{"id":23891,"date":"2025-05-02T07:30:00","date_gmt":"2025-05-02T11:30:00","guid":{"rendered":"https:\/\/jeffclarktrader.com\/market-minute\/?p=23891"},"modified":"2025-08-22T08:31:18","modified_gmt":"2025-08-22T12:31:18","slug":"the-secret-active-traders-use-to-make-tons-of-money","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/the-secret-active-traders-use-to-make-tons-of-money\/","title":{"rendered":"The Secret Active Traders Use to Make Tons of Money"},"content":{"rendered":"
\n

Managing Editor\u2019s Note: <\/strong>Jeff Clark\u2019s philosophy of trading centers on using options the way they were originally intended \u2013 as a way to reduce <\/em>risk.<\/p>\n

In fact Jeff often talks about how it\u2019s better to sit out than put on a trade that doesn\u2019t have a good risk\/reward probability\u2026 and he says \u201cdon\u2019t be stupid<\/a>\u201d when it comes to options trading.<\/p>\n

Our friends over at Seasonality Investor<\/em> have the same philosophy as we do. (You can learn more about what they do right here.)<\/a><\/p>\n

Moreover, they know that the win-rate doesn\u2019t mean anything\u2026 it\u2019s how you can maximize your profits\u2026 while minimizing<\/em> your risk.<\/p>\n

Check out William McCanless\u2019 breakdown of this crucial trading concept below\u2026<\/p>\n<\/div>\n

The Secret Active Traders Use to Make Tons of Money<\/h2>\n

BY WILLIAM MCCANLESS, ANALYST, THE SEASONALITY INVESTOR<\/em><\/strong><\/p>\n

All professional traders know this secret: \u201cwin rate\u201d has nothing to do with making money.<\/p>\n

When I talk to most aspiring traders, this blows their mind.<\/p>\n

But I\u2019ve also talked to A LOT of proprietary trading firms \u2013 from Canada to Singapore.<\/p>\n

And do you know what they do when someone walks into their office and touts their win rate?<\/p>\n

They laugh them out of the building.<\/p>\n

The most successful traders at proprietary trading firms have about a<\/strong>\u00a040% win-rate.<\/strong><\/p>\n

That means they lose 60% of their trades.<\/p>\n

Yet they still \u201cprint\u201d money every day.<\/p>\n

Does that sound weird?<\/p>\n

Take a look at this:<\/p>\n

Below you\u2019ll see what happened when I put $3,000 into an account with a futures broker called Tradovate, then traded specifically the S&P 500 Futures from July 31 to August 28, 2023.<\/p>\n

These were just day trades, which everyone says you \u201ccan\u2019t be successful at.\u201d<\/p>\n

So, how\u2019d it work out for me?<\/p>\n

I lost about 65% of my trades.<\/strong><\/p>\n

That means I lost a lot of money, right?<\/p>\n

Actually \u2013 I DOUBLED my account for a 100% return, making over $3,000 in profit.<\/strong><\/p>\n

Above, you can see a screenshot of my account history between July 31 and Aug. 29, 2023.<\/p>\n

On the bottom left, outlined in red, is my profit: $3,058. This is the total profit after fees and commissions.<\/p>\n

On the far right \u2013 also outlined in red \u2013 you see my win rate: 35.6%. So, I lost nearly 65% of my trades.<\/p>\n

But how did I make money if I\u2019m such a HORRIBLE trader who is wrong most of the time?<\/strong><\/p>\n

Well, the middle columns tell the story.<\/p>\n

On the left green rectangle, you see my average winning trade is $118.<\/p>\n

On the right green rectangle, you see my average losing trade is $40.<\/p>\n

That means my winning trades are three times bigger than my losers, on average.<\/p>\n

And when you turn to my BIGGEST outcomes, you see that my biggest winner was $1,010, while my biggest loser was $282.50.<\/p>\n

So, my biggest winning trade was more than 3.5x my biggest losing trade.<\/p>\n

Of course, day trading is a lot different than the type of trading I\u2019ll recommend at\u00a0The Seasonality Investor<\/em>, which has a much higher win-rate (in the realm of 80% in our backtest of TradeSmith optimal seasonal windows<\/a>).<\/p>\n

But the lesson here is important \u2013\u00a0win rate doesn\u2019t actually matter and it\u2019s a completely useless metric.<\/strong><\/p>\n

Herein lies the biggest secret to successful trading:<\/p>\n

It\u2019s not about being RIGHT, it\u2019s about being PROFITABLE.<\/strong><\/p>\n

In other words \u2013 it\u2019s a\u00a0RISK MANAGEMENT<\/em>\u00a0game.<\/p>\n

All the best traders understand this. That\u2019s why they NEVER care about losing or being wrong.<\/p>\n

