There are some weeks when we are unable to determine a direction. So what is the impact of a ‘pass/no trade’ week on your overall potential profit and loss? Despite what you might first think it actually works out to your benefit.
Less Risk and Fewer Costs
There are two elements traders must accept with every trade they take – the risk of a potential loss, and the brokerage costs of taking a trade. What a ‘pass/no trade’ week does is reduce both of those overall since no trade is made and no costs and no risk is incurred when no trade is made.
The less amount of time a trader spends in the market making trades the less exposure they have to potential losses. Making fewer, high quality trades over time is much less risky than placing a higher number of low quality trades.
Think about it this way: Imagine working fewer days per year at your job and still achieving the same amount of work for the same pay. That’s what the ‘pass/no trade’ week does for you.
It Doesn’t Hinder Outstanding Profitability Results
Of the 52 weeks per year when we make our calls approximately 14 of them result in ‘pass/no trade’ weeks where no trade is made. Even taking that into account, we still managed to achieve 100% profitability in just over one year. So, the impact of the ‘pass/no trade’ weeks, while not adding to the overall profitability, does not affect it negatively either.
Below is a typical example of how and why the pass/no trade week works in your favour.
In this example (Jan. 24 to Jan. 28, 2022) the call for the week was ‘pass/no trade’. The ‘up’ call for the week would have hit the 8% stop loss. The ‘down’ call would have posted a loss at the Friday close.
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