I really think that winning percentages are pretty meaningless and really only the focus of amateurs.
This guy is at a major hedge fund:
What he says, quite simply, is that very high winning percentages come at the cost of making less money overall, which is not what the objective should be. And that's not based on theories, but comes from his first hand experience working with some of the very best traders on this planet. **Brett Steenbarger:**
"...As a rule, maximizing batting average/minimizing drawdown comes at the cost of lowering overall system profitability...."
"William Eckhardt:
The Win/Loss Ratio
“One common adage on this subject that is completely wrongheaded is: You can’t go broke taking profits. That’s precisely how many traders do go broke. While amateurs go broke by taking large losses, professionals go broke by taking small profits. The problem in a nutshell is that human nature does not operate to maximize gain but rather to maximize the chance of a gain. The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance. …
What really matters is the long-run distributions of outcomes from your trading techniques, systems, and procedures. But, psychologically, what seems of paramount importance is whether the positions that you have right now are going to work. Current positions seem to be crucial beyond any statistical justification. It’s quite tempting to bend your rules to make your current trades work, assuming that the favorability of your long-term statistics will take care of future profitability. Two of the cardinal sins of trading - giving losses too much rope and taking profits prematurely - are both attempts to make current positions more likely to succeed, to the severe detriment of long-term performance.”
Market Wizards
George Soros: **"I don't care about being right or wrong on the market.**
What counts is how much you make when you are right."
Kenneth Grant, in "Trading Risk: Enhanced Profitability through Risk Control", depicts his experience as risk manager for some of the best and most successful hedge funds, amongst others Paul Tudor Jones funds and Steve Cohens SAC Capital, that: **ACROSS ALL TRADING STYLES, TIME FRAMES AND TRADERS, ONE RULE HOLDS TRUE:**
10% OF ALL TRADES INEVITABLY ACCOUNT FOR 90% OF PROFITS !
__________________ **Markus**
Doing without doing |