Calculating Costs to Determine True Profit
Most everyone who has
studied something about Candlesticks can identify an Engulfing White. However,
just being able to recognize an Engulfing White does not mean you have the
skills necessary to use Candlesticks successfully.
One of the dismal
realities of the Stock Market is that the retail crowd has at best a mediocre
percentage of success rate trading stocks, regardless of whether they are a
Long-term Investor or an Intraday Trader. A vast majority of new and beginning
traders lose most of their capital and then give up. The reason the Retail
Trader persists as a major Market Participant Group is solely the huge numbers,
which are millions of independent Americans who try to learn to trade stocks.
Recently the
Securities and Exchange Commission SEC has determined that a few “Retail
Traders” are becoming more successful, and a few of those actually reach
professional level percentages of success.
Many Retail Traders
are told falsely that if they have a 50% success rate, meaning half of their
traders are somewhat profitable, they are fine. The reality is that no
professional could keep his or her job at that percentage. The Professional
enjoys a high income due to an 80-90% or greater success rate trading Stocks,
Options, Commodities, Currencies, and other financial market instruments. They
do this with extremely proficient Spatial Pattern Recognition Skills™ using
Technical Analysis and Candlesticks in a relational manner.
How good are your
Spatial Pattern Recognition Skills? Take this test and see where you are in the
basics of Candlestick Pattern recognition skills.
Below are 3 charts
with similar setups of Engulfing Whites, after a period of Consolidation.
If you are setting
.10 cents, .20 cents, or $200 per day as your goal then you are limiting your
profit potential and one big loss could potentially be devastating. Calculating
costs to determine true profit needs to include considering the cost of the
trade, cost of software, transaction fees, brokers, and calculating how much
are you worth an hour. Subtract the total number of hours you put into that
trade plus every expense, which should include your home trading office costs
as well. The net is your true profit.
Summary
Unfortunately most
Retail Traders never stop to do the math and are losing money every time they
trade, even if the trade appears profitable before all expenses are subtracted.
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Trade Wisely,
Martha Stokes CMT
TechniTrader technical analysis using a StockCharts chart, courtesy of StockCharts.com
Chartered Market Technician
Instructor & Developer of TechniTrader Stock and Option Courses
TechniTrader DVDs with every course.
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