51%

[trader_dante]

When you say "the" strategy, is this your strategy? So, do I understand this correctly, you are now going for a high win rate, small profit strategy? Isn't this a 180º flip from what you used to advocate? Perhaps I should follow you on twitter so I can keep up with your weekly strategy recommendations

lol new_trader. Part of being a good trader is adapting to market conditions. This doesn't mean one minute you are using bollinger bands and the next you are using stochastics. It simply means that you have to do what is neccessary to stay alive and continue to grow.

For example, let's assume you have an excellent strategy whereby you enter trades and use a trailing stop loss which for a certain trending period means you make consistent growth. Then, through diligent examination of your records you note that your returns diminish and it's a direct result of the fact that the market has entered a more choppy phase, you adapt: maybe you lose the trailing stop or you start scaling out etc.

Can I also add that this is not some new strategy. I've always traded much the same way. However, there is an excellent opportunity most weeks. I started off trading it discretionary and through live trading it, I found it was better off systematised. This "strategy" is just a tool in my arsenal and makes up a small percentage of my trading.

 

[tar]

Go and play some poker and try to understand that there is a very fine line between gamble and skill. That line is never still, always moving in a constant change due to every hand being played.
If you gamble ie. all in, over the long term, you will not survive; if you use your skill, you will last longer because you will know when to fold and when to attack. it is a probability game.

In trading, it is the same!

+1

 

[robster970]

c. Expectancy is key, ie over any sample of trades beit a week, month, year or a specified representative numver, do you have a positicve expectancy to your trading edge/your execution of it.G/L

This is the central tennet for me. I have understood this from a mathematical PoV for a long time but it's only been in the last few months that I have got to understand my own trading method wrt to how the expectancy is created.

Having had the fortune to spend 4 hrs with you earlier in the year, I can see that your system is loaded with emphasis on the entry rather than the exit. Conversely I can see in my system that the +ve expectancy is created because of the exits with entry being a less important facet of the system.

I also sense that there is a sliding scale of +ve expectancy systems out there that go from high-strike/low r:r to low-strike/high r:r.

Achieving high-strike/high r:r from a purely systemic PoV (rather than discretionary) seems to not be possible from a mathematical/market behaviour PoV. This is just a hunch and is no way supported by anything empirical.

 

[the hare]

I do my best to win every trade I enter. Possible or not is irrelevant.

The key point is that I have no control at all over what happens once I'm in a trade, so trying to win is a bit pointless really, its all just probabilities.

I couldnt care less about how many I win, only about how much I make, and the severity of drawdowns (which appreciate noone else has becuase they have a 100% strike rate)

 

[trader_dante]

This is the central tennet for me. I have understood this from a mathematical PoV for a long time but it's only been in the last few months that I have got to understand my own trading method wrt to how the expectancy is created.

Having had the fortune to spend 4 hrs with you earlier in the year, I can see that your system is loaded with emphasis on the entry rather than the exit. Conversely I can see in my system that the +ve expectancy is created because of the exits with entry being a less important facet of the system.

I also sense that there is a sliding scale of +ve expectancy systems out there that go from high-strike/low r:r to low-strike/high r:r.

Achieving high-strike/high r:r from a purely systemic PoV (rather than discretionary) seems to not be possible from a mathematical/market behaviour PoV. This is just a hunch and is no way supported by anything empirical.

Robster, I have to say when I met you, you didn't look like a nerd ;-)

 

[robster970]

Robster, I have to say when I met you, you didn't look like a nerd ;-)

Don't be fooled by the beer and Jagerbombs.

I was a research physicist by trade. Materials, quantum stuff. Messing with 'frickin lasers'. Pays badly and academia is dull. Got out, had a life. Always a geek though.

 

[shadowninja]

BTW See. Awesome call. Had you been in with me, you could have made £100,000 while you slept. I did. Ferrari not on order as Ferrari have banned me for hogging all the new 458s.

Newbies send me your money. Call 09060 SENDCASH.

 

[shadowninja]

Speaking of Ferraris, can I ask one of you kindly gentleman to help me tidy my garden up? I fancy taking my Testorossa for a spin today.

 

[new_trader]

The key point is that I have no control at all over what happens once I'm in a trade, so trying to win is a bit pointless really, its all just probabilities.

I couldnt care less about how many I win, only about how much I make, and the severity of drawdowns (which appreciate noone else has becuase they have a 100% strike rate)

The key point is you have full control before you enter. Like Jesse Livermore said, "Don't take action with a trade until the market, itself, confirms your opinion. Being a little late in a trade is insurance that your opinion is correct. In other words, don't be an impatient trader."

