Firewalker's Journey: A path of discovery in search for enlightenment

This is a discussion on Firewalker's Journey: A path of discovery in search for enlightenment within the Trading Journals forums, part of the Reception category; Originally Posted by ymonly the average trader cannot emotionally survive a low win rate system.....if i believe that 1/2 of ...

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Old Aug 17, 2006, 5:25am   #169
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Quote:
Originally Posted by ymonly
the average trader cannot emotionally survive a low win rate system.....if i believe that 1/2 of my entries will be losers are u kidding me? if more than 80% win then guess how much stress is in the right now moment of mashing the mouse button...not as much.....i prefer over 90 for comfort .......and profit.....emini daytrading......if 50 % is okay then use the coin flip method.....just as good as 50 percent loser or winner.....6 trades per day and 1/2 will lose.......that is a grade of 50 means u r a failure or an expert trader with nerves of steel.....and those are few and far between, if that many.
The coin-flipping analogy makes no sense since the probability is the same each time (0.5W/0.5L) and one could have a rather long and nasty stretch of losses before the law of large numbers kicks in and things even out. Clearly what is of consequence, as everyone knows, is what one does with one's losers and equally as important is what one does with one's winners. To quote the Phantom of the Pits (I haven't the foggiest idea who this guy is, but IMO what he says makes sense):

1. In a losing game such as trading we shall start by assuming we are wrong until proven correct (We do not assume we are correct until proven wrong). Positions established must be reduced and/or removed unless or until the market proves the position to be correct.
2. Keep your losses quick and small.
3. Press your winners correctly without exception.


Easy to say - hard to do but if you don't do it you will blow up. The ego must be removed. It's not how often you make money (your %winners) but rather how much money you make. So if one can make lots of money with a "90% winners" system, cool. But it is entirely conceivable that someone could make just as much money with a "50% winners" system.

ljey
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Old Aug 17, 2006, 6:01am   #170
 
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Quote:
Originally Posted by ljyoung
So if one can make lots of money with a "90% winners" system, cool. But it is entirely conceivable that someone could make just as much money with a "50% winners" system.
Theoretically, yes. But practically is another matter.

But theory is so much easier to argue than application, and it's highly unlikely that the transition from the one to the other will ever be made, at least not here.

Too bad.

Db
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Old Aug 17, 2006, 7:43am   #171
 
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Quote:
Originally Posted by ymonly
the average trader cannot emotionally survive a low win rate system.....if i believe that 1/2 of my entries will be losers are u kidding me? if more than 80% win then guess how much stress is in the right now moment of mashing the mouse button...not as much.....i prefer over 90 for comfort .......and profit.....emini daytrading......if 50 % is okay then use the coin flip method.....just as good as 50 percent loser or winner.....6 trades per day and 1/2 will lose.......that is a grade of 50 means u r a failure or an expert trader with nerves of steel.....and those are few and far between, if that many.
Like I said, and you're only confirming this, it's a question about being able to handle it emotionally... Not saying I could handle a 50% win system, but what are the odds of coming up with a 90% system where signals occur frequently enough to make a sustainable profit?
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Old Aug 17, 2006, 7:54am   #172
 
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Quote:
Originally Posted by ymonly
the average trader cannot emotionally survive a low win rate system.....if i believe that 1/2 of my entries will be losers are u kidding me? if more than 80% win then guess how much stress is in the right now moment of mashing the mouse button...not as much.....i prefer over 90 for comfort .......and profit.....emini daytrading......if 50 % is okay then use the coin flip method.....just as good as 50 percent loser or winner.....6 trades per day and 1/2 will lose.......that is a grade of 50 means u r a failure or an expert trader with nerves of steel.....and those are few and far between, if that many.
WHat we are saying is this..

A 80% win system with negative expectancy bankrupts traders
A 20 % win system with postive expectancy is the foundation of riches in stock market .

IT IS ALL ABOUT EXPECTANCY ..

you are how ever correct in bringing the emotions into it . Hence my own view is unless the LOW WIN rate strategy is driven by machine and not human then it is the way ahead( not diffiult to design such systems ) . TURTLE TRADING SYSTEM IS ONE OF THESE SYSTEMS. THEY ARE ALL TREND FOLLOWING.

