Which of these strategies would you trade?

[jonlebon]

Stategy 1:
100% return a year
30 trades per year
on average: 5W 25L
no stop losses

Strategy 2:
25% return a year
100 trades per year
on average: 80W 20L
50pts stop loss.

When I started trading, I would have said 1 and probably laughed at anyone choosing 2.
However, I would now go for 2 as emotionaly easier to handle.

Please post feedback.

 

[jazzidee]

None

 

[meanreversion]

There's no mention of drawdown.

On balance, 2 is preferable because with more trades, it makes it less likely that you miss a big winner (which might happen with #1... you're on holiday, you can't access internet or whatever so you miss a 20R trade).

But hold on. What's with this no stop loss for #1? That makes it a no-no as far as I'm concerned.

 

[wackypete2]

There's no mention of drawdown.

On balance, 2 is preferable because with more trades, it makes it less likely that you miss a big winner (which might happen with #1... you're on holiday, you can't access internet or whatever so you miss a 20R trade).

But hold on. What's with this no stop loss for #1? That makes it a no-no as far as I'm concerned.

Agreed. Trading with no stop losses, regardless of profit potential, is an instant disqualification.

#3 would be the ODT strategy:
1000's of trades per day
no drawdown (thats for amateurs)
40% annual returns - backtested on old data

Peter

 

[Sang Froid]

Stategy 1:
100% return a year
30 trades per year
on average: 5W 25L
no stop losses

Strategy 2:
25% return a year
100 trades per year
on average: 80W 20L
50pts stop loss.

When I started trading, I would have said 1 and probably laughed at anyone choosing 2.
However, I would now go for 2 as emotionaly easier to handle.

Please post feedback.

Neither, Strategy 1 with no S/L instantly rules it out, Strategy 2 is just as risky, even the maths says so (I've had a couple of beers tonight so correct me if I'm wrong) :

25% return a YEAR?
80 Wins?
50 Stop loss?

say you started with £1000, so 25% return means you end up with £1250 after a year. In 80 wins that means you're trading for around £3 per pip. With a 50pip S/L you're risking £150. That's a whopping 15% risked per trade. If you want a basic 1:2 RR that means you should be aiming to make 100pips. 100 pips at £3 is £300. £300 with 80 wins is £24,000 minus the 20 losses at 50 pips = £21,000 grand total for the year.

This is of course assuming a 1:2 RR but with only 100 trades in a year I wouldn't really want anything less.
I'll take:

Strategy 3

2000% returns per year
100 trades per year
on average: 80W 20L
50pts stop loss

My maths is probably totally out here, only have this cold can of Carling to blame, 2000% seems a fair old whack, pretty risky if you've got 15% riding on every trade.

 

[amit1986]

You present so much certainty in your two scenarios, it's difficult to think of this as a true trading decision.

If those two were the only options and if the return figures you stipulated were certain (which, as you write, they seem to be), then Strategy 1 would be the smart decision.

I understand your reasoning for choosing Strategy 2, but you present two perfect worlds, each with their own states of nature: either you make 100% annually with probability = 1 or you make 25% annually with probability = 1.

You tell me which you would choose now.

Amit

Stategy 1:
100% return a year
30 trades per year
on average: 5W 25L
no stop losses

Strategy 2:
25% return a year
100 trades per year
on average: 80W 20L
50pts stop loss.

When I started trading, I would have said 1 and probably laughed at anyone choosing 2.
However, I would now go for 2 as emotionaly easier to handle.

Please post feedback.

 

[meanreversion]

say you started with £1000, so 25% return means you end up with £1250 after a year. In 80 wins that means you're trading for around £3 per pip. With a 50pip S/L you're risking £150. That's a whopping 15% risked per trade. If you want a basic 1:2 RR that means you should be aiming to make 100pips. 100 pips at £3 is £300. £300 with 80 wins is £24,000 minus the 20 losses at 50 pips = £21,000 grand total for the year.

This can't be right? You're dividing 250 by 80 to get 3 or so.... but this means each winning trade is run for one pip only if he's risking £3 a point.

Sorry, I think the beer got to you on this one.