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18 Minutes of Maths That Make Trading Almost Impossible to Lose — Transcript

by Tom Camp - Professional Day Trader · 2,775 words · 402 segments · language en · Watch on YouTube

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0:00By the end of this video, you are going
0:02to have a complete understanding of how
0:05if you stick to a good riskreward, good
0:09edge model, it is physically impossible
0:11for you to lose even if you have a lower
0:14win rate. Now, the first thing you need
0:17to understand is that you need an edge
0:21in the market. And the edge we're
0:23looking at is what I've covered on
0:24previous videos is manipulation,
0:27creating a new swing high, price action,
0:30closing,
0:33engulfing the previous candle and then
0:35moving towards the downside. Once we see
0:38this, we know for a fact we can put our
0:40entry at the new 4hour candle. We can
0:43put our stop loss at the high and we can
0:45try and target some kind of one to two
0:48with a target and things like that.
0:49That's an edge. That's a very simple
0:51simplistic edge. Now, why is this an
0:53edge in the market? It's nothing to do
0:55with anything mechanical. It's to do
0:58with the fact that this market that you
1:00see right here is is nothing more than a
1:03repeatable pattern. It doesn't matter
1:04how much analysis you do. It doesn't
1:06matter how much you think you know about
1:07market mechanics, all the orders, all
1:09the stuff that's set inside there. You
1:11are just looking for a repeatable move
1:13in the market time and time again. And
1:17I've gone viral before for talking about
1:19taking 20 trades without breaking a
1:23single rule. And it will essentially
1:26change your life. If you can take 20
1:28trades without breaking a single rule,
1:31your life as a trader would completely
1:34change because at the moment, why are
1:36most people actually losing? It's
1:38nothing to do with the strategy that
1:39you're trading. Whatever strategy you're
1:40trading, I'm telling you the edge I
1:42like, but the strategy you're actually
1:44trading, it's got nothing to do other
1:48than the fact that you revenge trade.
1:50So, if you take a loss, what happens
1:52after after you take a loss in the
1:54market? You go back in. You look for
1:56more. You look for more problems. You
1:57look to try and chase the market. You're
2:00always looking to to come back all the
2:03time. You are oversizing. And what I
2:07mean by oversizing is you're risking too
2:09much. If you can't handle losing trades,
2:13you're you're you're risking maybe five,
2:15six, seven% of your entire account on a
2:18prop firm, whatever it is you're trading
2:19because you're just looking to pass the
2:21account quickly. You're oversizing.
2:22You're blowing accounts. It's not
2:24working. Okay? You are experiencing
2:28FOMO. You're trying to get in the
2:29market. You're trying to force ways to
2:32find a setup when in reality, not every
2:35day is a trading day. You don't have to
2:37trade every single day. And the reality
2:39is you're forcing setups. You are too
2:43emotional. Okay? You are way too
2:46emotional in the market, which basically
2:48means you working too emotionally as a
2:51trader.
2:52It it it basically means you're you're
2:54going to be doing stupid crap. You're
2:56going to be revenge trading. You're
2:58going to be oversizing. You're going to
3:00have FOMO. You're going to be too
3:01emotional. Okay? You are lacking
3:04discipline. Okay, these are these are
3:07all very very common reasons that you
3:09are not making it as a trader right now.
3:11You are trading
3:14the wrong format. What I mean by trading
3:17the wrong format is you're listening to
3:18all these idiots online who are telling
3:20you that it's all about trading on the
3:22smaller time frame. It's all about
3:23precisionbased entries. You need to stop
3:26following what the crowd do. 97% of
3:28people do not make money trading. 97% of
3:32those people are on social media. Stop
3:34following the trend because that's
3:36another thing everyone is doing. You are
3:38following the trend and and you need to
3:42stop you need to do the opposite
3:44of what everyone else is doing. This is
3:47this is these are all very key issues
3:50that you have as a trader. I could go on
3:51and on and on, but it all comes down to
3:54everything which is sanctioned inside of
3:56your own head. And to fix this, it just
4:00comes down to not doing all of the
4:03above. Okay? We're not no no strategy
4:08hopping all these different things. And
4:09to fix it, we work on emotional
4:13discipline. If you can work on emotional
4:15discipline, which by the way, the cure
4:18for that is time and patience,
4:21this is this is what we need to be
4:23focusing on. But what we have to
4:25understand is the mathematics behind our
4:27edge in the market. Which is why I
4:30always look at 20 trades. But let's
4:31let's bring it down to 10 trades. Okay.
4:33So if we were to think about 10 trades
4:36as a trader and we are trading with a
4:39good solid simple edge and we're always
4:43looking for a good riskreward and by
4:48that I'm going to talk about a one to
4:51two in the market.