They just want, say, a 5:1 risk\/reward, like Paul Tudor Jones does:<\/p>\n

\u201cFive to one means I\u2019m risking one dollar to make five. What five to one does is allow you to have a hit ratio of 20%. I can actually be a complete imbecile. I can be wrong 80% of the time, and I\u2019m still not going to lose.\u201d<\/p>\n

\u201cBeing right\u201d and having a high win rate does not matter.<\/p>\n

I know people who have 90% win-rates who have completely blown up their accounts and are down year after year.<\/p>\n

I literally knew a guy who maintained an 85% to 90% win-rate for 11 YEARS STRAIGHT trading options credit spreads.<\/p>\n

Guess what? He lost money\u00a0every single year.\u00a0<\/strong>Because his risk-to-reward ratio was skewed in the wrong direction.<\/p>\n

All it took was losing ONE or TWO out of 10 trades to wipe out five or so of his winners.<\/p>\n

He stood to lose 4x to 5x what he could make on his trades\u2026<\/p>\n

Rather than standing to make 3x to 5x what he could lose.<\/p>\n

He touted his strategy as \u201clow risk,\u201d because he was so overly concerned with the probability of his trades being correct.<\/p>\n

But in order to have such a high probability, you have to construct the trade in a way that it barely pays you any money. No risk, no reward.<\/p>\n

To be a successful trader, you\u2019ve got to:<\/p>\n

    \n
  1. Find setups that have a good risk-to-reward ratio.<\/li>\n
  2. Take the trade with an appropriate position size.<\/li>\n
  3. Then walk away and let the trade either work or not.<\/li>\n<\/ol>\n

    Here\u2019s the fact of the matter \u2013\u00a0you cannot control the market.<\/strong><\/p>\n

    The sooner you relinquish all control, the better.<\/p>\n

    But you CAN control your risk and your reward. In fact, it\u2019s the ONLY thing you can control.<\/p>\n

    That\u2019s what separates a trader from a gambler at a casino:<\/p>\n

    The gambler cannot control their risk\/reward. A trader can.<\/p>\n

    So, once you find a setup with a strong risk\/reward ratio and you enter that trade \u2013 your job is finished at that point \u2013\u00a0because you managed your risk.<\/p>\n

    Seasonality Investor<\/em> Position Sizing and Risk Management Rules<\/h2>\n

    In\u00a0The Seasonality Investor<\/em><\/strong>, I will always seek to find trade ideas that have optimal risk-to-reward setups with as many variables in favor of the trade as possible.<\/p>\n

    But the rest is up to you as a responsible risk manager.<\/p>\n

    And how do you do that?<\/p>\n

    Well \u2013 everything begins with your\u00a0position sizing.<\/strong><\/p>\n

    The Golden Rule: Never Risk More Than 5% of Your Account on Any Single Trade<\/strong><\/p>\n

    Personally, I risk 2% of my account on any single trade by default.<\/p>\n

    If I have a VERY high conviction on a trade, I will go up to 5%, but no further.<\/p>\n

    If you risk 5% of your account, that means you would need to lose 20 trades in a row to go to zero. And it also means you can be in up to 20 trades at a single time.<\/p>\n

    If you risk 2% of your account per trade, it means you would need to lose 50 trades in a row in order to go to zero. And if you\u2019re doing 2% each\u2026 50 trades is all of them.<\/p>\n

    I consider the COST of the trade to be the total risk.<\/p>\n

    For example, if the trade is an options trade and one option costs $500 \u2013 then I consider the ENTIRE $500 as our total risk.<\/p>\n

    This is different from what many people will do.<\/p>\n

    For example, they will buy an option for $500 and then tell themselves: \u201cIf the option loses 50% of its value, I\u2019ll get out of the trade.\u201d So, they think of $250 as their total risk.<\/p>\n

    That would represent a 2.5% total risk on a $10,000 account, for example.<\/p>\n

    But I don\u2019t do that \u2013 and I suggest you don\u2019t, either.<\/strong><\/p>\n

    You see, when I buy an option \u2013 in this example, for $500 \u2013\u00a0I proceed under the assumption that I have now lost 100% of that money and that my position will go to zero.<\/strong><\/p>\n

    This accomplishes two very important things:<\/p>\n

      \n
    1. It stops me from micromanaging the position or exiting a position just because it\u2019s temporarily down\u2026 just to watch it rebound later.<\/li>\n
    2. It gives me strong hands and prepares me mentally for inevitable losses (because I assume my money is already gone).<\/li>\n<\/ol>\n

