[00:01] are seeing here on screen right now is, without a doubt, I really, these are the reasons why most traders are deceived.  In other words, not knowing this, not knowing what each of these elements
[00:14] trading, means that most people who want to teach you or sell you a winning strategy can easily fool you.  And I understand that when you're a trader, what you like most, what's most fun, is trading, it's being in
[00:28] front of the charts, that's the sexiest thing, right?  Being active, analyzing charts.  I understand that's the most fun, but unfortunately, the most fun isn't the most profitable.  And very few traders are willing to
[00:42] in these 15 minutes that this video will last, I'm going to teach you the basics you need to know about statistics and whether your strategy is profitable, whether the strategy you're being taught is
[00:54] truly a winner.  In other words, you'll have the basic and necessary knowledge to apply to yourself so you can know if what you're doing in the I know this is a lot of work.  And now, as you can see, I've put together a
[01:06] PowerPoint here, a quick one to make it clear and visual.  I understand that it can be tedious to learn certain statistics or certain concepts, and sometimes they talk to you about that, right?  Whether it's ratio sharp or whatever or h time underwater or eh profit
[01:21] factor and oysters, it puts you off a bit .  But I assure you that with just to teach you in this video, you'll already make a lot of progress, okay?  So that you won't be fooled again.  So, as you can see, we're going to start with basic statistics,
[01:33] okay?  applied to the trader, eh, there's nothing advanced, nothing advanced. Then it's up to you if you want to go into more detail; I recommend you do so, but this basic information is more than enough.
[01:45] statistics applied to trading, and how is this linked to psychology?  I'll explain why I'm making this video.  Statistics, knowing the what directly separates you from a trader who doesn't know why they win when they win and does
[01:59] lose when they lose.  In other words, you can be a trader who is not making a profit today.  He's a that happens and therefore how to improve it.  Or it could be a winning trader winning.  And that means he knows certain elements of his operation that
[02:14] help him if at any point he stops being a winner, he can change it and become a to psychology.  In an environment of total uncertainty, probability give you a certain degree of certainty; that is, they help you have
[02:28] a little more control within an environment where we have very little control.  And therefore, as you can see here, control, having control over your operations is what gives you confidence. Having objective, realistic data
[02:42] compare it with other traders, being able to see if you're on the right track, if you 're making a mistake, if something strange is happening , or not.  That type of information, which you only have through statistics, offers added security to your
[02:55] operations.  You're trading and you know why you're trading , when you're trading, how you're trading, 's overworking. You know everything you need to know to know that So, when I talk about statistics and probabilities sometimes
[03:09] other traders, most people are put off because they think you have to be a mathematician to know this, and that's not the case at all .  You're going to see it now, I'm going to explain it very simply and I'm going to show you in an Excel spreadsheet how to transfer
[03:22] platforms that offer this data and that makes many people relax, then I don't need to understand it anymore."  The problem is that even if they give it to you, if you don't know how to use that information, it's useless.  So I'm
[03:34] calculate this yourselves, although I'm going to show you how, but at least when you calculate it yourselves, you'll know why this is done and what its purpose is nobody in any kind of trading course who wants to deceive you will teach you this.   He's
[03:49] giving you the tools, the power to decipher that he's deceiving you.  So it's important that you know this.  So, as you can see, there are only 10 things you 10, see?  These are the ones here, these six plus these four that I have
[04:03] gathered here.  We're going to go one by one very quickly.  You need to know earn on average in each of your winning trades.  And all you have to do everything you earn in each of the profits, eliminating the stops, the break
[04:17] events, everything, just the profits.  You take those profits, add them up, and divide them 've had.  Next, the same must be done with the stops.  It is very important stop.  And the process is the same, traders: add up all the stops,
[04:31] events; add up all the stops you have and divide them by the number of stops you've had.  And you will already have two basic elements, which are the average of the profits and the average of the stops. This can be in money, it can be in
[04:44] number of points, pips, cents, it doesn't matter.  What matters is that you see here in point three, which is the risk-benefit ratio that we all know and that many people think about, right?  He says, "I want a 5 to 1, a 6 to
