Guide to Day Trading Strategies

R O S S C A M E R O N
2
Pro
À
 t Loss Ratios
Pro
À
t loss ratios are often overlooked by novice traders. We have our students trading with a 
minimum 2:1 pro
À
t loss ratio (every trade has the pro
À
t potential of 2x the risk). With a 2:1 pro
À
t 
loss ratio, our students can make money and be pro
À
table with only 50% success rate. When 
I work with students, the 
À
rst thing I look at is their trade history. I want to know their pro
À
t 
loss ratios and their average percentage of success. These numbers will tell me if they have a 
sustainable strategy. If you can trade with a 2:1 pro
À
t loss ratio, it becomes much easier for you 
to succeed. Most traders who fail will be trading with negative pro
À
t loss ratios. Meaning they 
lose more on average than they win. Regardless of their percentage of success, they will have set 
the bar so high, it becomes almost impossible to succeed. The odds are stacked against them. 
From a purely statistical standpoint, a negative pro
À
t loss ratio of 1:2 (you lose 2x what you 
win on average) is an unsustainable strategy unless you maintain 75% success rate. After years 
of trading, I can assure you that maintaining a 75% success is not easy. Often times the failed 
traders will exit the market having never realized they were destined for failure because they did 
not learn about the pro
À
t loss ratios required in order to be pro
À
table.
Pro
À
 t Loss Ratio Statistics
2:1 Pro
À
t Loss Ratio = 33% is your Break Even before commissions
1:1 Pro
À
t Loss Ratio = 50% is your Break Even before commissions
1:2 Pro
À
t Loss Ratio = 66% is your Break Even before commissions