I've learned this lesson the hard, and, I suppose, the only way. I've spent far too many hours in front of the screen so I don't think it's all just probabilities. To me it's a skill that improves with time and experience. I care about being right and only entering when I am certain I have read the market correctly. That pays and pays well.

 

[rufanuf]

The only difference between a successful trader and an unsuccessful one, is that the successful trader has found a system that is profitable for them. It does not mean that same system will be profitable for the next trader. How can this be so? Why can two people look at exactly the same identical facts yet argue over what they see? There so many variables in trading that in the end it just comes down to the individual, and whether their choices and decisio making criteria are more successful thn their counter parts.

 

[new_trader]

The only difference between a successful trader and an unsuccessful one, is that the successful trader has found a system that is profitable for them. It does not mean that same system will be profitable for the next trader. How can this be so? Why can two people look at exactly the same identical facts yet argue over what they see? There so many variables in trading that in the end it just comes down to the individual, and whether their choices and decisio making criteria are more successful thn their counter parts.

"There are only 10 types of people in the world: Those who understand binary, and those who don't"

How many people would argue that the above phrase says: "There are only ten types of people in the world: Those who understand binary, and those who don't" ?

 

[the hare]

The key point is you have full control before you enter. Like Jesse Livermore said, "Don't take action with a trade until the market, itself, confirms your opinion. Being a little late in a trade is insurance that your opinion is correct. In other words, don't be an impatient trader."

I've learned this lesson the hard, and, I suppose, the only way. I've spent far too many hours in front of the screen so I don't think it's all just probabilities. To me it's a skill that improves with time and experience. I care about being right and only entering when I am certain I have read the market correctly. That pays and pays well.

Up until early 2009 I traded a discretionary system, and spent a coniderable amount of time watching short timeframe charts (I've been a full time trader since 2004). I agree that trading can be a skill, and that performance improves with experience. For a whole bunch of personal reasons, I no longer trade that way, I toss coins for a living, or more precisely my random entry robot does the digital equivelent, so hopefuly I see this argument from both perpectives.

I have a huge respect for Livermore, but it can equally well be argued that waiting for a market to behave in a way that meets pre defined expectations (either indicator or price action) is a very dangerous psychological bias, that gives an Illusion of control which can be quite damaging.

That illusion become reality at the point that the triggers pulled. The only control thats available is the ability to decide to take the trade, or pass.

There's also a counter argument that waiting for confirmation generally results in smaller rewards, and typically involves greater risks (I'm talking short term trading rather than position trades). Thats the thing about trading isnt it, sound advice in one context is financial suicide in another context.

I really dont like the psychological mumbo jumbo spouted by the likes of Mark Douglas, but he does have a point when he says anything can happen any time. It just takes one other trader someplace to click a button for the best setups to fail. Interestingly enough I have PM's from a number of the all is known in advance crowd (including Mr Socco) that pretty much admit the same thing.

 

[new_trader]

Interestingly enough I have PM's from a number of the all is known in advance crowd (including Mr Socco) that pretty much admit the same thing.

Agree, that's why this post from SOCRATES always remains in the back of my mind.

Neither.

I have to approach all of this from a very different angle to what is the norm, either for efficient or inefficient traders.

I justly expect to get it right every time, and I very nearly do. Because of this I am aware that from time to time I may make an error, or, suddenly conditions change just as the buttons have been pressed. Therefore, statistically speaking, the greater the number I get right in a row, the more alert I make myself become to the possibility that the next one, or the next one after that, etc., could be the one to break the run.

This causes me to become more and more guarded and more and more "super alert" to such a possibility. Therefore I always use a ridiculously tight stop. I expect any pozzie to get at the money immediately, and in the money very quickly. If this does not happen quickly and efficiently, then I concede that what I did was right, but conditions suddenly have changed, or that conditions are about to change, or that conditions synchronously changed while the buttons were being pressed, or that I misread the market in gereral terms or the specific conditions existing at the time, or walked into an ambush, because that is also possible.

As a consequence of very long experience spanning several decades in this profession, I have to force myself not to be complacent. I have to be very aware of unexpected risks, just like everybody else.But, therefore, for the opposite reason to many others, I have to be be particularly guarded against lulling myself into a sense of false security, on the basis that a long successful run is going to continue as such. Therefore I have to prepare myself against these dangers, the greatest being dereliction of action (response) as a consequence of viewing an unexpected outcome as a contradiction, as a personal affront, if you like. Then for me rigid adherence to a tight stop policy is crucial in order not only not to damage performance and have to do unnecessary work to recover what is avoidable but also to assist in the emotional disconnection necessary.

