50% double reward strategy

This is a discussion on 50% double reward strategy within the Trading Journals forums, part of the Reception category; Great posts here, I agree. First, let me reiterate that my thread with the on average 50% win rate and ...

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Old Nov 4, 2008, 6:07pm   #16
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Great posts here, I agree.

First, let me reiterate that my thread with the on average 50% win rate and 1:2 risk:reward was intended as one example of how a simple expectancy system can make outstanding returns, no more, no less.

My intent was merely to show that to earn outstanding money you do not need a 90% win rate, nor 5:1 risk:rewards, that you can fall far short of those lofty albeit non-success relevant ambitions and yet make excellent and above all compoundable money on a risk adjusted net basis, and the latter is all trading is about.

You could in fact just as easily go on to make outstanding money with a trend following system that is right on average no more than 33% of the time, but with risk:rewards of 1:3 you will still have an excellent and compoundable money printer.

What needs to be seen is that these examples are just averages, meaning the latter system for example will not exit all profitable trades with 3 R's, in many cases you will take profits earlier, in some cases you will have far far larger profits, and it is only over hundreds of trades that you will on average end up with such stats of profits being 3 R's.

And that is what I mean when I say trading is simple, just think of the Turtles very elementary system that still works to this day, so coming up with a simple system is absolutely not the difficulty, what is difficult is the actual trading of a low hit rate Turtle type trend system, taking small loss after small loss after small loss without throwing the towel in, while waiting for the few mega trends to surface that will much more than make up for all your prior losses.

That's where trading is most definitely simple enough, but equally definitely not always easy.

But we aren't here to feel comfortable, we are here to earn money, and a simple trend following strategy was all it took to have turned Richard Dennis's 400 dollars into hundreds of millions, and many many hedge funds - including algo funds - today still trade simple longer term trend and shorter term momentum strategies, those two strategies are among some of the best and most net lucrative of them all.

Doesn't matter if you only trade price or with indicators or with fundamentals or with algo's, basically all you can do in trading is buy low and sell high, ie either try and catch reversals or wait for pullbacks, OR buy high and sell higher, eg buying breakouts.

Those two are the only possibilities to make money trading outrights, and that is what I mean when I say that trading shouldn't be made more complicated than it is. (Thats excluding certain options stuff where you can also bank on markets doing nada etc ).

There are so many examples on this board of great and robust stuff that works and that is simple, eg Dan and his moving averages and CCI, Grey and his CCI, trader Dante and his pinbars at certain levels, Captain Currency and his age old system of MA's, newtron bomb and his range breakouts with pullbacks, wasp and his trend lines, BBMAC has just posted a comprehensive system that sound like it mnakes lots of sense, etc etc.

People still lose money at trading and overcomplicate it because they can't believe how simple is best, because they run their losses and cut their winners short, because they want excitement not profits, and because they cannot handle losing as the mere cost of doing business that it is.

All that is needed is accepting that all one requires is a good, simple and robust system attuned to the cycles and waves in which markets always have and always will move, accept that everything goes through good and not so good patches and trade it through them accordingly with no loss of discipline or desire for revenge that only harms ones own brokerage account and nobody else, and not go looking for the next holy grail after the first string of 3 or 4 successive losses, eternally switching from method to method, and inevitably always at the worst time.

That at least is my take.

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Old Nov 4, 2008, 6:35pm   #17
 
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Another good post! In a nutshell, it boils down to psychology and sticking to the plan.
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Old Nov 4, 2008, 7:01pm   #18
 
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Quote:
Originally Posted by BSD View Post
just think of the Turtles very elementary system that still works to this day, so coming up with a simple system is absolutely not the difficulty, what is difficult is the actual trading of a low hit rate Turtle type trend system, taking small loss after small loss after small loss without throwing the towel in, while waiting for the few mega trends to surface that will much more than make up for all your prior losses.


BSD

The above post is one of the best post I have seen on this BB for years . Can I suggest that all traders read BSD's post few times as there is a lot of wisdom in every single word

Well done

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Old Nov 5, 2008, 10:34am   #19
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Muchas gracias

One thing I really wanted to say that is great about this board is that here we have some people actually WALKING THE WALK, real traders making a great living from TRADING ITSELF, and NOT from selling courses or whatnots ABOUT trading.

And Grey is just one such Market Wizard of our very own here who from time to time trades in front of others explaining exactly what and why he does what he does, FOR FREE because he makes his money from TRADING, live and in real time and with absolute honesty where others actually record their own entries and exits as measure of the overall trading day success, printing money every single time he does that for himself and those who are trading with him at the time !!!

Hat of and absolute respect for that, not only for your very obvious success, but also your willingness to share your very profitable method with others.

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