Profitable Traders: The Holy Grail for Brokers
Kevin Balanta
Backend Engineer & PO
In the trading world, being profitable isn’t just a goal but the outcome of a systematic, disciplined approach and a deep understanding of the market. Success in this marathon depends on the quality of education and the use of the best tools to enhance results and shorten the learning curve. In this blog, we’ll explain the fundamental elements that support the profitability of an experienced trader, from creating a robust strategy to managing emotions in trading, and how traders who meet these criteria are strategic allies for brokers.
Keys to a Profitable Trader
Simple System
To trade financial markets, it’s essential to have a defined profitable trading system, usually composed of a knowledge base or set of tools to make market decisions. This theoretical knowledge base relies on different ways of interpreting the market, either through technical analysis (based on chart analysis) or fundamental analysis (based on news impacting financial markets). This decision-making process will be backed by a statistical edge in the market expressed over time. This system should include clear entry and exit rules, risk management criteria, and a disciplined approach throughout. Understanding that losses are inevitable, a good system helps to control them while maximizing profits in the long run.
Backtesting
This tool validates a strategy’s statistical advantage in the market over time. A profitable strategy is backed by a rigorous backtesting process, using specialized software to move forward and backward in time, as well as switch between different time frames as the statistical advantage of the strategy in the market is validated. Statistical advantage means that by applying the strategy to enter and exit the market, the results over time have a win rate and risk-reward ratio probability that is fulfilled most of the time. By summing all losses and gains, the PnL, i.e., the historical outcome of operations, will be positive. Evaluating a strategy’s historical performance provides crucial data on its viability under different market conditions. A statistical edge is the key to consistent long-term gains.
Trading Plan
Once the strategy is backtested—supported by statistical data—it’s vital to define it as unbreakable rules in the trading plan. It’s important to define session and trading hours, financial instrument portfolios, entry types or setups, risk management including maximum number of daily/weekly entries, risk percentage per trade, maximum weekly loss/gain percentage, trade management including partial closure of positions, trailing stop, break-even, etc.
Trading Journal
Once the trading plan is fully defined, it acts as a compass guiding traders through different market situations. To maintain control and track the trading plan, it’s necessary to record every aspect of daily operations—this is known as a trading journal, a comprehensive record of operations. By having control of their trading through the trading journal, traders can identify common errors that affect expected results and highlight successes, evidencing the evolution of their operations over time. In Swiset’s trading journal, traders can include emotional records during trading, trade data such as entry and exit price, duration, and attach chart captures, among many other features.
Continuously recording operations along with detailed periodic analysis is a mechanism most traders use for continuous improvement. It helps identify patterns in decisions, assess the effectiveness of strategies, and learn from common mistakes. Moreover, it helps monitor and manage emotions associated with trading. Recording thoughts and feelings during and after each operation can help identify emotional patterns and work on improving emotional discipline.
Apply all these tools in your operations: https://swiset.com/for-traders/
Why Does a Broker Care If Traders Are Profitable?
Spread
Brokers earn income through spreads or other fees for each trade traders make on their platform. If a trader is profitable, they are more likely to execute more trades and generate more commissions for the broker.
Client Retention
Profitable traders tend to stay active on the broker’s platform for longer periods. This provides stability and loyalty to the company, which is beneficial for the broker in the long run.
Good Reputation
If traders succeed and make profits on the broker’s platform, this can build a good reputation for the company. Satisfied and profitable traders are more likely to recommend the broker to others, attracting new clients.
Increased Liquidity and Trading Volumes
Profitable traders can contribute to higher liquidity on the broker’s platform by trading more frequently and in higher volumes. This generates higher spreads and commissions.
Increase user retention with Swiset
Through Swiset, traders can conduct a comprehensive analysis of their operations, enabling better decision-making and risk management. In a study with one of our partners, we observed that with Swiset, the majority of traders increased their average lifespan within the Broker by 2 months.
Help your traders stay longer in the market: https://swiset.com/for-brokers/
