Is it really that difficult?

PTTRADER -

Allow me to talk psychology for a moment.

You have an interesting but suspicious trading metaphor.

ie. Trading Is a Battle - this is very emotional stuff. Can you detatch yourself from that emtotion 'in-the-heat-of-battle' ??

You include words such as NO MERCY, PITY, WAR, BRUTAL,etc.

Does this mean that if you are not careful you will be killed? (this should not be so with proper risk management) Is this an empowering or negative metaphor? A negative metaphor COULD prevent a trader from trading effectively.

Strictly speaking there are no right or wrong trading metaphors ; it all depends what befief structure the trader has and what he/she needs to visualise to be effective( and motivated)

I found 'THE 21 IRREFUTABLE TRUTHS OF TRADING' (John Hayden) an excellent psychology read ; it contains a section on 'trading metaphors' including the BATTLE version to which you allude.
 
What I mean is the markets ARE brutal. For the most part they show No mercy. Because of this fact one needs to realize that one NEEDS a good system and you NEED risk manangement and stop losses implemented, OTHERWISE you WILL get killed. Hope this clarifies my position.

Metaphors may describe well or they may fail to describe well but regardless, they do not change what the market REALLY is. The market is what the market is. We can't argue with it. All we can do is exploit the inefficiencies.of the market and protect our capitol. And the markets DO provoke emotion. In ALL of us, unless one is made out of granite. We must have strategies to deal with our emotions and strategies to protect us. Hey, if we don't protect ourselves who is going to protect us? There are thousands out there after your money and my money. If we offer to to them do not think for a minute they want jump on it.

Maybe a war is not a suitable metaphor for you but that is a beside the point. We could call the market a birthday party with a surprise for everyone. It simply doesn't matter what we want to call it. What does matter is that we understand that IT the MARKET (which is composed of all traders...institutions...brokers..wall street) are out to get money and it doesn't matter to them whose money it is. Therefore, one needs to protect their own capitol.
 
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Another nice side effect of keeping trade numbers in check is the reduced amount of emotional stress, i guess this comes under the use what fits bit..
 
jfran said:
The other thing that much mention has not be paid to is what do we call a good win rate, I may trade a system that gives me 10 points with each trade I take and you may use a system that gives you 3 poinst each trade. We may both be successful 50% of the time , but whose system is better mine or yours?

Something to think about

rgds

knarf
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Obviousley your are correct in your calculations. However, in short-term trading daytrading/swingtrading it would be rare to make that kind of points. At least with the kind of trading I do. One's style of trading does indeed factor into the picture. I am refering specifically to very short-term trading. At least I have never seen a daytrading system work that had say a 30% win rate. Why? Because you are going for the small but MORE SURE minor moves. Bigger moves are harder to predict!
 
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Who are we all to argue with Soros

'It's NEVER about whether you win or lose, it ALL about how much you win when you're right and how much you lose when you're wrong'.
 
anley said:
Who are we all to argue with Soros

'It's NEVER about whether you win or lose, it ALL about how much you win when you're right and how much you lose when you're wrong'.
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Good point. I concur. And that amount depends much on ones system and style of trading.
 
Even though I do have a 60-70% win ratio, I would also dispute #2. My high ratio comes from discipline (well, thats what I tell myself), not some funny entry technique.
 
pttrader said:
Please explain how discipline gives a high win/loss ratio. I have my ideas how it could in an indirect way but would like to hear your thoughts on the matter. Thanks.
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Rather than the win loss ratio, shouldn't we be looking at the expectancy which takes into account the size of profit and losses to work out how much we can expect from the system ?

Mac
 
Salty Gibbon said:
Isn't it the case that there is always a trade off between win ratio and reward / risk ratio.

For example you may have 2 perfectly good winning systems where one has a 35% win ratio and the other a 75% win ratio. The first one might have a 4:1 reward / risk ratio but the latter might only have say 2 : 1 or less.

Both would be perfectly good systems but pyschologically for some people ( including myself I might add ) it is important to have that high win %.
Click to expand...

It is not just wanting to win more of the time (which I suspect is primaevally inbuilt, though some overcome the preference). If you have a 35% win system, with a 4:1 reward ratio, you can expect to have fairly regular draw-downs of 65% of capital compensated by relatively infrequent rebuilds, when your 4:1 trades win. The expectation of the system is +75%, certainly, but many people find it uncomfortable to take all those stops in between the big wins. And, of course, you can expect to get wiped out completely from time to time (how often is left as "an exercise" for the statisticians among us: see also the thread on 10,000 coin tosses).

If you go for a 75% win model, and achieve that, you will not only make more money on a 2:1 reward ratio, but your chances of going bust are far more remote. The system which pays out 1.4 times risk on 75% of trades has a 75% expectancy, so is in a sense equivalent to the 35% and 4:1 system. But it is much safer. This does not seem to be a matter of psychology, so much as prudence.
 
Hmmm ?

Mandy said:
Its true that a lot of people lose money but with the right training and support the risk is minimised. We've all heard of high income-high risks. Go to www.currencytraderonline.co.za and see what they have to offer.
Click to expand...


