How Important is Your Win-Loss Ratio?

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How Important is Your Win-Loss Ratio?

How important is your win loss ratio?

In today’s article, I want to look at the win to loss ratio and its importance to a trading system.

Let me start by posing a conundrum; would you prefer to walk down the high street with a verified badge on your chest showing off a 92%-win loss ratio or would you prefer to drive down that high street in a top of the range sports car?

The bottom line is that the win loss ratio is just a measure of a system and we should only focus on being profitable.

What happens if we get fixated on our win ratio?

Focusing on our win ratio can result in premature exits from profitable trends, and holding losing trades far too long.  Systems based on a high win loss ratio are also higher risk. They usually result in few losses, but these losses are extremely large and can massively damage your account.

If we get emotionally upset by taking a loss then it suggests that we are more interested in being right than focused on being profitable.

What win ratio should we aim for?

The answer in short is that we should not focus on the win loss ratio as this is only a measure of our system. Our focus should be entirely on our trading rules; to make a profit.

How then should we use our win ratio?

Different trading systems need different win ratios to be profitable.

As an example, if a system has a win loss ratio of 2:1, and we risk $50 per trade, then a win will produce $100. In this scenario, so long as we have a win ratio above 34%, then we will be profitable.

To demonstrate this let us say that we take 100 trades and win 34% = 34 trades.

Wins = 34 x $100 profit = $3,400
Losses= 66 x $50 loss = -$3,300
Total profit $3,400 – $3,300 = $100.

Now, taking 100 trades to only make $100 is not profitable. So setting a minimum 50% win ratio would be more reasonable to trade this system, which yields:

Wins = 50 x $100 profit = $5,000
Losses= 50 x $50 loss = -$2,500
Total profit $5,000 – $2,500 = $2,500

We then test the system over 10 rounds of 100 trades and find out if the system is profitable.

If the system is profitable, we then focus entirely on the trade rules and executing the trades. We are not concerned about losing trades since we only need to win 50% of our trades, and that the system will provide that.

Closing out trades the Hawkeye Tomahawke FX Suite

In the Tomahawke scalping system, the strength of a currency can quickly change since we are trading fast time charts. If we focus on the current combined profit of all trades at one time, and reach our profit target, we should be happy to close out the trades, even if 4 are profitable and 2 are losing trades, as shown in the example below. Don’t be concerned that the -$5.04 trade would be counted as a losing trade as its value is insignificant to the overall profit.

Tomahawke Win Loss Example Chart

In summary, my hope is that this article has helped you think about win loss ratios in trading. Understanding win loss ratios will aid you in becoming a better trader.

If you would like to find out more about the Hawkeye Tomahawke system, please visit us at https://www.hawkeyetraders.com/tomahawke-forex-trade-room/

 


 

Learn more about volume and volume spread analysis, and see more examples of live trade setups in the next free LIVE Hawkeye Demonstration Room held every Wednesday. Open to all. Click this link for more information or to join us in class.

Learn to trade the Hawkeye way.

Good trading,

Randy Lindsey
Hawkeye Traders, LLC

You Must Learn This Entry Technique

I always preach that you are trading risk rather than a market and the example below highlights just that.

EURUSD Chart Setup

Look at the slowest time frame (bottom left). The Heat Map on the bottom stayed red, both bright and dark, throughout the whole day, indicating the bias was to the downside.

The other two time frames, especially the faster (on the right hand side), gave buy signals. But they were not elected as the slow time frame indicated too much risk.

Hawkeye Perspective

Using triple time frame entries filters the potentially negative trades and ALWAYS  keeps you the right side of the market. 

We demonstrate this and many other methods in our live demonstration room held every Wednesday, and this is open to everyone. Click this link for more information or to join us in class.

Good Fortune,

Nigel Hawkes
Hawkeye Traders

[The red arrows are for illustration only and do not form part of the software]

Who Would Have Thought It?

The Crude market is showing weakness in all time frames. If you were using Hawkeye, your positions would be extremely profitable. So lets go and do our volume analysis using our Hawkeye tools.

Crude Monthly Chart

Crude Monthly Chart
As you can see, price was rejected by the Hawkeye Zones, and where I have placed the magenta arrow shows Hawkeye Volume indicating selling for the last two months.

Crude Weekly Chart

Crude Weekly Chart
The magenta arrow shows selling last week. The trend is down, and the bottom of the Zone at 38.50 is the next area of resistance.