[04:56] 1, a 25,000 to 1, but the reality is different. When you do the calculations, end up with isn't always what you want. And the risk-reward ratio helps you know the average of what you win when you win, along with the average of what you
[05:11] you have to do is divide the average profit by the average stop-loss. Let's imagine a case where a trader wins on average, I don't know, let's say $ trader wins on average, I don't know, let's say $ 200 and loses on average $. If you divide
[05:24] risk-reward ratio of two to one. When you win, you win twice as much as you lose when you lose. Okay? But knowing this is useless because many people only focus on how much they let their profits run, without
[05:37] considering the fourth point, which is the win rate. And the win rate, the success rate, is nothing more than..." You select all the trades you 've made, each and every one of them, including stops, profits, and break events, and measure
[05:50] what percentage of them are profits and what percentage are stop losses. This way, if in a sample of 100 trades, for example, 70 were profits and 30 were stops, you would have a 70% win rate in that
[06:03] these two basic elements, it allows you to perform the first to determine if the strategy you're expected value. At the end of the video, I'll show you
[06:16] the formula directly in Excel, demonstrating how tells you how much you earn on average for each trade you place. It's calculated by multiplying your
[06:30] win rate (the percentage of times you make a profit) by the average profit of your trades.  You the average of your profits and subtract it from your loss rate stop-loss. Again, we'll see this later, and you'll understand it very easily,
[06:46] but this gives you a number. That number tells you that each time you enter the market, on average, you're winning or losing x amount of money or x points. The positive number, the better for you. It
[06:59] market, even if you lose on that specific trade , you'll still win x amount of money on average in the long run . Conversely, if it's negative, it tells you that this strategy, even if you win on one or more trades , will lose money in the long run.
[07:11] is another very common element used by traders to determine if . You simply divide your total profits by your total losses, and that gives you a number. The
[07:24] larger that number is above one, the better. The Profit  Factor strategy is a winner, if it's truly profitable. So, let's pause next page, and I'll explain why this is important to know. It says, "I
[07:38] encounter many traders who still are n't clear on what the winning strategy."  And when I ask you, for example, what your win rate is, or your success rate, reward ratio is, I find many traders who tell me, "My strategy, the one
[07:52] my mentor taught me in my course, has a risk-reward ratio of 4 to 1, for example, and it's right 50% of the time, a 50% success rate. And , I mean, you have a 5 to 1 ratio with a 70% success rate."
[08:07] That kind of thing, that kind of relationship, is nonexistent, it doesn't happen. It time. And what that tells me about a trader who comes to my unrealistic expectations of what to expect from a trading strategy.
[08:21] because if you tell them that your strategy, the one you have to use, has to produce certain numbers, and you, as a trader, will never consistently achieve those numbers...  The time factor— those numbers are impossible because you don't understand the reality of these two
[08:33] concepts, this mathematical expectation—makes it easy to become disillusioned with yourself. It's easy for your mentor, the seller of the course you bought, of the strategy, to tell you it's your fault, to tell you you're not a good trader, that those
[08:45] he achieves, and that if you achieve less, you 're a worse trader. When the reality is that, very likely—because it's happened to me many times—if we analyze , they think they need a better ratio or a better win rate, and
[08:59] they have strategies with a 40% win rate, with a ratio of, I don't know, 1.9 to 1 or 1.8 to 1, 2 to 1, and these are winning strategies, very successful strategies. If they worked on them, they would achieve truly profitable
[09:13] expect is completely absurd, and they don't understand these kinds of concepts, they discard it.  They quit or feel bad, lose self-esteem, lose confidence, and believe they're a bad trader. Do you see the power of this? It's crucial that
[09:27] you understand the reality of the numbers and what other traders' numbers are, because this helps you compare yourself to what's out there, to you see that other traders like you are achieving statistics that don't even come close
[09:41] , that's when you can realize you're being also necessary that you understand these other very basic statistical elements hourly distribution of your numbers, your trades; that is, at what times your
[09:56] strategy works better or worse. The important thing at the beginning—and I'll is that many traders think completely subjectively, without any supporting evidence, that certain times are better for their strategy.
