I Made My First $100k Using This Simple Strategy (Backtesting Proven Results)

Summary

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Takeaways

• 😀 Stick to one simple strategy for consistent results. Avoid jumping between strategies.
• 😀 🧑‍🏫 Risk management is crucial: always calculate potential losses before entering a trade.
• 😀 📊 A 2 R multiple risk-to-reward ratio should be your minimum goal for a trade.
• 😀 🔄 Scaling your position can maximize profits, with the first partial taken at a 2 R multiple.
• 😀 📈 The goal is to enter high-quality trades with low risk and a clear exit strategy.
• 😀 💡 Always track both your wins and losses to understand the risk-to-reward per trade.
• 😀 💰 The final profit of a trade might vary depending on how you scale, even if your original target is higher.
• 😀 ⏳ Backtest thousands of trades to refine your strategy and understand its effectiveness over time.
• 😀 🧮 Understand the risk amount for each trade, so you're prepared for worst-case scenarios.
• 😀 💪 Consistency and discipline are key to long-term success in trading. Stick to the plan.
• 😀 📅 Tracking weekly results helps you evaluate how your strategy performs under different market conditions.

Q & A

What is the main purpose of the trading setup described in the video?

The main purpose of the trading setup is to manage risk effectively while capturing favorable trades. It emphasizes using a consistent strategy with proper entry points, risk management, and position scaling to achieve a positive risk-to-reward ratio.

How is the stop loss determined in this trading strategy?

The stop loss is set just below the low of a recent candle. This is to limit risk and exit the trade if the price moves against the position, signaling a potential reversal or breakdown.

What is meant by a 2R and 6.37R multiple in this context?

A 2R multiple refers to a trade where the potential reward is twice the amount of risk. A 6.37R multiple means that the potential reward is 6.37 times greater than the initial risk taken in the trade.

Why are previous day high and low levels marked on the chart?

The previous day high and low levels are marked because they can serve as potential profit targets or retest levels. These levels help determine where price might reverse or consolidate, aiding in setting reasonable targets for the trade.

What does 'scaling' mean in this trading strategy?

Scaling refers to the practice of taking partial profits at predefined levels (e.g., after hitting a 2R multiple) while leaving a portion of the trade open to potentially capture a larger reward (e.g., 6.37R). This allows for a balance of securing profits and letting the trade ride further.

How does the trader manage risk if the price retraces?

If the price retraces and goes below the 5-minute range or fails to hold a key level, the trader stops out the remaining position. However, because partial profits were taken earlier (at the 2R mark), the trader still locks in overall gains.

What was the total profit for the week and how was it achieved?

The total profit for the week was $4,888. This was achieved by following a single trading setup, with a mix of successful trades (e.g., $1,430 profit on day 1, $3,035 profit on day 5) and losses (e.g., $1,640 loss on day 4).

What role does backtesting play in the strategy presented?

Backtesting is crucial in this strategy as it helps traders validate the effectiveness of the setup over thousands of trades. It allows for refining the approach, ensuring that it works consistently before applying it in live trading.

How does the trader ensure they are not jumping from strategy to strategy?

The trader emphasizes the importance of sticking to one strategy and refining it. By focusing on a single setup and consistently applying it, the trader avoids confusion and improves their chances of long-term success.

What does the trader mean by 'risk-to-reward ratio' and why is it important?

The risk-to-reward ratio refers to the potential profit compared to the amount of risk taken in a trade. It is important because it helps assess whether a trade is worth taking. A higher risk-to-reward ratio means the potential reward outweighs the risk, leading to more profitable trades over time.