You can see that I approach this differently to nearly everybody else, and the reasons for my approach being so.

 

[15 min tlb]

Just thinking to myself recently. That whole notion of having a system that's got a 51% chance of leaving you with profit (R:R 1:1) is great in theory. And yes, if you're a casino with hundreds of thousands of punters every year, then it's perfect. However, in the real world, in Darren's world (that's me) where mistakes happen or there's a requirement to eat... or ****... and where Sod's law is a reality, 51% isn't enough. I need a system that's much higher so that when I make mistakes or there's a power outage or I need the toilet or get a phone call, my missing a trade in that instance won't mean the difference between profit and loss for the year! Additionally, if it's 51%, how do you really know it isn't 49%? And if it's 51%, you could have a seriously painful drawdown for 5 months.

So, if it's 51%, I'd suggest that you're better off getting a job.

And to be honest, this whole notion of "it's a probability game" is, frankly, nonsense.

Trading is 80% psychology , only 20 % the rest.It is not what you do right by following systems , but what you do wrong in the 80 % .80 % hit rate , good r/r are worth nothing if the beast can't master execution ,timing ,patience,discipline,fear,greed,leverage,money management,emotions ,draw downs,handling losses and mindset.It is the mindset where all the natural animal instincts affect the trades and hit rate.

30 % hit rate can be very profitable . with small losses and few very large profits , provided trader can master psychology.

 

[donaldduke]

Since this thread got bumped today i will add this relevant quote, by Steven Cohen from the book Stock Market Wizards.

I compile statistics on my traders.
My best trader makes money only 63 percent of the time.
Most make money only in the 50 to 55 percent range.
That means you’re going to be wrong a lot.
If that’s the case, you better be sure your losses are as small as they can be, and that your winners are bigger.

 

[Mr. Charts]

"Originally Posted by SOCRATES
Neither.

I have to approach all of this from a very different angle to what is the norm, either for efficient or inefficient traders.

I justly expect to get it right every time, and I very nearly do. Because of this I am aware that from time to time I may make an error, or, suddenly conditions change just as the buttons have been pressed. Therefore, statistically speaking, the greater the number I get right in a row, the more alert I make myself become to the possibility that the next one, or the next one after that, etc., could be the one to break the run.

This causes me to become more and more guarded and more and more "super alert" to such a possibility. Therefore I always use a ridiculously tight stop. I expect any pozzie to get at the money immediately, and in the money very quickly. If this does not happen quickly and efficiently, then I concede that what I did was right, but conditions suddenly have changed, or that conditions are about to change, or that conditions synchronously changed while the buttons were being pressed, or that I misread the market in gereral terms or the specific conditions existing at the time, or walked into an ambush, because that is also possible.

As a consequence of very long experience spanning several decades in this profession, I have to force myself not to be complacent. I have to be very aware of unexpected risks, just like everybody else.But, therefore, for the opposite reason to many others, I have to be be particularly guarded against lulling myself into a sense of false security, on the basis that a long successful run is going to continue as such. Therefore I have to prepare myself against these dangers, the greatest being dereliction of action (response) as a consequence of viewing an unexpected outcome as a contradiction, as a personal affront, if you like. Then for me rigid adherence to a tight stop policy is crucial in order not only not to damage performance and have to do unnecessary work to recover what is avoidable but also to assist in the emotional disconnection necessary.

You can see that I approach this differently to nearly everybody else, and the reasons for my approach being so."

This was one of the many things I agreed on wholeheartedly with Albert.
Perfectly put.
Richard

 

[hoodoo man]

You wont get a win rate of 75%+ while using fixed 1:1 stops, i mean real ones you actually hold with your broker.

And so you will have to take some large losses every now and then.

I don't agree that this follows. Why would one have to take large losses? If we day trade in a liquid market, no overnight positions, and hard stops held at the exchange, then the possibility of a larger than expected loss is very slim.

As for not getting a 75% win rate - what does this need to do with made up risk reward ratios and using a hard stop? Are you saying that it is impossible to get three trades correct out of 4 using 100 tick stops and targets? 50 ticks? 10 ticks?

If you are wrong more than a quarter of the time, what does this say about your skill level and business plan? Yes, one can make money, but the purpose of being an independent trader is to make a fortune from the markets as quickly as your skill level allows. Surely a higher strike rate allows one to employ more capital on each trade, compounding the account much faster.