This is How You Actually Trade Profitably! (25 Years of Trading Experience)

The truth behind sustainable success in trading. Many, many traders approach the markets with completely wrong assumptions, and many traders trade concepts that they can't really use for themselves at all. Why not? They have: A) neither the time to use it extensively, B) they use it in the wrong timeframes and at the wrong times, and C) they haven't understood at all how the math behind trading really works in depth. Today in this video, I'm going to show you exactly how you first define a trading setup for yourself that can be promising for you in swing trading or also in day trading. Secondly, I'll show you, and this is even more important, which key figures you actually have to record and determine so that you can become successful at all. And thirdly, I'll show you that it's absolutely essential to know at what times I even want to execute my trades.

Well, in this video, I mainly want to show you how important it is to prepare yourself really well for a trade. And we'll do that now with the S&P 500 in day trading. And then we'll do the same with the S&P 500 and see how you could plan a swing trade there. And you'll already see how different the nuances of the details are that matter, and how much shorter the distances are that we can plan. And after that, we'll take a look at the whole thing mathematically. Because this is very important to me, I've deliberately chosen a pre-session, so before the market opens for people who like to work in the morning, and I'll also point out how risky it is to actually trade in such phases, as liquidity isn't that high yet. But it always has the advantage that because the big players aren't putting a lot of money into the markets yet, things sometimes move faster. So let's take a look at it all and start with the concept of day trading in the S&P. So here is the S&P 500. I have the cash session of the S&P 500 here in the daily profiles. 1, 2, 3, 4 days. And now let's see what yesterday's profile looked like. And we can already see this here is the value area. Here we have a single print. That means there was a lot of buying here. That shows me that the probability is higher for now that the market has upward pressure, especially since the VPOC has established itself at the top. What does that give us? Ultimately, we have a beautiful zone up here where we can see that the market, well, feels comfortable up there, and the big market participants have done their business there. Now, let's just transfer this price range into our footprint chart, 5 minutes, And take a look at it. 7,457 is about here, and now we see here at 7,461, that's where liquidity and also time start to be gathered again. That's why we use market profiling. And then we go here and take a look at it, and we can already see, okay, so that's an interesting price range where the market could move up since it had liquidity up there yesterday, and markets love to play liquidity. And now we have an idea. And how far do we want to follow this idea? Until the point where liquidity starts to fade again, and that's roughly in this area of 7,480. And we'll transfer that over here as well. So, and what we can see now is we have an idea for a trade that should be long-oriented. And now we have to ask ourselves the question: where do we put our stop loss? If we're planning an entry here, and what I already see here is there was a lot of liquidity here above this. I'm just going to claim now the market will push upwards, which it did. And now the question: Where do I put my stop loss? And we'll just do this very relaxed now without thinking too much, and place it below the last swing low where the market would then be below these price areas. And so we get a very clear key figure here. Entry 62, stop loss, I'll just make it 52 now, and so we have a $10 stop loss. Whether that's a lot or a little doesn't matter right now. What matters is, how can I build this whole model for myself? Looking up, I see now, okay, that's my plannable profit target, and the plannable profit target is from 62 to 80, and so I have 18 points that I, Uh, sorry, dollars that I can plan for on the upside. So that means I have a clearly predefined plan in place, and I know exactly when the opportunity is right for me to generate a solid entry for the market right now. It really feels like the perfect moment to act. So that's our first idea that we were able to develop based on the context from the cash session, based on the balance we had here, and based on the assumption that the market wants to play this balance again. And now comes the crucial part. We've thus been able to determine a risk-reward ratio for ourselves. 18 divided by 10, and 18 divided by 10, I think everyone's aware, results in a risk-reward ratio. Now I've activated the Caps Lock. Results in a risk-reward ratio of 1.8. That's a decent setup. And so we have the opportunity here to enter a nice trade. If we are accordingly well over 40% in the average win rate, it's a solid position to consider, provided the market conditions remain favorable for us. I explained that quite well in the previous video, how important it is to look at the whole thing. But we're looking at the same model now in swing trading, and we'll then take a deeper look at these key figures, because for many, this is something that unfortunately gets far too little attention. And for many, it's also the case that they often don't hold through the profit runs. And if you don't hold through, I want to show you what impact that has. Now let's look at the swing trade. Before we get back into it, a quick notice: World Class Edge just launched. And if you want to know how really institutional traders and market makers actually trade, click the link below. And secure your spot at World Class Edge.

All right, back to it.

