{"id":17672,"date":"2019-09-20T00:27:11","date_gmt":"2019-09-20T07:27:11","guid":{"rendered":"https:\/\/www.tradingheroes.com\/?p=17672"},"modified":"2022-11-13T21:54:12","modified_gmt":"2022-11-14T04:54:12","slug":"increase-trading-profitability","status":"publish","type":"post","link":"https:\/\/www.tradingheroes.com\/increase-trading-profitability\/","title":{"rendered":"How to Increase Trading Profitability with the MaxR Metric"},"content":{"rendered":"<p>You want to increase your trading profitability&#8230;but where to begin?<\/p>\n<p>Well, you could risk more per trade.<\/p>\n<p>But that doesn't work for everyone.<\/p>\n<p>Another way to do it is to let your profits run longer.<\/p>\n<p>But how do you determine the best place to set your take profits?<\/p>\n<p>That's not always easy to quantify.<\/p>\n<p><strong>A data-driven way to figure this out is to use the <em>MaxR<\/em> metric.\u00a0<\/strong><\/p>\n<p>I'll explain it in this video. If you prefer the text version, it is provided below this video.<\/p>\n<p><strong>Note: This only helps if you have a strategy that is already consistently profitable and you want to explore if there is a way to increase your profit per trade. <\/strong><\/p>\n<p>If you don't have a profitable strategy yet, start with our guide on <a href=\"https:\/\/www.tradingheroes.com\/\">how to choose the right trading strategy<\/a> for you and our <a href=\"https:\/\/www.tradingheroes.com\/forex-backtesting-guide\/\">backtesting guide<\/a>.<\/p>\n<p><iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/Hb8-c4iG1B4\" width=\"840\" height=\"450\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<h2>MaxR Optimization Explained<\/h2>\n<p><strong>MaxR measures your maximum theoretical profit on a trade, if you didn't move your stop loss or set a take profit.<\/strong><\/p>\n<p>This is the ultimate &#8220;what if&#8221; scenario and it can show you how much money you are potentially leaving on the table.<\/p>\n<p>Let's take a look at MaxR on a chart&#8230;<\/p>\n<p><a href=\"https:\/\/www.tradingheroes.com\/tradingview-review\/\" target=\"_blank\" rel=\"noopener noreferrer\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-17808 size-full\" src=\"https:\/\/www.tradingheroes.com\/wp-content\/uploads\/EURUSD-maxR.png\" alt=\"MaxR on EURUSD\" width=\"1219\" height=\"595\" srcset=\"https:\/\/www.tradingheroes.com\/wp-content\/uploads\/EURUSD-maxR.png 1219w, https:\/\/www.tradingheroes.com\/wp-content\/uploads\/EURUSD-maxR-768x375.png 768w\" sizes=\"auto, (max-width: 1219px) 100vw, 1219px\" \/><\/a><\/p>\n<p>If you went short at the first orange line at 1.21609, then you might have been happy with an easy 2R profit.<\/p>\n<p>But you also would have missed out on all of the profit down to the second orange line (MaxR).<\/p>\n<p>Now it's generally not a good idea to give into FOMO (fear of missing out).<\/p>\n<p>However, in this case, it can be useful to measure these moves after your trade was closed out, to see how much profit you could have bagged on the trade.<\/p>\n<p>Compile MaxR stats on your trades and you may start to see potential optimizations.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-17809\" src=\"https:\/\/www.tradingheroes.com\/wp-content\/uploads\/MAXR.jpg\" alt=\"MaxR analysis\" width=\"620\" height=\"298\" \/><\/p>\n<p>Let's say that you have been targeting a 1R profit target and have been winning about 60% of your trades.<\/p>\n<p>If you look at the data however, targeting up to 2R would only lower your win rate by about 2%, but it would <em>double<\/em> your profit.<\/p>\n<p>If you targeted 3R, you would still have a decent win rate and you would <em>triple<\/em> return on each trade.<\/p>\n<p><strong>Keep in mind that before you make any trading decisions, you should have a lot more trades than in this example.\u00a0<\/strong><\/p>\n<p>&#8230;and you should <a href=\"https:\/\/www.tradingheroes.com\/forex-backtesting-guide\/\">backtest<\/a> any changes, before trading them in your live account.<\/p>\n<p>But this shows you how MaxR analysis can help you make more per trade.<\/p>\n<p>MaxR is a metric that I came up with, but you can get a similar result by using Maximum Favorable Excursion (MFE).<\/p>\n<p>You can find <a href=\"https:\/\/www.tradingheroes.com\/best-trading-journals\/\" target=\"_blank\" rel=\"noopener\">trading journals that show you MFE here<\/a>.<\/p>\n<h2>How Do I Determine a Maximum Move?<\/h2>\n<p>Obviously, there is some discretion involved when determining the maximum move on each trade.<\/p>\n<p>&#8230;and you will never be able to get anywhere near hitting the maximum profit on every trade.<\/p>\n<p>But for the sake of MaxR analysis, there are two ways that you can determine your maximum move:<\/p>\n<ol>\n<li><strong>Eyeball it<\/strong> (more for right-brain dominant traders): Take a look at the chart and ask yourself where you would have realistically closed the trade.<\/li>\n<li><strong>Use a formula<\/strong> (more for left-brain dominant traders): You could say that you will get out of a trade if the trade retraces more than 2R. Or you can use a moving average or a X-bar trailing stop. Regardless of what you decide to use, keep it consistent.<\/li>\n<\/ol>\n<p>If you really want to geek out about trading strategy optimization, consider reading <a href=\"https:\/\/amzn.to\/2NlPpke\" target=\"_blank\" rel=\"noopener noreferrer\">this book<\/a>, or learning how to <a href=\"https:\/\/amzn.to\/30eDjQA\" target=\"_blank\" rel=\"noopener noreferrer\">code in Python<\/a>.<\/p>\n<h2>Conclusion<\/h2>\n<p>So that's how MaxR can help you stretch your profits on every trade.<\/p>\n<p><em>This is by no means a magic bullet.<\/em><\/p>\n<p>You may compile the data and find that you already have the optimal exit point.<\/p>\n<p>If this is the case, then great! Knowing this will give you more confidence in your strategy and make it less likely that you will suffer from FOMO.<\/p>\n<p>It might even give you JOMO (joy of missing out) because you know you are already trading an optimal exit.<\/p>\n<p><strong>Give MaxR a try, you might be surprised at what you discover.<\/strong><\/p>\n<p>If you tried MaxR, what did you discover? Let us know in the comments below&#8230;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>\u00a0<\/p>\r\n<p style=\"font-size:0.8em\"><em>Disclaimer: Some links on this page are affiliate links. We do make a commission if you purchase through these links, but it does not cost you anything extra and we only promote products and services that we wholeheartedly believe in. TradingHeroes.com is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>MaxR is a very simple metric that can help you optimize your trading strategy. Learn how it works and what to look for. <\/p>\n","protected":false},"author":2022,"featured_media":17808,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[201007],"tags":[201650],"class_list":["post-17672","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-trading-software-tutorials","tag-trading-journal","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.1.1 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>How to Increase Trading Profitability with the MaxR Metric - Trading Heroes<\/title>\n<meta name=\"description\" content=\"Learn how to increase your trading profitability by tracking the MaxR metric. 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