[10:10] are better for their strategy. Unsubstantiated, not objective, just because you've been told so, that those areas are with your own eyes . Therefore, what you
[10:23] have to do to know when a strategy works, and if it works, is to possible time frame in the market. And this way you'll have data on how the strategy works at different times of day and you'll be able to see with data when it
[10:36] Furthermore, you'll be able to see how your attention span fluctuates, right? The cognitive resources to be good traders, because not everyone can be constantly trading for 3 or 5 hours. There's certainly a performance curve
[10:51] where at the beginning it might be a little harder to stay focused, to get going, then this performance drops. It helps you have an external, realistic view of yourself . But again, don't believe everything you're told. They tell you, "No,
[11:04] this strategy works better in the European window or in London or..."  "That's it ." How do you know that? Have you tested it? Does it really work better and are you just doing it because someone told you to? The same goes for the
[11:17] number of trades. It's crucial that you accumulate a series of trades in your sample, which means that they meet two requirements. One is that the sample is significant, meaning that it has a sufficient number of trades
[11:30] to say that the sample is solid, that it's not just a product of chance. The other is that it's representative, meaning that the 've created and are currently executing, is applied in contexts of low and high
[11:44] volatility, in upward, downward, and sideways trends, and in periods that are more seasonal and others that are less seasonal. When you see that and have that sample, you can draw much
[11:59] my strategy has survived all these..."  "Environments, means that it's likely to behave the same way in similar future environments." But Most of you who don't want to backtest, who don't want to analyze
[12:11] data, do 3-month or 4- month backtests, you have 100 trades, and you start drawing conclusions that you think are valid when in reality they aren't. insignificant, insignificant, and representative sample, and you crash and burn.
[12:26] crying starts, and you contact me to say, "Look, Victor, that I'm doing really badly, that I'm not a good trader, that I have no emotional control, and it's a lie. It's just that, how can you trust a strategy that has
[12:39] that it actually makes sense to apply it in the future?"  And that's statistical, it's not mental, it's not psychological, it's entirely mathematical.  Number nine, I just underwater, but it's time underwater and drawdown.  You probably already
[12:53] consecutive loss your strategy can have.  And that has to be collected, no matter what .  And it's basically calculating what the maximum profit point you've reached is 've had is in a consecutive period of time.  Again, as I
[13:06] very quickly in an Excel spreadsheet at the end, but then there's the Time Underwater, which is that time range that also needs to be calculated, which helps you know how In other words, a trader not only has to control how much they lose, but also how much
[13:20] profits, because what matters here is making money.  So, if you reach a maximum amount of money, lose it, and go a year without generating new profits, that's psychologically very impactful.  So, you need to know
[13:33] roughly how long it takes your strategy to recover from a drawdown in the data, because this way, when you're losing in real time, without making new highs again, it will give you a more or
[13:46] worry, uh, when you can relax, because if you've seen that in the past you go three months without making new highs and then you recover and you're in the new highs, you don't have to be worried, you don't have to think
[14:00] that something strange is happening.  If you don't have that statistical data on how much you lose in maximum drawdown and how long it takes you to overcome that worry, switch strategies, doubt yourself, think
[14:13] have nothing to do with reality.  And finally, you also need to know the maximum possible ranges of your trades, that is, how much you earn in the best-case scenario and how much you lose in the worst-case scenario.  If you don't have those
[14:26] elements calculated, it's easy to fall into euphoria and greed when you see that you're than you should, and then into fear and panic when the price goes against you .  So that's it, traders, these are the 10
[14:38] essential statistical elements that every trader must know, no matter what.  This will and prevent you from being constantly deceived by the But then, as you can see, there are some more advanced statistics that I'll leave
[14:51] here for you.  We're not going to discuss them, but I encourage you to look up the names and learn them.  The sharp ratio, the sortino ratio, which help you know if the strategy versus its risk really pays off.  The risk of ruin or the