      I used to run a live trading service.<\/p>\n

      And every time I signaled a trade \u2013 inevitably, somebody who had racked up a good string of recent winners using my recommendations would always get greedy and put on WAY too much size.<\/p>\n

      Then when the position was down \u2013 the messages would start flooding into the chat:<\/p>\n

      \u201cShould I sell? Do you think it will rebound?\u201d<\/p>\n

      They would start looking for any shred of information or evidence that the trade would work out.<\/p>\n

      And they\u2019d message me at all hours of the day or night, looking for reassurance.<\/p>\n

      Why?\u00a0Because they put on TOO MUCH SIZE.<\/strong><\/p>\n

      If you are putting on a trade and you are not 100% willing to lose ALL of the money you just invested\u2026<\/p>\n

      And the thought of losing that money would keep you up at night, make your palms sweat, and make you bite your nails\u2026<\/p>\n

      Every time you see a red candle, you\u2019d feel like somebody is stabbing you in the gut with a knife\u2026<\/p>\n

      Well, my friend, these are the better choices:<\/p>\n

      DON\u2019T TAKE THE TRADE.<\/p>\n

      Or, at least, take the trade with a position size that is appropriate \u2013 between 1% and 5% of your account.<\/p>\n

      Choose to ignore this advice at your own risk.<\/strong><\/p>\n

      Because one day you will experience a string of winners.<\/p>\n

      You will think to yourself, \u201cWow, if I just add on some more size, I could make a lot of money FASTER! These trades are working out great!\u201d<\/p>\n

      I have seen it more times than I can count. I\u2019ve EXPERIENCED it several times myself.<\/p>\n

      And maybe you\u00a0will<\/em>\u00a0make a lot more money faster\u2026 for a while.<\/p>\n

      You\u2019ll get more and more confident and add on more and more size \u2013 envisioning the Lamborghini you\u2019re going to buy and the first-class flights you\u2019re about to book as you trade by the ocean and pull in the millions.<\/p>\n

      Then the losses will come \u2013 and you will go to zero.<\/p>\n

      All because of bad risk management and \u201crevenge trading\u201d: trying to double down on the next trade to win back what you lost.<\/p>\n

      You\u2019ll be better off following my advice, managing your risk, and trusting the process \u2013 relying on larger rewards than what you risk.<\/p>\n

      Even LOSING six out of every 10 trades can DOUBLE your account \u2013 as we saw earlier \u2013 if you have the fortitude to hold onto winners and cut losers.<\/p>\n

      You cannot cultivate this mental fortitude if you are trading too large. Yet it becomes easy when your risk is appropriate and you can trust the process.<\/p>\n

      Focus on Your Stats \u2013 Not Your Money<\/h2>\n

      Another very important tip is:<\/p>\n

      NEVER concentrate on the amount of money your trades are making or that your account is growing by.<\/strong><\/p>\n

      This can make you feel discouraged.<\/p>\n

      Instead \u2013 focus on the PERCENTAGES that you\u2019re making and growing your account by.<\/p>\n

      For example, did you make 2% on that trade? 3%? 4%, over a five- to 30-day time span?<\/p>\n

      Most people take several months and maybe even a year to see such a gain.<\/p>\n

      Did your overall account grow by 2% or 3% that month? If you have a $1,000 account, that can seem so small because it\u2019s only $20 or $30.<\/p>\n

      But, if you\u2019re able to grow your account at around that pace over the next 12 months, you\u2019re looking at 24% to 36%.<\/p>\n

      That\u2019s beating the S&P 500 and pretty much any money market fund \u2013 and definitely beating inflation.<\/p>\n

      So, no matter how small of an account you have, the question is:<\/p>\n

      \u201cDid you put your capital to superior use by actively trading it versus most other alternatives out there?\u201d<\/p>\n

      If so \u2013 you\u2019re winning.<\/p>\n

      I would suggest starting with a small amount of capital anyway and trading it up over the course of six months while saving money for future trades.<\/p>\n

      Then, once you\u2019re comfortable that you\u2019re getting good results, add some more savings, and so on.<\/p>\n

      That\u2019s all for now. Let\u2019s find the next best trade!<\/p>\n

      William McCanless
      \nAnalyst, The Seasonality Investor<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

      The biggest secret to successful trading is that it\u2019s a risk management game.<\/p>\n","protected":false},"author":100,"featured_media":0,"comment_status":"closed","ping_status":"0","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[158],"newsletter-type":[],"ticker":[],"class_list":["post-23891","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-william-mccanless"],"acf":[],"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/23891","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/100"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=23891"}],"version-history":[{"count":4,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/23891\/revisions"}],"predecessor-version":[{"id":25046,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/23891\/revisions\/25046"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=23891"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=23891"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=23891"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=23891"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=23891"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=23891"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=23891"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}