In swing trading, it's many times easier if you say, I live off large risk-reward ratios, and I'd like to show you that. The first thing I can look at, for example, is the volume profile for the specific price range that I'm interested in. Now I see immediately, all right, down here the highest liquidity had been played, and up here I also had high liquidity. I'll just claim now that the market likes to run from liquidity to liquidity. And when I look at the whole thing, what's always crucial for me, especially in swing trading, is that I can place an order here, for example. Why am I placing an order there? Because the market, it was down here, accepted the prices here again, so it's within this whole structure and says, yes, I'll take this sideways phase as acceptance. And so I can place an order down here regardless of the fact that the market did all that and it looks nice. It is very important to know that in swing trading you do not have the chance to be in the market all the time. You have to be patient. So you have an entry here at, let's say, 7443. This approach ensures you are only taking trades when the conditions are actually favorable. Let's write that in there. Entry 7443 via Limit Buy. That is what, uh, we can plan here. And now we move on. Now we have carefully planned our exit strategy up at the corresponding next major level, which is sitting at 7513. To execute this, our exit is planned via a Limit Sell order, also set at 7,513, which will allow us to secure our position once the market reaches that specific target that is sitting just slightly below the corresponding volume levels that the market had clearly shown us here on the left side of the chart. So that means our plannable route for this trade is exactly this right here. Here is where we are looking for our entry point, and so That is the core of our trading idea for this specific setup. And now I'll do the following and say, where does my stop loss belong? Now, in hindsight, you always see, yeah, I could put it here, and what have you. But that's not right. The right way would be to look and say, where was the last time there was high liquidity? And I'd position the stop loss below that. I'll look at the profile here again and see how the liquidity Really keeps ebbing away. Let's do the following. Let's keep it simple and say we'll put our stop loss right here, just under this last station. Now we say all right, let's set that stop loss at 7,420. This gives us a clear defined level to manage our risk effectively while we stay in the trade. Your stop loss is set at 7,420. Now that we have established these key figures, we have everything we need to determine if this specific trade setup aligns with our personal strategy. It is crucial to have these numbers clearly defined before you commit any capital. Let us quickly review the essentials once more: your stop loss, your entry point, and your planned exit strategy. So those are our key figures. Let's take a moment to check these figures. Exactly how high is the risk-reward ratio, and what win rate do I actually need to blindly book such swing trades? It is an interesting question. And then, you are going to learn something quite nice and useful for yourselves. Let's take a look at that. So, now let's take a look at the whole thing. The trade has an entry at 7443, stop loss 7420, take profit 7513. That means a risk of 23 points and the profit potential is 70 points. This results in a reward that is 3.04 times as large as the risk. That means, even if you make, say, 100 such trades, you'd already be at breakeven with a theoretical win rate of 25%, meaning you're only right with a trade every 4th time. If you're now at 30 or 35%, the whole situation looks quite different. And for that, I absolutely want to show you a table now that you should use as the absolute alpha, as the ultimate benchmark to always check all of your trades. So, now I want to look at the whole thing mathematically with you. Look here. Let's start here on the left with the Swing Trading Model.

Yeah.

That means we're looking at the long-term trade that we've planned for ourselves here. And my point here is that we can observe how the whole thing looks When we examine it accordingly. So that means if we assume a risk-reward ratio of 3.04, that this would be our average risk-reward ratio, for example, over the last 300 trades. And I claim that you can locate a lot of such trades in a relatively manageable amount of time in various markets, especially in stocks. Moving on to the next point, you will find that it is actually much easier to identify potential trades here than it is when you are day trading. In day trading, you need much more time. For B, let's just assume we've calculated a theoretical win rate over the last 500 trades of 35%. With an average risk-reward ratio of 3.04, we need nearly 25% just to break even. But now we have 35%, and that means the expected value per trade, which many don't calculate because they mix things up, is 0.414R per trade. If we break down the math, that would mean that with a total of 300 trades, we would end up with a cumulative return of 124.2R. This really illustrates how consistent performance across a larger sample size can lead to such a substantial total return. This means that with an approach that takes much less time, but with the willingness to hit many more stop losses, which doesn't feel great since we're not right as often, we'd simply earn, well, 124R. That is exactly what we would be earning with it, and I have to say that is a really great rate. Now that we have covered the first option, let's move on and take a closer look at version B, where we decide to explore a different approach. Specifically, let's try our hand at day trading. And in day trading, as you could just see, I'll show it again. It requires a lot, lot, lot, lot of information, and above all, the right moment when you're in the market to see. Okay, now I'm entering. That means you have to be active, and you have to be able to actively, immediately, and always stay focused to seize the moment without hesitating or anything else. Otherwise, you've already got a problem. Let's go back. It's much more time-consuming, and anything that requires a lot of time requires more attention. That means you won't find as many markets available to you as you would in swing trading. But here too, let's say 300 trades. What kind of result would come out of that? A theoretical win rate of 35.71% would be enough to break even. Now I'll claim we have a win rate of 50%, so significantly more than in the swing trading approach, and we also have much smaller profit runs, because 1.8 is our risk-reward ratio. Very important: The probability that the market reaches your take profit, your profit target, is of course significantly higher because the market usually needs much less time and covers much less distance. This means that with this concept, you'd have an expected value of 120R. On average, you have 0.4R per trade. That means if you compare these models, you would actually earn a bit more money with the swing trading approach, even with a much lower win rate, than with the day trading approach, where you need much more time and much more focus than with swing trading. And a lot of people aren't aware of that at all. And now it's precisely important to figure out when and at what times I can use these models for myself. Just like I showed here, you can also use this in the pre-session if you want to trade in the morning, for example. And swing trading, you should be able to use that 24 hours a day so that you're also in a position to place your ideas on the market by the end of the workday. But the truth is also, and this is very important to me, if you use a swing trading model, the sequence of your losers is naturally larger than in the swing trading approach. That means your drawdowns, your price declines, would be a bit larger with the same position size. Nonetheless, you can also fine-tune several key numbers there to potentially establish an average risk-reward ratio for yourself that is consistently greater than 3. This process helps you better align your strategy with your personal goals. And then, of course, you have a really great path. I just need to correct something very briefly. This 24-hour model was, of course, aimed at the swing trading approach, and there you can implement Your trading philosophies in a relaxed way, with appropriate limits. And this model, which I've shown here for day trading, you have to be much better at looking and selecting when there's actually enough liquidity in the market for my strategies to work properly. Because I just presented a single strategy to you. Yes, those are the most important things. It was very important to me to explain that again because I know the model is clear to some, but many aren't so familiar with this simple math, and I hope you enjoyed it. Enjoy it.