Crude Daily Chart

Crude Daily Chart
The story unfolds. For the last seven days sell/no-demand Volume has been dominant, and where the magenta arrow is you can see the red Trend dot has broken out of congestion to the downside.

Hawkeye Perspective

All time frames are short. The weekly bottom of Zone at 38.50 must hold or the market will be in serious danger of free fall.

We demonstrate this and many other methods in our live demonstration room held every Wednesday, and this is open to everyone. Click this link for more information or to join us in class.

Good Fortune,

Nigel Hawkes
Hawkeye Traders

[The magenta arrows are for illustration only and do not form part of the software]

Get Ready for a Potentially Great Trade

The dollar index is breaking out of an 8-month trading range. This is happening on some of the strongest economic numbers since 2009. The Fed was requiring stronger economic data – and that arrived on Friday.

The sentiment is that there will be a rate raise at the next Fed meeting. If this is the case the dollar rally is just starting and Hawkeye will show the way.

Dollar Index Monthly Chart

Dollar Monthly Chart
We are now approaching the high that was established 8 months ago and a Hawkeye Zone at 104.13, but we require more volume to provide the market energy to breach this overhead resistance.

Dollar Index Weekly Chart

Dollar Weekly Chart
Price is now in a Hawkeye Zone, with the top side being 101.45. However, attendant volume is not rising, which it needs to do to be able to break out to the upside.

Dollar Index Daily Chart

Dollar Daily Chart
Now this really tells us the story. Good increasing daily volume on a Hawkeye Wide Bar on Friday, price should retrace back into the Wide Bar in the early part of the week, then find some volume that will push it up to the Hawkeye Zone area

Hawkeye Perspective
If 101.45 is breached we should be on our way to a substantial Dollar rally.

Overhead resistance has to be taken out, so no maverick trades please. But have this on the radar as a potentially extremely profitable trade is being set up.

And remember, if the dollar goes up look to a short bond trade.

We demonstrate this and many other methods in our live demonstration room held every Wednesday, and this is open to everyone. Click this link for more information or to join us in class.

Good Fortune,

Nigel Hawkes
Hawkeye Traders

[The magenta arrows are for illustration only and do not form part of the software]

Which Market Shall I Trade?

I often get asked which is the best market to trade; my reply is Bonds. They are world’s largest market by volume of trades (contracts), and have extended trends. As always, look for the longer time frames and here Hawkeye’s Gearbox does the trick.

Bonds – Yellow Time Frame

Bonds Hawkeye GearBox Yellow Timeframe

Here, on the left of the chart, you can see the Hawkeye Gearbox producing the correct tick speed to set your charts to every day, and below is the Gearchanger showing you during the day which speed to trade i.e. yellow = the yellow tick speed etc.

Now look at the chart, you can clearly see where the magenta arrows are indicating where to go short with a full Hawkeye setup.

Bonds – Red Time Frame

Bonds Hakweye GearBox Red Timeframe
The magenta arrows show Hawkeye entries. There is a minus trade (indicated by the cyan arrow), but students of 6 ways a market moves would probably exit when the price entered the congestion zone (indicated by the red circle)

Hawkeye Perspective
Bonds give extended trends. And Hawkeye, using the yellow and red tick speed, gives many swing trade positions

We demonstrate this and many other methods in our live demonstration room held every Wednesday, and this is open to everyone. Click this link for more information or to join us in class.

Good Fortune,

Nigel Hawkes
Hawkeye Traders

[The cyan and magenta arrows are for illustration only and do not form part of the software]

Is this the start of US Dollar strength?

The euro had a break down on Thursday and Friday. Why? Well, Europe is a mess – with the huge number of immigrants from the Middle East, the European Central Bank hinting at more QE, and exceptionally high unemployment.

Technically? Well, let’s look at the charts, starting with the EURUSD monthly.

EURUSD Monthly

Since July 2014, there has been selling volume (indicated by the lower magenta arrow) as price exited the Hawkeye Zones (the upper magenta arrow), red selling volume continued and Hawkeye Trend went to bearish.

EURUSD Weekly Chart

In the weekly chart we can see that since early August the euro has been in congestion (indicated by the cyan arrow), price went to the Hawkeye stops (indicated by the magenta arrow) – which, as I have pointed out many times, is an area of resistance.

On Friday Hawkeye showed selling volume, and is now indicating a further bias to the downside.

EURUSD Daily Chart
The daily chart shows us how price has tested the Hawkeye Zones and been rejected (indicated by the upper magenta arrows), volume has been short all week (indicated by the lower magenta arrow), and the Wide Bar (indicated by the yellow arrow) has been taken out with a lower close on Friday.