What about a 80% system with POSTIVE expectancy ? These systems are extremley difficult to design but they can be done.. MY OWN VWAP ENGINE is one of them . My system has well over 80% win rate ( proven by real time trading and not back testting ) with postive expectancy which supports me emotionally with a long term profit.

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Old Aug 17, 2006, 7:54am   #173
 
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Quote:
Originally Posted by Grey1
ven if the strategy was driven by 100 % piece of software a 40-60 system could result in massive drawdawns that the winning trade has to run for a LONGGGGGGGGGGGGG time to compensate the losses which would make the trade subject to more adverse NEWS( upgrade/down grade/geo political issues/macro economic projections ) ..Saying that , I KNOW mathematically you are correct. I myself developed few trading algorithms based on mathematics you refered to ..

IT IS HUMAN NATURE TO WANT TO WIN MORE TIMES THAN LOSE .. EVEN IF THE TOTAL WIN IS SMALLER COMPARE TO ONE TIME BIG WIN .. We are all human ....

Grey1
Couldn't agree more. Maths are one thing, practical trading is another, taking into consideration the human nature, emotional and psychological aspects.
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Old Aug 17, 2006, 8:02am   #174
 
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Quote:
Originally Posted by Grey1
IT IS ALL ABOUT EXPECTANCY ..
grey1
I'm not usually a fan of quoting others to support my own views, but in this case I think Van Tharp is very applicable. If you've read his snowball metaphor you know what I'm talking about. Quote:

… your trading system should have a positive expectancy and you should understand what that means. The natural bias that most people have is to go for high probability systems with high reliability. We all are given this bias that you need to be right. We’re taught at school that 94 percent or better is an A and 70 or below is failure. Nothing below 70 is acceptable. Everyone is looking for high reliability entry systems, but its expectancy that is the key. And the real key to expectancy is how you get out of the markets not how you get in. How you take profits and how you get out of a bad position to protect your assets. The expectancy is really the amount you’ll make on the average per dollar risked.


And just for the record:
Expectancy = (Probability of Win * Average Win) - (Probability of Loss * Average Loss)
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Old Aug 17, 2006, 8:10am   #175
Joined Mar 2004
db quote,

'You're not going to get anywhere until you stop waiting around for somebody to tell you what to do and start the work. If you have absolutely no idea how to locate a pattern, try the First Steps forum. Or hire a mentor. But all of these "what would you do" questions are pointless.'

I think you're wrong here....it's not pointless at all.

Learning by example is effective for many people.

But hey it's your thread so up to you.

Just consider whether your approach is working, because although your theoritical explanations make a lot of sense, turning this into a profitable approach seems very difficult, even for those who are willing to study the market until their eyes bleed.



Porks.
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Old Aug 17, 2006, 8:12am   #176
Joined Nov 2001
Quote:
Originally Posted by ljyoung
The coin-flipping analogy makes no sense since the probability is the same each time (0.5W/0.5L) and one could have a rather long and nasty stretch of losses before the law of large numbers kicks in and things even out. Clearly what is of consequence, as everyone knows, is what one does with one's losers and equally as important is what one does with one's winners. To quote the Phantom of the Pits (I haven't the foggiest idea who this guy is, but IMO what he says makes sense):

1. In a losing game such as trading we shall start by assuming we are wrong until proven correct (We do not assume we are correct until proven wrong). Positions established must be reduced and/or removed unless or until the market proves the position to be correct.
2. Keep your losses quick and small.
3. Press your winners correctly without exception.


Easy to say - hard to do but if you don't do it you will blow up. The ego must be removed. It's not how often you make money (your %winners) but rather how much money you make. So if one can make lots of money with a "90% winners" system, cool. But it is entirely conceivable that someone could make just as much money with a "50% winners" system.

ljey
A good post. Loss control is of the essence. It isn't easy to do and I am inclined to be a little too fast sometimes. That is better than looking at it, though. Some traders say that if the trade does not go the way they expect within minutes, they are out. That means that if they do not want a stream of losses they had better learn to be good at selection and timing. An incentive to do some serious studying, no coin flipping here...

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