time. more on trading psychology. Attending
• Am I still hungry for trading and trading seminars is a great way for a trad-
• How long will it take to go from market knowledge? You should never er to become reinvigorated. And it's also
being a less-experienced trader to an stop trying to gain more knowledge a great value to tht^e already invigorat-
experienced and hopefully successful about markets and trading. Even suc- ed. You not only will gain fresh trading
trader? The precise point in time at cessful veterans who have heen in the and market knowledge, but you also will
which trading success will arrive will business for many years will say tbat get to see and speak witb the seminar
vary greatly among traders. Some they are still leaming on a daily basis. If lecturers as well as traders who are in the
beginning traders will spend nearly all you are still striving to leam more about same position as you.
their time coming up to speed. Others this business — and are enjoying doing
may spend an hour or two a week on it — then that's a positive signal. • How much should I listen to
the subject. There is no right answer on other traders when trying to evaluate
how much time to spend studying trad- • How many losing trades should I my own trading progress or my own
ing and markets. Many new traders take absorb before I change my trading trading plan? It is good to have a trad-

BEGINNING futures traders who "FLAME OUT" are usually the

ones WHO did not have the FINANCIAL resources to trade
FUTURES in the first place.
www.fijturesmag.com | June 2005 41
 Trading Techniques

The LEARNING curve IMPROVES when a trader has CONTACTS

with OTHER traders with similar EXPERIENCES.
ing partner or buddy to share your save time and to keep track of what's can be extrapolated tbat most of tbe
ideas and discuss markets and trading. going on in all the markets. professional futures traders make most of
The learning curve improves when a their money on one or two trades out of
trader has contact with other traders • What is the average success rate every 10.
with similar experiences. of the professional trader? 1 have not This only underscores the importance
It also is beneficial to have an experi- seen any exhaustive studies of the per- of sound money management in futures
enced mentor guide you through the centage of winning trades of tbe aver- trading. And that, if you break it down,
rough waters all traders experience. But age professional trader. However, it is gives you the best answer to bow you
at some ptiint most traders want to he generally agreed up>on by many in our achieve success in trading: You cut loss-
autonomous in their decision-making. industry that the better professional es short, and you let winners run. I FM
As many traders gain more experi- traders have a winning percentage of
ence, knowledge and confidence, they around four out of every 10 trades or a
will use outside influences as second 40% winning percentage.
Jim Wyckoff is the editor of the Trends in
opinions to reinforce or provide another Breaking this down even further, it is
Futures analytical, educational and trading
angle to their own sound opinions. estimated that half of the winning advisory service, whidi is published by Futures
Many traders also have full-time day trades are only small winners and not Magazine Group. You can contact him at
jobs and need outside sources to help much better than breakeven. Thus, it [email protected].

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42 FUTURES i June 2OO4