Hawkeye Perspective
Weakness across all time frames. Look for support at the Zone areas shown on all time frames, but a test of the monthly Hawkeye Zone area is on the cards.

We demonstrate this and many other methods in our live demonstration room held every Wednesday, and this is open to everyone. Click this link for more information or to join us in class.

Good Fortune,

Nigel Hawkes
Hawkeye Traders
Understanding Price and Volume: Now that’s trading!

[The cyan and magenta arrows are for illustration only and do not form part of the software]

Hawkeye Tips for Consistent Trading Success.

Digital-vs.-Analog-free-license-CC0
Below are some “tried and true” Tips we use for consistent trading success.

  1. Clear your head before you start trading . Keep yourself well hydrated with clean fresh water. If you are really having a bad day, don’t trade.
  2. Take a step away until you are able to come back with a clear mind.
  3. Take a moment and think about your trades before you execute. You will need lot of patience to wait for the right setups. A good trade is worth waiting for.
  4. Focus on the quality of trades, not quantity of trades. Trade less, but win more!
  5. Use a trade journal. It serves as a tool to reveal past mistakes and enables you to identify weaknesses or strengths in your day-to-day trading. Without an accurate trade journal, common mistakes are often repeated.
  6. Develop a trading plan that works with your trading style and stick to it. Understand it is YOU making the mistakes not the market and not your indicators! Practice and strive for FLAWLESS EXECUTION.
  7. Trust your setups. Don’t abandon the weeks and months of work invested in building your trading plan. If you start doubting your signals or trades, go back to a simulated account until you build the confidence you need to trade your plan successfully. Once you begin to “cherry pick” your trades, you are done for.
  8. Develop multiple trading strategies for varying market conditions. For example, have a strategy for trading trending markets, and have a different strategy for choppy market conditions.
  9. Be flexible and practice trading multiple markets. This will broaden your trading skills and present you with more trading opportunities.
  10. Read the news of the day before you start trading, and know when major news events are being announced so you are not caught in a trade during an announcement.
  11. Practice sound money management principles. Begin small and don’t increase your lot size until you have earned the right to do so. You earn the right to increase your lot size by showing consistent trading profits.
  12. Never add to a losing position (unless that is part of your strategy).
  13. Pactice your trading plan in a simulated account until you are consistently successful for a minimum of 3 weeks. Adjust it as necessary until you prove that you can show weekly profits for 3 straight weeks minimum.
  14. Remember that trading is your business profession. Give yourself time to learn the skills needed to get the job done.
  15. Find a good trading “buddy” to help you focus on success, and help keep you accountable to following your trading plan.

We demonstrate this and many other methods in our live demonstration room held every Wednesday, and this is open to everyone. Click this link for more information or to join us in class.

Good Trading,

Randy Lindsey
Hawkeye Traders
Understanding Price and Volume: Now that’s trading!

Hunters Wait For the Perfect Shot And So Should You

Let’s begin with a short update on the ES, that I discussed last week. We are still in daily and weekly congestion. Although the market is rallying up, it will struggle to get above the Hawkeye stops on the daily chart. The critical point we have to look for is a breakout of the weekly pivot high that was established on February 27. If that weekly pivot high is taken out, then all bets are off, and we are off to the upside. But at the moment, we are having distribution volume profiles at the top of this market.

Now, I would like to look at the GBPJPY cross. Let’s begin with the Fatman indicator.
fatman daily

On the daily chart above, you can see I’ve placed a red arrow where the brown line (GBP) is starting to bend down.

And, if we look at the weekly chart (below), you can see that the brown line (where I have placed the arrow) is still in steep decline.
fatman weekly

This shows us that when we get setups occurring on the timeframes of daily, weekly, and monthly, we have a low risk entry.

I’d also like to say that the fundamentals on the British pound are very bearish. We have an election coming in about four weeks in the UK, and it looks like a hung Parliament. In other words, no party will have a majority, so there will be a lot of compromise. The markets don’t like it when there is no solid government in power. So, I recommend that you really start paying attention to all the pound crosses.

On the GPBJPY daily chart, see where I have placed a red arrow, just below the last pivot low extension?
gbpjpy daily

On Friday, the market closed underneath that pivot line extension. Now, because this is a daily chart, and I want to swing trade it, I want to wait until there is no part of a bar that is straddling that pivot line extension (the yellow line that goes through the price that occurred on Friday). So, we will have to wait until Tuesday for a 100% setup on this market.

