Advanced Trading: Profit Optimization
This is an advanced trading system on building profitable exit strategies to help you make
more money trading.
I’ve coached hundreds of traders using these principles.
Many of them have seen drastic improvements in their profitability and cut down losses
significantly.
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Ratio Optimisation
This is one of the simplest changes you can make to your trading system and create the
best exit strategies for any market condition.
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Ratio Optimisation improves your Risk: Reward and helps you cut your losers quicker.
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Phase 1: Data Collection
Finish taking 30-100 trades then progress forward with Ratio Optimisation.
Remember, this step is the most important but 99% of traders still skip it. This is why such
few win.
Phase 2: Surface Area
Defining your A+ Setup
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Your winners will look unique to you and your strategy. They should always be selected
based on the data you collect.
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Here are some common examples of what A+ setups look like across some of the profitable
traders I’ve coached:
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Momentum Trades
A lot of traders notice the “slow grind” price action to the downside or upside. This is a
common A+ setup for many.
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The assumption here is that the “trend” or similar price action as what we see on the left
hand side will keep continuing, rather than a fast and vertical movement or a choppy
environment.
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For example: Here’s what a slow grind looks like for many traders:
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Mean Reversion
For mean reversion trades, a lot of the A+ setups occur at swing highs or lows. This is where
traders look for entries.
To do this, a lot of traders study their counter-party’s bias- especially when placing stop
losses.
For example:
A lot of traders wait for a swing low to get “taken” and all those stop losses triggered,
combined with a wick through the low that shows a sign of exhaustion. When price then
moves back above the low, they jump into the trade.
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After you’ve defined your A+ setup, follow these steps:
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Step 1
Make the following observation: How far into my invalidation area does my average winning
trade go? (example later)
Let’s assume the answer is: An average winning trade only ever goes 60% into my stop loss
area and the other 40% remains untouched.
Step 2
Now you need to decide how much of your invalidation area you will eliminate- this is where
the R multiple increases.
Note: If you observe that your trades only go 60% into your invalidation zone, that doesn’t
mean you immediately remove the other 40%. Always start slow, sudden changes can mess
with your system. If the data of the last 30 trades tell me to remove 40% of my stop loss, I’ll
remove a conservative 10%-20% and wait before making more changes.
Step 3
Take the next 30-100 trades with the new invalidation zones, then make more changes.
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Strategy Example
This is what an average winning trade looks like for you with a 1:1R multiple. You noticed the
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white area is unexplored by price action (on average).
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For the next 30-100 iterations of your trade, you can tighten your stop loss. This increases
your R multiple from 1:1 to 1:1.1
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If you keep using this process of collecting data, iterating, collecting data again, not only will
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you increase the size of your winners, you can better manage your capital based on what’s
required to make your trades possible.
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Phase 4 and beyond
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What should you do next?
● Action Plan: Use the data you collected and start making invalidation surface area
observations to your system. You need this to make the Ratio Optimisation Strategy
work.
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● Stay Motivated: If you can consistently execute one strategy and make quality
observations about your system, you’ll beat 99% of traders. Most don’t do this so
make this your competitive advantage.
● Consider Private Mentorship: If you want to work 1:1 with me to build more
profitable strategies, click here to apply now.
