022: Survival Ratio
Nah, forget what I've written in the previous entry. I cannot worship 2 Gods and I really need to choose what to focus on. Obviously since I'm back here, that means I'm proceeding with my original plan of trading for a living (unless I find some less demanding job in finance [because accounting is honestly boring] which: 1. won't require me to deal with other people's drama, 2. will give me ample opportunity to network with smart business-minded or trading-minded individuals, and 3. won't eat my personal trading time with endless work [weekly OT? Hell, no!], OR if I fail in fx trading big time and need to start over, then ok I'll apply for a job again).
I haven't seen any formula combining risk and reward that includes the risk of drawdown (the risk - reward ratio we know is too simplistic for me--like, so what if my average gains to average loss is high? One mistake with not being careful with my stop loss and drawdown and I'll be gone like most newbie traders). My profitability on average had been 60%+ but my drawdown is usually between 15-50%. I haven't experienced margin call, but that might just be counted as "beginner's luck".
So I made one myself, which I call as Survival Ratio.
If R/R ratio = ave. gains / ave. losses, basically showing how good one is with probabilities, then that survival ratio on the other hand will compute a newbie's smarts by dividing net profit with gross profit, and using whatever percentage he gets with the drawdown percentage (which is amount of drawdown over total amount of equity). The latter ratio is directly proportional to one's chances of survival, so the lower the number, the higher the stupidity lol.
More helpful stuff I plan to use as metrics in the new test I'm trying out next week (current position trading style vs. bank manipulation day trading style):
RISK
Profitability = # of winning trades/# of total trades
Drawdown % = amount of decline/amount of total equity
REWARD
Profit Factor = gross gains/gross losses
RISK & REWARD
Risk-Reward Ratio = ave. gains/ave. losses = (gross gains/# of winning trades)/(gross losses/# of losing trades)
Expectancy = net gains or loss/total # of trades
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I love how this new freedom feels like I've gotten my life back -- better health & skin, and being able to have more control of my time. Ironically, this freedom made me more disciplined than I expected, I wake up and sleep earlier now and able shun distractions and temptations (no more stress-eating hah!). I have yet to get back to my previous workout routine of T25 and pole dancing though, but no rush :P What's important is I have the time to focus on learning more about fx trading. My dad also got interested in it so I made him a simple guide, which I might be sharing on future posts since some of my friends are also asking me to teach them. I'm not an expert, I'm waaaay new to be one (about to celebrate 1 year by the end of September), but I'm not selfish, so glad to share whatever I learned :)