If you are an aggressive trader, you may already have a short in place on the daily. However, when we come to the weekly chart, you’ll see that the danger signs occur, and you have to be cautious. Now, if you look at the second arrow on the daily chart (on the gray little dot), which shows us an aggressive entry now to the downside. So, everything is in place on the daily. However, we need to have at least one more day (Monday) to get a real confirmation and a low risk entry.

If you look at the monthly chart (which I’m not going to display), you’ll see that the trend dots are starting to roll over. Again, showing us this up move on the GPBJPY is over, and we should expect a decline.

Now, let’s look at the GPB weekly chart, and you can see I’ve placed a red arrow.
gbpjpy weekly

This is the danger area. Can you see that it’s coming right down and touched the Hawkeye stop (the cross)? And if you look on the cross line, you can see that it has come down to that support area seven times. So, as soon as it breaks that support (which might come this week), you have a sure fire, low risk entry to trade the GPBJPY to the downside. But, you must be cautious and wait, like a hunter waits for the perfect shot. So, you must wait for the perfect set up. I do believe we will get a perfect setup this week. So, stay alert and good fortune.

Nigel Hawkes

We teach this and many other methods in our live training room held every Wednesday. Click this link for more information or to join us in class.

Please contact us at [email protected] for any questions you might have about using Hawkeye Indicators in your trading!

[The red lines and red and blue arrows are for illustration only and do not form part of the software]

Announcing New Prices on ALL of Our Products!

Starting 3/7/2013, all of our package prices have be reduced at least 35% or more.

We have also cancelled our lease program, so no new leases will be available after 3/7/2013.

Please visit our store for new prices on Standard Packages… and check out our new modules. With the modules, you can start out with the basics and work your way up to the full packages.

Hawkeye Traders Storefront

Please Contact Us with questions or more information about our newest changes.

Good trading,

Hawkeye Traders

Forecast for the GBP/JPY

gbp/jpy daily chart
GBP/JPY – Daily Chart

With the US markets closed today for the annual Thanksgiving holiday, focus in the currency markets has centered around the Japanese Yen once again, as money flows continue to move into other currencies ahead of the Japanese elections in December. Both the USD/JPY and several of the cross currency pairs have seen sharp moves higher, with the GBP/JPY one of these, and climbing on the daily chart once again today, following yesterday’s wide spread up bar, which added further impetus to the move.

Following the breakout above the 130.00 price level, the bullish trend is now firmly established, with both the daily and three day trends firmly established. The Hawkeye Heatmap has also returned to bullish, following a period of transition, and with sustained and rising buying volumes on the daily chart, supported by buyers on the three day chart, the outlook for the GBP/JPY remains very positive. Finally of course, Hawkeye has delivered a conservative entry signal this week giving a solid entry for longer term trend traders in this currency pair.

Oil continues to trade in congestion

oil futures chart
January WTI Oil Futures – Daily Chart

January oil futures closed marginally higher yesterday, closing the oil trading session at $87.38 per barrel, having touched an intraday high of $87.89 per barrel, before ending the oil trading session just 10 cents per barrel higher. The current lack of direction for crude oil has been a feature of many markets over the last few weeks, as commodities in general trade in a consolidation phase as we move towards the year end, with the price congestion for oil clearly defined by the pivots above and below this current range.

To the upside, we have two isolated pivot highs, just below the $90 per barrel level, and below, two isolated pivot lows in the $85 per barrel price area, which define the limits of the current congestion phase. The most recent of these was on Tuesday, which is pushing the market lower as a result.

The Hawkeye widebar of early November was never validated, suggesting a lack of downside momentum, with the market pulling back to trade within the spread of the bar and failing to continue the bearish trend, with the daily trend now in transition to white. The three day trend however remains firmly bearish, with no transition as yet, and supported by heavy selling volumes in this time frame.

On the daily chart buyers have returned, but counterbalanced by yesterday’s rising selling volume in a narrow spread day. The Hawkeye Heatmap is in transition from bearish to bullish, but has yet to complete the full cycle, and the key now for the oil market, is whether we see a break above or below the current congestion. For a move higher, the $90 per barrel level is now key, and if this holds then we can expect to see a retest of the deep price congestion in the $92 per barrel area and beyond. A break below the $85 region, could see the market sell of sharply again, and test the $78 per barrel level in due course. As always, Hawkeye will reveal the future direction of the market, using volume as the only leading indicator.