Completely New
Views: 122 Posted By Mandy
Completely New

I’m completely new to Forex but would like to know how to get started.This is especially in so far as internet training and back-up is concerned


You learn quickly Mandy :cool:
 
theknifemac said:
Rather than the win loss ratio, shouldn't we be looking at the expectancy which takes into account the size of profit and losses to work out how much we can expect from the system ?

Mac
Click to expand...
In short-term trading (daytrade-swing trade) win/loss ratio is very important. At least for me it is. You need a high win/loss ratio because you are going for small profits. They do add up by the end of day to larger profits but it is more difficult to make it work if you lose 7 or 8 trades out of 10 trades. You need to win on 6 or 7 out of 10 trades. For instance, you might make 70.00 on one trade, make 140.00 on another lose 50.00 on another, make 120.00, make 65.00, make 175.00, lose 100.00, make 50.00, lose 60, make 125.00. So you have made 10 trades. Lost on 3 and won on 7. Since you managed your losses well the high win/loss ratio pulls you out and you end up the day with 535.00 profit. You took three losses.
 
growltiger said:
It is not just wanting to win more of the time (which I suspect is primaevally inbuilt, though some overcome the preference). If you have a 35% win system, with a 4:1 reward ratio, you can expect to have fairly regular draw-downs of 65% of capital compensated by relatively infrequent rebuilds, when your 4:1 trades win. The expectation of the system is +75%, certainly, but many people find it uncomfortable to take all those stops in between the big wins. And, of course, you can expect to get wiped out completely from time to time (how often is left as "an exercise" for the statisticians among us: see also the thread on 10,000 coin tosses).

If you go for a 75% win model, and achieve that, you will not only make more money on a 2:1 reward ratio, but your chances of going bust are far more remote. The system which pays out 1.4 times risk on 75% of trades has a 75% expectancy, so is in a sense equivalent to the 35% and 4:1 system. But it is much safer. This does not seem to be a matter of psychology, so much as prudence.
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Well said!
 
growltiger said:
It is not just wanting to win more of the time (which I suspect is primaevally inbuilt, though some overcome the preference). If you have a 35% win system, with a 4:1 reward ratio, you can expect to have fairly regular draw-downs of 65% of capital compensated by relatively infrequent rebuilds, when your 4:1 trades win. The expectation of the system is +75%, certainly, but many people find it uncomfortable to take all those stops in between the big wins. And, of course, you can expect to get wiped out completely from time to time (how often is left as "an exercise" for the statisticians among us: see also the thread on 10,000 coin tosses).

If you go for a 75% win model, and achieve that, you will not only make more money on a 2:1 reward ratio, but your chances of going bust are far more remote. The system which pays out 1.4 times risk on 75% of trades has a 75% expectancy, so is in a sense equivalent to the 35% and 4:1 system. But it is much safer. This does not seem to be a matter of psychology, so much as prudence.
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Good point! Risk is also related to good decision making. Not just on how much you can win or lose. For instance If you decide to never enter a trade, then you are assuming NO risk whatsoever. If you were to just "guess" what the market was going to do then place your order you would be assuming more risk than in the first case. However, if you use a system with a proven high win rate then by definition you are reducing your risks. On the other hand, if you use a system with say a 40% wn rate the you are are increasing your risks as opposed to a 70% win rate system. So, risk is more than just the dollar amount you risk to obtain a certain reward. It also directly related to the system you use. My point is: your system can and does increase or reduce your risks! For my part I had rather use a high win rate system!
 
pttrader said:
Good point! Risk is also related to good decision making. Not just on how much you can win or lose. For instance If you decide to never enter a trade, then you are assuming NO risk whatsoever. If you were to just "guess" what the market was going to do then place your order you would be assuming more risk than in the first case. However, if you use a system with a proven high win rate then by definition you are reducing your risks. On the other hand, if you use a system with say a 40% wn rate the you are are increasing your risks as opposed to a 70% win rate system. So, risk is more than just the dollar amount you risk to obtain a certain reward. It also directly related to the system you use. My point is: your system can and does increase or reduce your risks! For my part I had rather use a high win rate system!
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My advice to you would be to look further than the win rate.
Alone it does not tell you want you want to know.
You need to look at the Expectancy of your model. This is calculated from the win rate and other info.
The Expectancy needs to be positive ( greater than zero) for you model to be worth using.
There are websites which tell you how to calculate Expectancy.
e.g. www.indextrader.com.au/positive_expectancy.asp

Glenn
 
If you are realy serious about trading full time with more chances of success? The ONLY route to take would be Option trading. Your chances of success on options is far greater than anything else.

bull
 
bulldozer said:
If you are realy serious about trading full time with more chances of success? The ONLY route to take would be Option trading. Your chances of success on options is far greater than anything else.

bull
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Well THAT goes contrary to just about everything one is likely to hear, at least for the individual trader.

I'm not being contrary, as I know from personal experience that good money can be made in options. I'd like to know what approach you take, though.
 
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