What is better Profitability and stability in trading process

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What is better ? Profitability and stability in trading process

Online trading attracts a significant amount of users first and foremost because it is a great opportunity to earn a large profit. Yes, of course, you can earn a sizable profit from one contract and in principle, it is not hard. However, that’s just lucky, it’s like winning the lottery. Hence, many experts say that profitability alone isn’t a goal market participants should strive for. Your end goal for trading should be stability, a stability that will lead to the dynamic growth of your capital. On this note, it is widely debated which is better in trading, short-term profit and overnight success or stable trading that produces results. Let’s examine this question together. This will without a doubt be useful for every online investor without exception.

So, let’s begin our analysis of the advantages and disadvantages of both profitability and stability in trading. Of course, it isn’t right to separate these concepts, as in both cases we are talking about getting results. Therefore, to clarify the concept, when we say profitability, we mean earning a large financial profit from a contract with an increased level of risk, decided on the basis of the trading parameters of individual investors based on their statistics. And, of course, in terms of stability, we mean generating a specific amount of profit in the medium-term to long-term perspective. As you can see, the end result is profit either way, although the benefit comes from how it is generated.

The following situation can be taken as a practical example of stable and profitable trading. More than likely, every trader online has encountered the success stories where an average online investor, overnight or in a day, earns a hundred or even a thousand percent or a six-figure profit from a single contract! There are other stories as well where, for example, professional investors trade profitably for 100 days, meaning that they generated a minimal, although maintained positive result over a long period of time. What do you think, who is the more successful trader on the market? Of course, beginners would say that it is better to make millions right away than toll away on the market for ages. However, experts say that it is better to generate profit stability! Here lies the difference between professional and successful traders from inexperienced market participants.

The problem is that, when articles are published, no one ever goes into the overall statistics of these lucky individuals. Of course, large capital growth definitely happens in trading, especially when working on highly volatile markets or during major collapses and rate spikes. For example, in 2008, at the beginning of the international crisis, an entire portfolio of international currencies collapsed. If you looked into the history of the market, you would see how within the span of a week the GBP/USD lost more than half of its worth. When heavy leverage is used and significant investments are made in a single contract, it is possible to earn an impressive amount of money, as a number of traders have done. The history of stock market collapse repeated itself in 2020 and 2020. In this period, even beginners can generate significant capital! That being said, as you can see, there are large lapses of time between highly-lucrative trading periods that aren’t profitable in such a way. Unlike these “lucky” individuals, experts strive for stability and profit all the time they work on exchange platforms! And on that note, it is important to mention that, while their stories are portrayed in the best possible light, the vast majority of traders who produce such impressive result eventually lose every penny of it. The reason for this lies in their less than professional approach to trading and the psychological problems that arise with earning a large amount of capital. A bit further into the psychological aspect, the issue is that achieving success gives you confidence. This is a very negative factor in terms of trading on the market. When an investor is so confident in their exceptional nature, they make mistakes, often involving risk and capital management, as well as effectively conducting technical analysis. As a result, large amounts of capital quickly dissolve.

In general, it isn’t great to brag about significant results among traders, as it is well known that money is drawn to calm. A more attractive and professional goal is to demonstrate stable trading results. We’d go as far as saying that you can tell a lot about an active trader from their investment chart. Gradual capital growth that moved up stably without any large losses or spikes up looks more attractive than a chart with high peaks and subsequent critical losses.

If you are new to trading, we recommend striving for stability, rather than short-term success. It is better if you increase your capital stably over an extended period of time, let’s say $200, improving your professional skills and the quality of your trading than to accidentally earn a lump sum of profit. In this way, you are investing in your future and you can calculate more accurate trading signals.

When considering the benefits of stably generating income, it is important to note the drawbacks. In this case, there is only one point of contention, the increase in capital isn’t dynamic. Of course, earning minimal profit growth isn’t all that interesting to any investor, although when you take stability into account, as well as overall statistics from a long-term perspective, it isn’t all that much of a drawback.

The conclusion thus far is that, without a doubt, you prove your level of professionalism as well as the quality of your work on the market when you generate profit stably, rather than achieving success overnight. Yes, when you achieve astonishing success short-term it is great, however, when your focus is on the long term, you can earn even more! Once this is clear to you, we have the following recommendations for you to help you generate a stable profit:

● You never stop learning throughout your career, you will generate a reliable profit on the market if you gradually polish your trading skills and expand your experience. Trading is a complex process, both in technical terms, as well as intellectually. You can never fully master all the nuances of working with financial assets. Therefore, if you want to consider yourself a professional, you need to continuously strive for self-improvement.

