0:04 You must have an H in the markets or
0:07 rather your trading system. Your trading
0:09 strategy must have an H. You might be
0:13 wondering, man, Rainer, what is an H? An
0:16 H is something that you do repeatedly
0:19 that yields a profit over time,
0:22 otherwise also known as a positive expectancy.
0:24 expectancy.
0:27 And by the way, if your age is using 19
0:30 indicators on your chart, you don't have
0:33 a strategy. You've got a Christmas tree.
0:36 Okay. So, how do you then define an age?
0:38 So, you can define an age using this
0:40 mathematical formula. Don't don't freak
0:41 out, right? Because it's simple that
0:44 even a 12-year-old can figure this one.
0:46 So, E, right? stands for either
0:48 expectancy or your age is equals to your
0:50 winning percentage multiply by your
0:52 average gain minus your losing
0:54 percentage multiply by your average
0:56 loss. I'll walk you through an example
0:59 so you can see how this this works.
1:01 So let's say you have a trading system
1:04 that has a 70% winning rate. Your
1:07 average gain is $80 and your losing rate
1:10 is 30%. Why 30%? Because you know 100%
1:13 minus 70% you'll get 30%. So that's your
1:15 losing rate. And let's say your average
1:17 loss is $100 per trade. So what you're
1:19 going to do is to plug in these numbers
1:21 into the formula I just shared with you
1:23 earlier. So this is your winning rate
1:25 multiply by your average gain, your
1:27 losing rate multiply by your average
1:30 loss, and you'll get $26 per trade. So
1:33 this means, right, what does this $26
1:35 means? This means that you can expect to
1:39 earn an average of $26 per trade. So
1:41 let's say you have taken 100 trades
1:44 using the using this trading system.
1:46 What you're going to find is that you
1:51 will have about $2600 right after taking
1:55 100 trades. So this is what it means to
1:57 have a positive expectancy and this is
2:00 what it means to have an H in the
2:02 markets. Your E right your expectancy
2:04 has to be positive. If it's negative
2:05 then clearly you don't have an H and the
2:08 more you trade the more you will lose.
2:11 Now a question for you. Which is more
2:13 important? Your winning rate or the
2:16 risk-to-reward ratio? I'll give you five
2:19 seconds. One, two, three, four, five.
2:21 Okay. The answer is this. The most
2:24 important metric is it's a trick
2:26 question. Actually both of them are
2:29 equally important because on its own
2:31 let's say on its own your winning rate
2:33 is meaningless because you can have a
2:35 90% winning rate a 95% winning rate but
2:37 let's say every time you win you win a
2:40 dollar but every time you lose you lose
2:43 $100. So despite having a very high
2:45 winning rate you still have a
2:47 unprofitable trading system. And
2:49 likewise it's true you can have a
2:51 amazing risk-to-reward ratio. Let's say,
2:53 let's say every time you risk a dollar,
2:55 you make $3 back, right? Quite a
2:57 favorable risk-to-reward ratio on your
2:59 trades. But what if your winning rate is
3:02 only 10%. Then what use is that? You
3:04 still have a unprofitable trading
3:06 system. So to know whether your trading
3:08 system has an age in the markets to know
3:10 whether you have a positive expectancy,
3:12 both your winning rate and
3:14 risk-to-reward ratio, they you must
3:16 combine them because both of them