4:54So, we need a couple of things to
4:55obviously fall into place. If you want
4:57to know or or watch the video I did on
5:01the complete edge, go and watch my last
5:02video. Go and watch a video called the
5:04perfect setup. All these different
5:05things I've got on my channel. Subscribe
5:08and I literally the last one was a
5:10complete checklist of everything I look
5:11for in the actual trade. But for now,
5:13I'm going to tell you about the
5:14mathematics behind it. Okay? If we were
5:17to take 10 specific trades in the
5:22market, okay, this is and this is the
5:24thing. Everyone takes losses all the
5:26time and people are so focused on the
5:30losses because they keep oversizing.
5:32They keep risking too much and all that
5:34kind of stuff. Okay, let's say you let's
5:37say you go on a bit of a bad run. You've
5:38taken a couple of losses in the market,
5:41three losses in a row. Okay. And then
5:43you maybe have a little bit of a win and
5:46then a very typical streak would be that
5:48you lose a couple of trades here and
5:50here and there. And this is obviously
5:53causing issues because in the market you
5:55are losing more than you are winning.
5:57But if there is a way now where you can
6:01make money despite losing more trades.
6:05So this one I've done here we've got 1 2
6:073 4 five six losses. Okay. and we've got
6:12that would bring us to four wins.
6:15So, let's just say we were risking
6:18£1,000. So, the risk here is
6:23£1,000 per trade.
6:27So, the way this works, excuse me, the
6:30way this works is if you're risking
6:33£1,000 per trade
6:35and your riskreward was a one to one,
6:39which means for every £1,000 you risk,
6:43you get back £1,000,
6:45then you would be down. So, that would
6:47be okay. You would be down a total in
6:49here of £6,000.
6:53your wins in here because you're going
6:55to be winning a£1,000 would be
6:59£4,000. So this is here is with the one
7:04to1
7:06riskreward
7:08based on that you are losing money
7:12because the total profit and loss factor
7:16here would actually be minus £2,000. So,
7:20you're down at the moment, which by the
7:22way, this isn't necessarily a bad thing
7:24if you're risking accordingly. But now,
7:27if we focus on a one to two riskreward
7:32and we get those six losses back, we
7:35still lose the same amount of trades.
7:38£6,000 is lost. But now we're looking at
7:42the wins in the market because out of
7:45the wins a one-to-
7:49riskreward is basically risk 1,000,
7:55win
7:572,000.
7:59So what this would look like, let's just
8:00say I took a long position here. This is
8:02a one one. Okay, right here is
8:08my
8:10£1,000 risk. Okay, now a one one would
8:14be £1,000. So I get back a one one in
8:17the market. If I was to target a 1 to2
8:21in the market, just like that, then that
8:25number there doesn't look like 1,000. It
8:28looks like 2,000. which is why it's
8:30always worth trying to get the one to
8:34two
8:36in the market.
8:39So if we add that now four wins out of
8:43only winning four out of 10 trades, the
8:46win here is £2,000 per trade. 2 4 6 8
8:50which means we have got an £8,000 gain
8:54on that account. Obviously with the
8:57total
8:59P&L you are obviously taking away your
9:01losses in the market. Now that would
9:04that would basically give you a profit
9:06factor of £2,000 overall. That by the
9:12way in 10 trades, four wins, six losses
9:15is a 40% win rate.
9:19You can make money trading with a 40%
9:24win rate on that basis. of you looking
9:26for a one to two riskreward.
9:30Imagine how it's going to look when you
9:32have good months in the market and you
9:35win six of the trades and lose just four
9:38trades. So, if we was to take this
9:41entirely
9:44right here, this isn't going to let me
9:46right click. If I was to take that
9:48entirely, okay, let's go. Six wins now.
9:522 4 6 8 10 £12,000
9:58would be the gain on the account out of
10:01six wins. Four losses
10:05I am down
10:08£4,000
10:10which means my total
10:13profit and loss factor here would be the
10:1512 minus the four. I am actually up
10:19£8,000.
10:20That's not bad. if we're taking 10
10:22trades in a single month based on a 60%
10:25win rate. So that there now flips. It's
10:28a 60% win rate. Now the reality is this.
10:33Okay? And this is this is what no one
10:35tells you, especially these gurus gurus
10:38on social media and things like that.
10:39All of this is variable. What I mean by
10:43variable is that basically every time
10:46you take a
10:49trading month for example okay this here
10:53this here could be Jan and then you've
10:56obviously got Feb March April May and so
11:00on okay
11:03you you may have a break even January
11:07you may have a if you look at this one
11:10here a 40% win Right? Let's just say
11:13your account is £100,000, for example.
11:17If you if you did 10 trades with a 1 to2
11:20riskreward setup, and you only won four
11:23of those trades, £2,000, £2,000 would be
11:27a 2% gain on your account. But then in
11:32March, you may come to the market and
11:36you may you might only win two trades.
11:40So, if we kind of go on on this now and
11:44we and we flip it and we think, okay,
11:46two wins in this example, that's only
11:51£2,000
11:52gained. If we look at eight losses now,
11:57we're going to take away obviously
11:58£8,000
12:01because we've lost £8,000. So then now
12:03you're actually down what? You're down
12:06£6,000. So you're down 6% for that month
12:08on a 20%
12:11win rate based on that month. So let's
12:13say you're down for example on a
12:15singular month, but then you go up on
12:17the next. So you could be you could be
12:19down, let's just call it 6%, let's say
12:21you had a really bad month, but then on
12:24April you could have the 60% win rate
12:27and the 60% win rate here is is up 8%.
