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Well, to each their own, I guess. If you're trading for a living, surviving
a couple years of poverty takes on a completely different perspective.
My understanding of how to use PHW is that it allows you to rank market
opportunities and filter out those that aren't worth trading. I've seen a
similar approach applied with Reward/Risk ratio. One thing that R/R doesn't
take into account is price vs. minimum shares vs. liquidity. I consider
these real factors in trading, especially as applied to position sizing,
execution, etc.
You're correct in pointing out that hourly wage does depend on
capitalization and rate of return (among other things). However, I've seen
few people go through the mechanics of actually calculating it, let alone
considering it.
I would contend that if the "hourly wage" of trading is less than what
could be made through another work activity, maybe trading isn't
appropriate (yet). For all those people wishing to quit their day jobs,
this is probably a good exercise to complete BEFORE trading full time.
Essentially it's a trade-off analysis between two opportunities.
BTW, I include opportunity trade-off analysis as part of the trading plan.
If I can get better returns on another opportunity (and the switching costs
are not an issue), I do it. In fact, I recently pulled trading capital for
two much better performing business opportunities. Who says a portfolio is
only made up of markets? That seems rather limiting.
Cheers,
Kevin
To: Omega List <omega-list@xxxxxxxxxx>
Subject: Re: Trading Journals and Trading Plans?
> Sunny Harris has a concept called Potential Hourly Wage (PHW),
IMHO, that's a bogus concept. Your hourly wage depends on your return %
and your account size. Given an adequate return, and enough time, your
hourly wage approaches infinity as your account grows. One should
concentrate on the risk/return ratio of the method and let the hourly
wage take care of itself. If the method is good, you can survive a few
years of poverty before you can afford to buy that island. :-)
--
Dennis
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