Hi Tim,
very good point.
Like most others starting out in this, I suppose, I initially made the mistake of believing that becoming net profitable in trading has something to do with the number of trades that are winners.
I suppose I really only turned the corner once I realized that hit rate is psychologically comforting, but is otherwise irrelevant to net profitability.
It's conventional wisdom, I supppose. A firm belief that the more often you are right, the better you must be.
I've never trusted conventional assumptions all too much though.
Boards are filled with a representative sample of the trading community I guess.
The trading community in total though has far more net losers than net winners.
And a majority on boards always go after high hit rate strategies.
So that clearly couldn't be the answer.
That's the stuff I was doing when I started out in this:
An earnest and totally dedicated effort to finding out what the truly
success relevant factors in trading are, while disregarding the noise.
What I was basically doing was a parallel approach: Benchmarking what the best of the best do, and eyeballing charts to find out what would work.
Eyeballing charts to come up with a way to make money was always easy, but then all charts ever represented to me was a display of the results of all market participants transactions, nothing more, just a display of the constant fight between bulls and bears, with periods where one side was stronger than the other and where trends developed.
That is all price is to me, a result of what the participants are doing.
I have absolutely zero doubts that you could show some kindergarten kids a few charts and they would be able to generate some extremely attractive returns.
Their advantage is that they haven't had their brains fried by the unprofitable crowd who believe that success in markets is down to cracking a secret system hiding behind an elusive Holy Grail that somehow manages to conduct all market participants in a mysterious way with a magical wand.
What kept me from becoming net profitable far earlier was not really because I didn't know what to do.
That part was simple.
What wasn't easy was the actually doing it.
And that is where what you said comes in.
To actually do it needed confidence.
That confidence eventually came after one had eyeballed sufficient charts to see that they really always do look exactly the same, be it charts from today or from a hundred years ago, all charts offer the exact same opportunities again and again and again, meaning no matter what kind of a hole one had dug oneself into, markets would always offer you more than sufficient opportunities to resurface.
That observation was what did it, coupled with simple benchmarking.
What do the best of the best do.
I visited lots of professional traders I met on a Frankfurt board that has since unfortunately dried up as the founder lost interest, in my early days, in their offices or homes, and that gave me additional coinfidence.
Plus, I
read about what the best of the best did.
Jesse Livermore.
Market Wizards.
People like Bill Lipshutz, the most profitable trader at Salomon Bro's for his 8 years there with a hit rate of no more than 20 - 30%.
I became net profitable once I learned to totally let go of the individual trade as completely inconsequential in the big scheme of things, once I learned to totally accept that losing is fine, it's just a cost of doing business as a trader, when I learned to simply play out my edge the way it is supposed to be played out, not being upset by losses, and, equally important, not getting overly enthusiastic of winning trades.
I only made it, in short, once I learned to let go.
I don't really keep detailed records any longer, account stats aside that I don't really much look at in detail any longer either apart from the bottom line, but off the top of my head I'd say that it is very possible indeed that I have had runs where I have loser after loser, maybe even ten at a time.
To me trading is only about bottom line, and about having a system that is scalable, that is compoundable.
And once I realized that it is the low hit rate strategies that are more profitable than the high hit rate ones, that fortunes are earned with systems that really capture big moves, it was clear that that was the strategy I was going to follow, and it was then that I fully learned to totally let go of individual trades or even strings of losers.
It's basicaly the same like going to a bar to pick up a girl.
Insecure, negative guys who have a problem with a girl having other plans at this time for whatever reason will always be going home alone.
Confident guys with a positive attitude who take a girls otherwise oriented interest in their stride without taking it personally will always have company and fun.
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
. 
