The Trading Coach Podcast
1077 - How Much ROI Is Enough ROI
Dec 24, 2024
Explore what defines an edge in trading as the complexities of return on investment (ROI) are unveiled. Learn about the importance of backtesting and how subjective profit assessments can influence your trading strategy. The conversation shifts to the value of time, encouraging listeners to evaluate opportunity costs and recognize that small, strategic efforts in trading can lead to significant wealth accumulation over time. It's a blend of finance insight and life balance that may reshape your trading approach.
19:15
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Quick takeaways
- A sustainable edge in trading requires more significant returns than 1%, justifying the effort invested in various strategies.
- Backtesting trading strategies over diverse market conditions is essential for identifying patterns and enhancing future profitability.
Deep dives
Understanding Edge in Trading
An edge in trading is defined as a statistical advantage that indicates a trading strategy can potentially yield profits. While a 1% return is technically considered an edge, it may not be sufficient for most traders to pursue actively. It is crucial to recognize that real profitability requires more significant returns that justify the time and effort involved in trading. Thus, traders are encouraged to focus on strategies that provide a more favorable risk-to-reward ratio and a sustainable edge over time.
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