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What is the most significant factor in determining a trader's profitability?

Updated: Apr 27, 2023


Every beginning trader dreams of breaching profitability someday, are there specific factors for successful traders that make them highly profitable?


My personal trading experience

I've been trading in the markets for around 2 years now, finally seeing the light at the end of the tunnel of profitability. There certainly have been many factors that have helped guide me on my road to profitability, but one event shaped me into the trader I am today.


Losing 90% of my portfolio in one day broke me, and that day I decided to change my habits in trading. So, the day after I had to ask myself," Why am I not profitable"?


Many factors caused me not to be successful, but I realized all of those reasons were because of me and not anyone else.

What determining factors were handicapping me from being profitable

First off, many reasons were defining why I wasn't profitable, some reasons weighed heavier than others. I believe the main reason was my greed.


All traders feel this stressful trait when first trading, as well as dealing with this even as an experienced trader as it never truly goes away forever.


For example, my biggest loss early on (losing 90% of my portfolio), was my most significant one as well, considering the lessons I've learned from this mistake. Greed took out my portfolio for many reasons.

What factor made me realized I didn't have profitable traits as a trader?

On that dreadful day, I was up $125 on the day, after the first 15 minutes of the opening of the New York Session.


This led to another mistake which was over-trading because I wanted more profits, so I took trades that broke my trading rules.


So, I bought another put at the level I just sold my recent contract at.


This greedy decision was a true example of breaking my old "trading plan" of not over-trading and wanting more than the agreed $100 profit target of the day.


So, as I hopped into this trade, this trade started badly as SPX was bought hard by institutional traders at a key level and reacted by gapping up 4 points.


This had me down -$200, as the contract had a .50 delta which I knew would hurt me if this catastrophically ran lower. This led to me making my third mistake, which also was impacted by greed.


This third mistake was me canceling my stop loss, WHY WOULD I DO THIS? Only two attributes can lead to this, it's called greed and revenge trading.


As I lost $450 the day before, I was revenge trading that day, as I wanted the $450 back and then some. As a result, I canceled my stop loss and the trade kept going worse and worse, as SPX rallied another $4 slowly.


I call this a contract killer as when a position goes against your contract, it kills your delta slowly which gives you less of a chance of the contract coming back to life. As it slowly ran, I saw an area of liquidity.


So to fix the other mistakes of greed, revenge, and over-trading, I tried to double down and buy another put at the top of the rally. This is when I put 80% of my money in one trade, so I could "manage my loss and get out during the next pullback".


This didn't happen, as the rest of the day it consolidated in a small $4 range. My contract was being killed slowly as it was a 0dte, and the deltas slowly decreased.


I sold the contract at a 97% loss, as it was by far my biggest and most impactful trade.

How did I learn from this traumatic loss?

Telling my story feels like a clean slate, as I've reflected and corrected so much about what happened that day.


To be honest, I believe I wouldn't have become the trader I am today without a dramatic experience to showcase my flaws.


So what flaws were on showcase, and how could I correct them?


I displayed many flaws that day, such as greed, revenge trading, over-trading, trading with scared money, and lack of discipline.


These flaws are crucial, as I learned it only takes one day when these flaws can take over your character, ultimately leading to losing an immense amount of money as I did in one singular trade.


So what did I do to fix these?


First off, I realized I have to take a break after a big losing day like that, so I took a month off to recoup myself. Why?


Personally, this helps with revenge trading. This helped, by when I lose I don't like to have the previous day's loss on my mind, so I wait until that feeling goes away.


I believe that risk to reward(RTR) is one of the biggest factors to being profitable as well because if we have the right risk in place, we won't be able to lose more than we can afford to.


This and risk management is KEY to being a successful trader. Setting a good RTR is key, as we can calculate how many losses= 1 wins, I use a 3/1 rtr ratio as I can lose 3 times before hitting one profitable trade.


For example, if I have a 3/1 rtr, then if I risk $3, I can lose 3 times and still be profitable with a tp of $10, resulting in a profit of $1.


This gives me an amazing stressless life as I can lose a trade, but still be profitable on the week as long as I have a 50% win ratio, which is very doable.


RTR is very important, but this trait alone won't cause profitability.


Didn't you mention risk management as well? Oh YES I DID! Perfect risk management usually is only risking 1-2% of your portfolio.


This is where greed messed me up, as my ego didn't allow me to "only make 2% of my portfolio" as that was surely too little money.


I truly took the power of compound interest for granted here, as the gains will compound and grow your account beautifully.


So why only risk 1-2%? For example, if you lose 1-2% then it only takes 1-2% to make it back.


If you risked 20% and lost it, you'd have to make DOUBLE to get back where you started.


THATS 40% you have to m which I'll probably be from revenge trading if you keep thinking about making up that loss.


These two attributes alone can shape the way you trade! But, it's way easier said than done, as we humans are very emotional creatures.


What does cause profitability then? I believe it's the combining of all positive attributes in your trading plan, and being disciplined enough to follow them.


Conducting a mathematical RTR showed me that there is a way I can be profitable, as I conducted my BKR TRADING PLAN.


Just follow your rules, and stay in character, as one out-of-character day can destroy the portfolio you've been grinding and working on all year as I did.


Final reflection

As a young trader, seeing all your savings go down the drain slowly hurts but makes you question, what happened?


That's when, I realized my plan wasn't working, and that I have to build a real set of rules as well as do the hardest part, which is following them.


The discipline it takes to be a profitable trader is like a boxer cutting 50 pounds for a fight, very hard but if done right can be VERY REWARDING.



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