[15:04] also very interesting loss concepts that have to do with drawdown, but which are slightly more concrete perspectives. These, as I say, these four concepts I understand that you don't want to learn them.  The first 10 are necessary
[15:17] , but if everything goes well, it will be very useful for you to learn these as well .  And as I've said, this will help you to have better confidence behaviors.  In other words, you will not hesitate when entering, nor will you have fear or
[15:30] uncertainty because you will have everything within your control.  Furthermore, it will give you objectivity.  You will know that each of your movements has a meaning that is not subjective, not emotional, not
[15:42] based on what you believe, what you don't believe, how you feel that day, but has all this, peace of mind, which is what's important.  So, to show you platform you have, it 's basically this.  You have to
[15:55] record the days you trade, the time, the result you have in ones and zeros, the can be dollars, it can be pips, it can be whatever.  If it's a you're a day trader, how much accumulated money do you earn?  You're winning.  Your
[16:10] gives you information about the time underwater that we have mentioned, which you have here, the maximum drawdown, how the capital grows in dollars or euros and the basically what you need to know to determine if the strategy is a winner or not.  And
[16:23] with that, you can simply calculate in Excel , for example, you see, you select the entire sample you have, you click on filters and here you can the percentage of the risk- benefit ratio that I have.  Okay, so what you'll
[16:36] do is eliminate the ones and the break evens, leaving you only with the stop losses, see here?  So, if you go to the stop loss column and measure the average from here, you realize that this strategy loses an average of 7.6
[16:48] points when it loses.  And the same when you go to the ones, you select only the you go to the ones, you select only the profits, you see what the average is and here 21.4 average points.  What you have to do to find out the risk-
[17:01] reward ratio, as we have taught before, is divide the 21.4 by the -7.5 we have seen of stops and that will give you a ratio of, I don't know, approximately 3 to 1 strategy, you basically select this column, which is the
[17:15] and break events.  Again, you go here to the average and it turns out that it is correct 37% of elements necessary to know the mathematical expectation.  You are right 37% of
[17:27] you have a risk-reward ratio of 3 to 1.  We want to know if that's a Let's do the formula here, as you can see, which would be, we put a parenthesis here and what they would tell us is to multiply the uh, how much was it?
[17:42] multiply the uh, how much was it? 063 037 of the profits 37% for eh 21.4 which are eh the points gained minus the stops, which in this case are 0.63% of
[17:56] stops, which in this case are 0.63% of stops for 7.5 of loss.  As you can see, this tells us that when we win we win on average three points, 3.2 points. then multiply by the value of the point or asset you are trading.  We imagine
[18:12] the value of the point here is, I don't know, $10. Therefore, we will earn an average of about $32 each time we enter the market.  Or the topic of earlier.  Notice that what you have here is a point distribution, and this is
[18:25] platforms provide it, but all you have to do is select all the profits and stops you've had, the entire column, and ask Excel to create a graph of the point distribution.  This will give you everything.  These
[18:37] profitable.  Do you see the zero here?  All of those are profit trades, and all of these are example, this trade here gave me 32.5 points and this trade
[18:49] here made me lose -31.5 points.  In this way we can see the highest values ​​here , that is, my maximum positive excursion is 84 points in this entire sample and my maximum negative excursion is -69 points.  What does that mean?
[19:02] trade that goes to 80 points in profit, I don't have to be happy because I know that this can happen.  On the other hand, if it goes letting myself be influenced by FOMO, I'm being more greedy than I should
[19:17] very rarely and the same goes for losses.  And that's all, I hope this has been helpful.  It's a very quick, very simple, basic lesson covering what assure you that if you learn this, repeat it constantly, apply it little
[19:33] by little, simply use it in your daily life, your start seeing what it really means to do trading and you're going to move away from everything that trading involves, as the charlatans tell you, who
[19:45] tell you how to analyze charts, they only tell you how to have the when that's the least important thing, what matters is capital management and I hope you enjoyed this video. If so, don't forget to make a good
[19:59] profit, especially by visiting the link I 've left below, Zafridon 24. help you think long-term, making trading fun, assets, your capital, will be protected in a completely
[20:12] parallel way.  Have a great day, traders, lots of profit and see you soon.