Trading is a numbers game. The formula for profits is deceptively simple.

Sum of winners – sum of losers = Profits

Easy math

All you have to do is capture more gains on the winning trades than you forfeit on the losing trades. Duh.

To add further insight, consider the expectancy formula which reveals the four metrics you need to know before determining if a strategy or system will be profitable.

(probability of winning x average gain) – (probability of losing x average loss)

Expectancy Formula

Here’s a quick example somewhat similar to the Cash Flow Condors system.

Probability of winning: 85%

Average Gain: $100

Average Loss $300

Expectancy Formula: (0.85 x $100) – (0.15 x $300) = $40

This system should make $40 per trade, sans commissions, of course

Let’s take a minute to think about ways you could make more moolah. There are only three variables in play here: average gain, average loss, and the probability of winning.

If you can increase your typical gain then, congrats! you’ll make more money

If you can decrease your average loss, then, hurray! you’ll make more money.

If you can increase your probability of profit, then bangarang! you’ll make more money.

Which is easiest?

None of them. And besides, maybe you’re already maxing out your gains, properly bailing on bad trades, and achieving the system’s expected probability.

What then? How can I make more money?

Before I answer, let me make one thing clear. I’m assuming you have a profitable trading system – one with an edge, a positive expectancy. If you don’t, then following either path below will simply result in you losing money faster.

Got it?

Now, you have two options when trying to bank more coin: increase size or increase frequency.

Super Size!

By increasing size, I’m referring to your position size. As in the amount of money or risk allocated to each position. Have you ever had a profitable month and then thought, “hey, if I had only added a zero to all my trades I’d be swimming in dough right now!”

If so, then you know what I’m talking about. If Trader A risks $100 per trade and Trader B risks $300 per trade, and they both execute the same system, then Trader B will make more money. Not because he’s smarter, more disciplined, or better looking. But simply because he bet BIGGER.

Here’s the problem. Increasing size elevates your blood pressure and brings more emotion into the equation. There’s also a limit as to how big you can get before wrecking your risk protocols.

As such, I’m not a fan of increasing size as the path to higher profits. No, I prefer the second route – increasing frequency.

Trade More Often

When I say increase frequency, I mean trading more often. Instead of deploying five trades a month, maybe you enter ten. I can think of a whole host of benefits with this adjustment, but here are three.

First, you care less and less about the outcome of each trade because, well, you have tons of them. Each is one in an endless stream of positions, a single tree in a forest. And when you don’t obsess over the outcome, then it’s easier to focus on your process and the tasks at hand.

Second, you are using natural market volatility to your advantage. This is because trading frequently requires you to implement time and price diversification.

Third, this also forces you to employ strategy diversification. It’s much easier to trade frequently if you have a well-equipped toolbox.

Hat Trick!

These three perks provide clues for how you go about increasing frequency. You have to learn more setups and more strategies. Think about the ability of a trader to discover opportunities if they only know how to trade bull retracements, versus someone who can spot five patterns.

And, consider the difference between a trader who only knows how to buy calls versus one who knows ten different strategies. Who will have an easier time entering a trade or two a day?

Bottom line: Veterans know the easier route to profits involves increasing frequency instead of size.

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