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●Use a multitude of analytical approaches and strategies when you trade. The issue is that, on the market, price fluctuation is both unstable and volatile. Occasionally it is possible to forecast the relatively chaotic movements involving sharp volatile rate reversals. Therefore, there is no way whatsoever to generate signals stably in a long-term perspective only relying on one strategy. There is no one system that fully takes into account all of the possible situations you can find on the market, meaning that having a restricted selection of trading systems negatively affects your trading stability. Here, it is recommended that you develop an entire arsenal of analytical approaches for yourself, which should include systems based on both technical and fundamental approaches such as, trading based on trends, chart levels and market figures, candle pattern systems and price level strategies, wave patterns and utilizing indicator services, and trading the news, the leading fundamental approach to analysis. You should have a quality selection of trading at your disposal that accounts for all situations and market variance. This way, you can not only generate stable trading results but also improve upon your professional skills and expand your experience

● Set realistic goals for yourself, the first mistake trader make is setting unattainable trading goals. Many traders dream of earning a million trading in a month, but that is completely unrealistic. It also creates a myriad of problems for investors, first and foremost psychologically, disrupting their emotional state and decreasing stability when trading.

● Set yourself realistic goals and methodically work to achieve them. For example, identify the minimal capital growth you expect from yourself in a day, ideally up to $200. Trade using an effective system with which you can reliably achieve this trading indicator. Other than that, be disciplined about clearly setting your trading tasks for the day, giving you the opportunity to manage your capital.

● Don’t take risks, unwarranted trading risks are the enemy of trading stably. With a larger contract, you risk even more significant losses that have the potential to completely change your trading indicator and cause you to lose your entire capital. Therefore, to achieve overall stability trading and meet your daily trading goals, we recommend that you adhere to the basic rules of money management. Professional traders advise investing no more than 5% of your total operating capital on anyone trading position on the financial market. Following this, you can only generate profit stably, however, at the same time you are setting up the safest trading conditions for you and your capital.

● Celebrate your progress, trading is a very interesting process and not only because you have the opportunity to earn real money. Trading is a daily intellectual and psychological challenge. That being said, if you ate stably achieving your set goals, you need to celebrate that fact. You are now included in the 10% of successful traders who are capable of generating a stable profit on the market. It isn’t a secret that 90% of all traders lose capital, and you are earning stably. Use it to motivate yourself to work towards further professional growth.

● Don’t ever compare yourself to other investors. When working on the market, you can encounter various approaches to successful trading, including generating multi-million-dollar profits in the space of a day, as well as achieving 100% capital growth. As a result, you might be tempted to follow the approach of such “lucky” individuals. However, it isn’t worth it, as such a path leads to a multitude of mistakes and large financial problems that can destroy your trading capital. Note your doubts when you evaluate your own strengths and abilities, follow your plan and strategy, and work out your own trading philosophy. This is the only way to create the conditions for stably generating profit on the market.

● Take a break when you receive unexpected results. When you trade with financial assets, despite traders’ best efforts to generate stable results, there are times when investors end up with trading anomalies. It could be a large amount of profit, or a significant loss, both situations are anomalies. If you succumb to the situation, take a break from the market. It is vital for the stability of your mental health as an investor. Some experts take extended breaks in such circumstances until they feel certain that they won’t succumb to gambling on the market or be distraught when trading.

● Listen to your emotions. Psychology is possibly the most important aspect of trading and it holds significant influence over the trading process. Therefore, in order to trade stably on the market, you need to pay close attention to your emotions and mental state. You need to evaluate your accurately emotions and mood in order to achieve your set trading goals. Therefore, you achieve a high degree of awareness when you make trading decisions and increase the quality of your market analysis and, accordingly, you more effectively achieve vital indicators.

As you can see, professionalism and trading stably go hand in hand. Traders can only achieve success on the market through hard work and continuously improving their professional skills.

“General Risk Warning: Binary options and cryptocurrency trading carry a high level of risk and can result in the loss of all your funds.”

Financial Characteristics of a Successful Company

It is often debated whether a commonly perceived “good” company, as defined by characteristics such as competitive advantage, above-average management, and market leadership, is also a good company in which to invest. While these characteristics of a good company can point toward a good investment, this article will explain how to also evaluate the company’s financial characteristics to make a final decision.

While the short-term process may have changed, the characteristics of a good company in which to buy stock have not. Earnings, return on equity (ROE), and their relative value compared with those of other companies are timeless indicators of which companies might be good investments.

What Are Earnings?

Earnings are essential for a stock to be considered a good investment. Without earnings, it is difficult to evaluate what a company is worth, except for its book value. While current earnings may have been overlooked during eras like the internet stock boom, investors, whether they knew it or not, were buying stocks in companies that they expected to have earnings in the future.

Earnings can be evaluated in any number of ways, but three of the most prominent metrics are growth, stability, and quality.

Earnings Growth

Earnings growth is usually described as a percentage, in periods like year-over-year, quarter-over-quarter, and month-over-month. The basic premise of earnings growth is that the current reported earnings should exceed the previous reported earnings. While some may say that this is backward-looking, and that future earnings are more important, this metric establishes a pattern that can be charted and tells a lot about the company’s historic ability to increase earnings.

While the pattern of growth is important, like all other valuation tools, the relative relationship of the growth rate matters, as well. For example, if a company’s long-term earnings growth rate is 5% and the overall market averages 7%, the company’s number is not that impressive.

On the flip side, an earnings growth rate of 7% when the market averages 5% establishes a pattern of increasing earnings faster than the market. This measure on its own is only a start, though. The company should then be compared to its industry and sector peers.