12:31So, you could be an 8%
12:34gain, which means out of four trading
12:38months, even with a 6% loss, which is
12:41wild, but not unusual,
12:45you could be up 10 - 6, you could be up
12:484%. Something like that. And then let's
12:51say you take a May and you've got a 3%
12:55gain, for example.
12:58There's there's so many different
13:00variables that are going to come and
13:01every single month is going to be very
13:03very
13:04particular and very very different. If
13:07you go to June, you could have a 5%
13:11gain. If you go to July, we could be
13:16down
13:193%. For example, and then you might get
13:22August where you've won 80% of your
13:25trades. If you win 80% of the trades,
13:30this was 60%. This was a 60% win rate.
13:34Obviously, that's with four losses. If
13:35you change that to just two losses
13:39and you've won eight trades, 2 4 6 8 10
13:4412 14 16,000
13:48minus 2,000, you're up about 14%,
13:50something like that. My math isn't very
13:52good. I'm just talking in my head. But
13:54let's just say you let's say randomly
13:56you've got 15% gain and you've had a
13:58really really good month because the
14:00market momentum is working in your
14:01favor. September could be a break even
14:05month.
14:06October could be another break even
14:09month.
14:10November could be a 5% gain. December
14:17could be anything like a three let's
14:20just call it a 3% gain. I'm talking what
14:22I'm trying to do here is is talk
14:24realistic in terms of what it's actually
14:26like to be a proper day trader. I've
14:28always said this before, you need
14:29capital if you want to make this work.
14:31You can't be relying on prop firms and
14:33things like that. This is for people
14:34that have got capital and want to trade
14:36properly.
14:38Okay? But if you add all this together,
14:41even with the big losses in months,
14:44you're you're looking at 3 8 + 15 18 25
14:4935 40 take away a couple of things.
14:51Maybe you maybe you've gained 30%
14:54in in a year, 35% in a year, which is is
14:57successful, very very successful for a
15:00trader. That's with losing months.
15:01That's with break even months. That's
15:02with very small gains on months.
15:06When you couple this with compounding,
15:08so you've got income coming from
15:10different sources and things like that,
15:12other businesses, and you start
15:13compounding your account. I'm going to
15:14talk about compounding in another video
15:16entirely. Like I said, this is a video
15:18not for people chasing prop firm
15:20affiliate codes or anything like that.
15:21This is for people that have got actual
15:23capital to trade. This is this is how
15:25you start making money if you are
15:26trading prop firms. The idea is to get
15:28cash from the prop firms and start
15:30creating live account trading. That is
15:32your future as a trader. Trust me,
15:35proper traders aren't trading prop firms
15:37that you you think they are on Twitter
15:38and things like that, but they're not.
15:40They're not. This is mathematics now.
15:42And to achieve the mathematics, you need
15:45a couple of things. You need a good safe
15:51simple edge. You need good riskreward.
15:57And then you need good emotional
16:01discipline.
16:04This is the foundation
16:06of everything you could possibly dream
16:08of for being a trader. Imagine what's
16:10going to happen when your account gets
16:11to a quarter of a million pounds in size
16:13because you're going to be trading it in
16:15two ways. Well, you're going to growing
16:17the account in two ways. Number one is
16:21you're going to trade it normally.
16:25Number two, you're going to compound it
16:28with cash flow. So, you're going to find
16:30cash flow from somewhere else. This is
16:31what I do. This is what I do. This is
16:34what I'm saying. The people I'm trying
16:35to talk to here are in a position where
16:37they can do it this way cuz this is how
16:38you're going to grow. If you're not in a
16:40position to do it this way, my advice
16:43would be use the prop firms, get paid,
16:46and don't stick around. Get that money
16:47moving. Get that money doing things.
16:49This is obviously isn't financial
16:50advice. This is realistic education that
16:53no one in the trading space is telling
16:55you. If you follow, I like to call it
16:59the three Gs. good, safe, simple edge,
17:02good riskreward, good emotional
17:03discipline. If you follow that to a T
17:06over 10 trades, 20 trades, the
17:10riskreward sorts you out, it makes up
17:12for the fact that some months you're
17:14going to have a 20% win rate. Some
17:16months you'll have a 40%, a 50%. Some
17:19months you'll have a 60 70% win rate.
17:22But the realistic nature of trading is
17:24very, very simple. Not every month is
17:27the same. Sometimes you're going to lose
17:29loads of trades, but you need to adjust
17:31with riskreward. You need to make sure
17:32you're risking accordingly. Sometimes
17:35you're going to have really good months
17:36and things like that. This is how you
17:39get amazing at trading in the
17:42mathematical sense. And this is why when
17:44you have an edge and a model that you
17:46trust, it is physically impossible for
17:49you to fail as a trader.

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