If 70% chance of winning per trade, how much risk to take?

[Mr. Charts]

Well - if he has 70% winners but his average winner is 10 ticks & his average loser is 50 ticks, he should try to avoid 10% of his capital per trade regardless of how comfortable he is.

 

[GladiatorX]

Well - if he has 70% winners but his average winner is 10 ticks & his average loser is 50 ticks, he should try to avoid 10% of his capital per trade regardless of how comfortable he is.

Thats if his sub-conscious motives are to profit...
Consider that for him, comfortable may be risking more than is reasonable so that can eventually lose and avoid the responsability of being a consistant money-maker

If he is comfortable with the risk; then it is right for him, even if that means instant blow-up Haha.

If he risks 0.0001% per trade and has no commisions; there is still a chance of a blow-up, there are always going to be risks that an unavoidable; so in the end it is about his risk tolerance and what is logical to his findings from backtesting.

 

[virtuos0]

Hi,

I guess this is more of a maths question.

If a trade is likely to be successful in 70% of the time (studied for 20 years, signal generated 10-20 times a year) , how much capital would you risk, and why ?

Please provide mathematical reasoning.

Thanks

It also be helpful to know whether this is a definite market phenomenon, i.e you know what combination of market factors are causing this OR is this just a statistical anomaly you have come across? If it's the former you can risk plenty, if it's the latter I would risk roughly..umm.. nothing.

 

[anley]

0.5% of your total risk capital per trade.

If the strategy is any good you can probably make 10%-20% a year with very little drawdown. And believe me, people would kill for that type of performance over 10-20 years.

However, you probably don't want to hear the figures above. Chances are you're looking to make 100% - 300% a year and in 5 years retire

 

[arabianights]

wtf is the point in all that effort to make 20% a year?

 

[Paul71]

0.5% of your total risk capital per trade.

If the strategy is any good you can probably make 10%-20% a year with very little drawdown. And believe me, people would kill for that type of performance over 10-20 years.

However, you probably don't want to hear the figures above. Chances are you're looking to make 100% - 300% a year and in 5 years retire

I could live with 10 - 20% per year, but i wouldn't want to put in more than an hour for it.


Goodnight gents.


Paul.

 

[secondary]

zz

 

[pedro01]

Well, at least you had the balls to come here & admit that !

Now - stick around for a bit.

 

[anley]

wtf is the point in all that effort to make 20% a year?

Who says it's a lot of effort? And with solid and scalable returns of 10% - 20% it's possible (but not easy, you need the right people behind you) to raise a billion or more. Then your profit share is 100-200 million with NO risk.

10%-20% risk adjusted returns are the returns of dreams.............

 

[Hoggums]

This is highly embarrassing.

I have retested it, and I am unable to recreate the result I previously saw. There must have been an error in my Excel modeling.

Let me explain what I did.

I got the daily Dax data off Yahoo and copied to Excel. My theory was simple. If Wed open > Mon open, then Fri close>Wed open. I sorted by all Fridays, then sorted by the signals generated (Wed open> Mon open) and counted all the trades that was in the money (Fri close>Wed open). Having tested this three times, I am sure that there was an error. It works 54%, Avg Win 60pts, avg loss 80pts.

This actually taught me something.

Cheers.

You should also note that on yahoo data todays open = yesterdays close. You can't actually open the trade at yesterdays open in the morning - so you should not rely on that column at all unless you open your trade in the evening at close.

As a general rule - anything automatic with >70% success rate I would be suspicious of. It's probably an error in the backtest or unrealistic test conditions rather than discovering the holy grail.

 

[secondary]

zz

 

[foredog]

If you're looking for something simple and mechanical/numbers based have a look at the link in my signature and read the infiniteyield blog on there and also read up on opening range breakouts and the turtles method (Attached) then see what you can come up with.

 

[Paul71]

wtf is the point in all that effort to make 20% a year?

Personal game objectives. Do people like the challenge or the money? I'm sure most of the die-hards on this site prefer the challenge rather than the money, and maybe the buzz also. It's a funny old game, because one person can buy-and-hold and outperform a so-called 'scalper'...what a funny game that is.



Paul.

 

[tenbobtrader]

Chartgame.com - The time-lapse stock trading game

worth a re-post

have fun

 

[tomo1]

You aren't supplying enough information in order to make an informed decision.

For instance - size of winners vs size of losers would be pretty important.

you would have to take so many other factors into consideration such as account size...

 

[DeadMoney]

Hi Hoggums, do you mean an 83% success rate is not good?

From my personal experience, I have been scale trading.
I have taken around 100 winners of $50 to $100 in a row.
so my success rate was 100 percent.

then I took one loser for $250,000.00
that knocked my success rate down to around 99%

it also wiped out my trading account.

so from my point of view a 99% success rate is total crap.

and any anytime someone starts telling me what a great success rate they have,
I really don't even want to hear it.

 

[*JDR*]

Who says it's a lot of effort? And with solid and scalable returns of 10% - 20% it's possible (but not easy, you need the right people behind you) to raise a billion or more. Then your profit share is 100-200 million with NO risk.

10%-20% risk adjusted returns are the returns of dreams.............

I agreee.... I don't trade full time and don't open that many postions.

Just got back around to trading again after a break - due to time contraints... new kids... lots of work etc....

I would be extremely happy with 20% return on a fully loaded account. Last 3 months since I started again I've made 7%.... but on an account at 5% of the size I would like it to be....(the rest in cash )

Wouldn't quit the 9-5 on it..... but in 5 years compounding.... whoa! early retirement here I come.