Let's talk about how to find the best trading strategy. And prior to we do this, let's first speak about what is the best trading strategy.
Before we can do that, we need to specify "best.".
Is the very best trading strategy the one that makes the most cash, or is it the one that has the most winners?
In this example I want to use The Wheel and The PowerX Strategy to reveal you precisely how you can discover the very best trading strategy.
How to find the very best trading strategy
Now, in order to do this, first we require to specify some criteria that we utilize.
Here are the ones that I like to utilize in order to identify the very best trading strategy.
As an example, I desire to understand the account size needed in order to trade the strategy?
I suggest, do you need a $5,000 account or a $100,000 account?
Another thing is I wish to know the possible return of a trading strategy. Just how much cash can I make? And this is where we are talking about the ROI, the return on investment.
Then obviously I want to know what winning percentage can I anticipate with the technique.
I likewise wish to know the risk per trade. So how much am I risking per trade that I'm taking?
Likewise for me it is necessary to know the overall drawdown, right? So what can I anticipate if things go truly, truly wrong? What is the drawdown of this strategy?
Also, I wish to know the time needed to execute the method, and can I use money management? And if so, what money management technique is the best to use?
Once again, you may have different criteria. Without it, how will you understand if a trading strategy is for you or not?
The Wheel vs The PowerX Strategy
So here's what I want to do right now.
I wish to compare The Wheel trading strategy with The PowerX Strategy.
Both of these trading strategies I'm personally trading on my accounts and I wish to show you some really, extremely particular examples here.
Account size required
Let's get started and let's talk about the account size required.
For The Wheel trading strategy, where we are selling choices, getting appointed the stock and then offering calls against it, I suggest that you have at least $20,000.
The account that I'm personally trading live has $50,000 therein, so I've got $100,000 in purchasing power.
For the PowerX Strategy, you can begin with as little as $5,000 to $10,000. $5,000 if you wish to trade alternatives, $10,000 if you want to trade stocks.
Potential ROI
What is the potential ROI, roi?
For The Wheel it is 30% if you're not using any margin.
And it is around 60%, that's what we're anticipating here with a margin account, if you're selecting a margin account.
For the PowerX Strategy, we're taking a look at 60% without a margin account, and this is why we're trying to find 100%, 120% with the margin account.
As you can see, this is a more conservative strategy?
30% to 60% annually for The Wheel, and 60% to 120% for The PowerX Strategy, depending on whether you're using a margin account or not.
Winning Percentage
Now, let's speak about the winning percentage.
The winning percentage with The Wheel, I'm very, extremely tempted to state that it is 100%, but when it pertains to trading, there is no 100%.
So even though I personally, thus far given that I've been trading this strategy, have 100% winning percentage I wish to be conservative here and say 95%.
Because, as you understand, it's everything about truths not hype.
With the PowerX Strategy, you can expect 50%. This suggests that every other trade you can expect to be a loser. But it doesn't matter, it still generates income, right?
Risk per trade
The risk per trade with The Wheel is where you can anticipate around 5% of the purchasing power.
So if you have $100,000 in buying power, you can expect a $5,000 threat that you have per trade here.
With the PowerX Strategy, it needs to be 2% of your buying power.
As you can see, The PowerX Strategy is risking less, and if threat is crucial to you, then you understand which technique is more ideal for you.
Expected drawdown
So what can you expect as a drawdown?
What does a drawdown mean?
It suggests that while you're in trades, your account might decrease by 25%. This is something that can occur, you require to be prepared for this.
With The Wheel method you can anticipate 25% of your buying power.
With the PowerX Strategy on the other hand, you're looking at only a 10% drawdown.
Time needed
Time needed to perform.
If you're trading The Wheel strategy, you require around five minutes each day. You do not need a lot of time here.
With the PowerX Strategy, you need between 15 and 20 minutes daily.
Both are swing trading strategies, not day trading strategies.
You don't need to sit in front of your computer system all day, which I believe is great because I do not understand about you, however I don't want to sit in front of my computer all day long.
Money management
If you wish to utilize money management to actually grow your account rapidly with this strategy, it is difficult with The Wheel and here's why.
Of all, you have a pretty high risk and you need a lot of buying power. This is why you require to have at least $20,000.
With the PowerX Strategy it is very simple and we can utilize the repaired ratio money management to grow your account rapidly.
If money management and growing your account quickly is crucial to you, I suggest The PowerX Strategy.
The Very Best Trading Strategy Summary
This trading strategy, The Wheel, is ideal if you are trading for income.
The PowerX Strategy is best if you are trading for growth, which indicates that you have a rather little account that you want to grow.
Now, if you already have a $100,000-- $200,000 account, I extremely recommend that you trade The Wheel.
If you have a smaller sized account usage The PowerX Strategy to construct your account.
Anyhow, as you can see, in short, there is no "best trading strategy.".
There's simply a best trading strategy for you based on your danger tolerance, based upon your accessibility to trade, account size and so on.
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