Earnings Stability

Earnings stability is a measure of how consistently those earnings have been generated over time. Stable earnings growth typically occurs in industries where growth has a more predictable pattern.

Earnings can grow at a rate similar to revenue growth; this is usually referred to as top-line growth and is more obvious to the casual observer. Earnings can also grow because a company is cutting expenses to add to the bottom line. It is important to verify where the stability is coming from when comparing one company to another.

Earnings Quality

Quality of earnings factors heavily into the evaluation of a company’s status. This process is usually left to a professional analyst, but the casual analyst can take a few steps to determine the quality of a company’s earnings.

For example, if a company is increasing its earnings but has declining revenues and increasing costs, you can be guaranteed that this growth is an accounting anomaly and will, most likely, not last.

What Is Return on Equity?

Return on equity (ROE) measures the ability of a company’s management to turn a profit on the money that its shareholders have entrusted it with.

ROE is calculated as follows:

ROE is the purest form of absolute and relative valuation and can be broken down even further. Like earnings growth, ROE can be compared to the overall market and then to peer groups in sectors and industries. Obviously, in the absence of any earnings, ROE would be negative. To this point, it is also important to examine the company’s historical ROE to evaluate its consistency. Just like earnings, consistent ROE can help establish a pattern that a company can consistently deliver to shareholders.

While all of these characteristics may lead to a sound investment in a good company, none of the metrics used to value a company should be allowed to stand alone. Don’t make the common mistake of overlooking relative comparisons when evaluating whether a company is a good investment.

Researching Company Data

The world of stock picking has evolved. Previously, it was the duty of traditional stock analysts has become an empowered by individuals using the internet; now, stocks are now analyzed by all kinds of people, using all kinds of methods.

In order to compare information across a broad spectrum, data needs to be gathered. Since the majority of information available on the internet is free, the debate is whether to use the free information or subscribe to a premium service. A rule of thumb is the old adage, “You get what you pay for.”

For example, if you are looking to compare earnings quality across a market sector, a free web site would probably provide just the raw data to compare. While this is a good place to start, it might better suit you to pay for a service that will “scrub” the data or point out the accounting anomalies, enabling a clearer comparison.

Final Word

While there are many ways to determine if a company that is widely regarded as “a good company” is also a good investment, examining earnings and ROE are two of the best ways to draw a conclusion. Earnings growth is important, but its consistency and quality need to be evaluated to establish a pattern. ROE is one of the most basic valuation tools in an analyst’s arsenal but should only be considered the first step in evaluating a company’s ability to return a profit on shareholder’s equity.

Finally, all of this consideration will be in vain if you don’t compare your findings to a relative base. For some companies, a comparison to the overall market is fine, but most should be compared to their own industries and sectors.

Is Profitability or Growth More Important for a Business?

To be successful and remain in business, both profitability and growth are important and necessary for a company to survive and remain attractive to investors and analysts. Profitability is, of course, critical to a company’s existence, but growth is crucial to long-term survival.

Key Takeaways

  • When evaluating a company, what should you weigh heavier: profitability or growth?
  • A growing company may not be earning any profits yet, but may nevertheless provide a great investment opportunity.
  • Other times, a lack of profitability can be a huge red flag that something is wrong with the firm.


A company’s net profit is the revenue after all the expenses related to the manufacture, production, and selling of products are deducted. Profit is “money in the bank.” It goes directly to the owners of a company or shareholders, or it is reinvested in the company. Profit, for any company, is the primary goal, and with a company that does not initially have investors or financing, profit may be the corporation’s only capital.

Without sufficient capital or the financial resources used to sustain and run a company, business failure is imminent. No business can survive for a significant amount of time without making a profit, though measuring a company’s profitability, both current and future, is critical in evaluating the company.

Although a company can use financing to sustain itself financially for a time, it is ultimately a liability, not an asset.

An income statement shows not only a company’s profitability but also its costs and expenses during a specific period, usually over the course of a year. To compute profitability, the income statement is essential to create a profitability ratio. A number of different profitability ratios can be calculated from which to analyze a company’s financial condition.


Determining and focusing on profitability at the beginning, or start-up, of a company, is essential. On the other hand, growth of market and sales is the means to achieving that initial profitability. Identifying growth opportunities should become the next important item on any company’s goal list after a company moves beyond the start-up phase.

Growth for a business is essentially an expansion, making the company bigger, increasing its market and ultimately making it more profitable. Measuring growth is possible by looking at some pertinent statistics, such as overall sales, number of staff, market share, and turnover.

Though the present profitability of a company may be good, opportunities for growth should always be explored, since they offer opportunities for greater overall profitability and keeps analysts and potential, or current, investors interested in the company.

Knowing the present condition of any company is essential to creating a successful growth strategy. If a company has too many weak areas, such as performance, sales or marketability, a premature attempt to grow can ultimately collapse the business. A first step is the consolidation of current markets, essentially meaning the lockdown of the current state of a company before attempting to alter it with growth.

The Bottom Line

Profitability and growth go hand-in-hand when it comes to success in business. Profit is key to basic financial survival as a corporate entity, while growth is key to profit and long-term success. Investors should weigh each factor as it relates to a particular company.

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