I will explain the math below. The price of the GBP/USD when I wrote this was around $1.4076. If you sell at a profit of 10 pips, that means the price will be $1.4086. You can choose to look at pips only, whereas I will look at percentages.
1.4086/1.4076 = 1.00071 = 0.071% gain per trade.
You admittedly said that you have a 61%-87% success rate in batches of 100 trades. This means that 61-87 trades will be successful and 13-39 trades will be unsuccessful. You have also said that you average a 72% success rate.
You use exponentiation or compound interest each time. 1.00071ˆ61 = 1.0442. This is the result for the successful trades.
1.00071ˆ39 = 1.028. This is the result for the unsuccessful trades.
Trades that are unsuccessful, cost you money. 1.0442/1.028 = 1.015.
That means that there will be an average of 1.5% return upon every 100 trades.
Hi hhiusa
Earlier on in this thread you accused me of making many assumptions etc
Well your assumption that was based in your maths - every 100 trades I will make on average a return of just 1 5% is so unbelievably INCORRECT - all due to so many incorrect assumptions - basically because you just have not got a clue how my method works and how I trade.
I say that with no disrespect because I have checked your own trading thread out and similar I don't really understand how you really trade - other then maybe on FX pairs - and even the info you supply on the statement does not really give me all I need to know.
OK - you have confirmed you don't use stops and that mostly you leave trades on a few days or longer - that you are prepared to average down and that you look for 1% + return on winning trades.
You have then worked out your projected returns all based on maths etc.
Now the only way you can do that with my method is by having all the stats - not just cherry picking win ratios and assumptions that I make a 10 pip profit on every winning trade and have a 10 pip stop ?
Remember my retail way is as far as I am concerned fairly "unique" - its far detached to the majority of normal ways retail traders trade and very different to commercial/ institutional trading - ie the guys you think you should try and replicate .
I put emphasis on trade entries and accuracy and doing all the things most traders say you cannot do - ie catching interim lows and highs and making multi intraday trades a day that might last 2 mins or 2 hrs or 2 months - with no fixed targets on each trade.
My stops are all the same - ok well 3 to 7 pips so if you average 5 pips as the stop size that would apply and cover over 60% of all my trades#
I will not enter a trade on my full stake size I am working on that day unless I can enter with a stop under 7 pips. However my full stake size is again not fixed in stone - it depends on so many factors - including the time of the day and also the day of the week and of the month - and of course my last 100 trades success rate in terms of profit return
You cannot work all these variables out in just a simple maths formulae - ok you might think you can as you are good at advanced maths - but you results will only be correct if you have all the relevant information
Win ratios on the own are of no real guide. Similar Risk to Reward ratios in isolation are of no real use - but if you have all the components involved - then you will get a more realistic answer.
Sharpe ratios etc and other ratios used by the industry are similar are not of great use when you are not compounding ( I don't compound) and for just retail size capital accounts.
You have made me chuckle when you said about 1 5% on ever 100 trades - so let me explain more to show how you are so wrong
I would do normally 100 intraday trades in approx 7 trading days ( on average )
So according to you if I average 1 5% return every 7 trading days - in one full trading year of say approx 250 trading days - that's approx an average annual 54% ROC .
Trouble is you have then forgotten to factor in all my money management "edges" the tips etc you don't read about in books and told about on courses
1. As already said - my stop size is nearly constant - ie average 5 pips - but my targets are entirely fluid / flexible - and although I expect a minimum 1:1 RR on even as really poor trades - most trading days I will also have winning trades with RR's of 3 and 5 and even as high as 10 .
2. Because I am after efficiency in trading - I want my RR's of 3 or 5 within 30 mins of trading - and then I can bank it - an also get more trades in my trading session window
3. On busy trading days I don't stop at my daily target of 50 pips - I can easily double or treble it and even 7 fold it but then most of the winning pips might be on just partial stakes with the stops already in profit - so not to risk a winning trade go to a loss. - slight diversion here - how many trades do you have that go from being in a winning position into a loss that you keep having to average down on ??
4. With my method its possible to have 6 winning trades that make me more money that 15 winning trades with double the amount of pips. I hope you understand this as its certainly not factored in anyway on your basic maths formulae.
A typical 100 trade result for me would be the following
Win ratio - 71%
Average R/R - 2.4
Average efficiency factor - 7
Winning trades 71 - average pip size 13 pips - 923 pips
Losing trades 29 - average pip size 4 pips - 116 pips
Net pip results - 923 - 116 = 807 pips
Value per pip - anything from $10 to $70 - ( that's another reason why i will not disclose results)
My daily target is 50 pips on full stake size for session
So if I do 100 trades in approx 7 trading days - my normal expected result is 7 x 50 = 350 pips
Therefore if I make approx 807 pips in that period - i am over double my target - but it does not mean it double over my money target.
Now all these figures are not fixed in stone - and as the FX markets - they are constantly changing - ie
My win ratio might drop to 64% in April and my RR's might drop to 1.7 and my average winning trade might go to 11.
However in May - my win ratios might improved to 78% my RR's improve to 3 and my losing trades average stop in below 4 and I do 100 trades in only 6 working days.
Going back to your assumption of 1 5% return on 100 trades - its actually between 7 and 19% - all depending on the size of stake and the the amount of partials stakes in the 100 trade result
Anything under 5% return on 100 intraday trades is inefficient and means the method is then not that brilliant.
For me to make losses over 100 trades and over 7 trading days - I would need a win ratio of under 40% - RR under 1.4 and average winning trade under 8 pips with stop size of 5 pips
Please feel free to question these figures
Regards
F
