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As long as you understand that you are always trading probabilities, I don't think the idea of prediction matters for any one trade. You can't predict that you will have 50% of a win for a given trade, even if your overall winning percentage is 50%. Individual trades are binary, but sets of...

"Believe" or "disbelieve" don't factor into it at all. You either find something that works or you don't. It's an empirical question, not a metaphysical question. If Goldman Sachs finds an automated trading system that works for them, it does not mean that Joe Schmoe Traders will also find...

How do you get from A to B on this? If automation works, why would that require every institution to make money? Your conclusion doesn't follow from your premise.

Are there really all that many "consistently losing systems"? It would not surprise me if they are as rare as "consistently winning systems". I forget who said it here on ET, but someone with a lot of good posts said that what kills most traders isn't a horrible losing system, it's...

Would that imply that if your per-trade returns should show an increase correlated to the square root of the amount of time in the trade? Interesting correlation to check.

Well, when I posted the thread, I was hoping some of the better posters would chime in with their own experience. There's been some food for thought provided and that's about all I expected could happen. I happen to think the question of capital productivity is paramount. If your capital can't...

While there is some relativity in the idea of benchmarking and it's not an apples to apples comparison, the reason you want to do it is so that you don't set unrealistic expectations or overoptimize your system just to jack up the per trade results. Would you tell someone who was a...

Yes, my size estimate might be too low. That would mean fewer, but larger trades, taking the profit per hour down. At 1 400-lot trade per day, he's making about $3/hour per contract. Not to say that's anything to sneeze at, obviously, over time and with scale.

Soros sent his son to Niederhoffer to learn how to trade. I suppose Soros is tainted by association in your mind? If you were in Soros' shoes at the time, what makes you think you would have thought differently of Niederhoffer, given the information available at the time, not 20/20 hindsight...

If he traded 2 million contracts over 16 years, from the founding of his hedge fund until the time he wrote "Education of a Speculator", that is around 400 contracts per day. If he traded 50 lots, which seems like a realistic number for a trader his size, that's 8 trades per day, or one every 3...

OK, dude, whatever. So, anyone else besides this tiddly-wanker jackhole have thoughts on Niederhoffer's quote?

You are the only one talking about win-loss ratios. Gross and net are definitely important for a trader. If my wins gross $500/trade, but my losses gross $600/trade and my winning percentage is 50%, I am losing net $100/trade. How can that not matter? Niederhoffer wasn't saying "My winning...

BTW, the $70 is NET, not GROSS. In your example, the NET profit per contract per trade is $0.

Right, but increasing the number of contracts traded won't alter the profit per contract. I do think that the profit per minute of time spent in the market is important, though, and that should have been a part of my initial question about what is realistic to expect.

I don't see anywhere in the quote where VN says he knew which trades would be winners or losers. Obviously, the ways in which a trader could arrive at that $70 figure varies, but the question I am posing is what is a realistic expectation for an individual trade for someone who trades with a...

There is absolutely a tradeoff between frequency and size of average gain. I always go back to the Niederhoffer stat because I think that with all his resources, if he could not find something sufficiently compelling in the futures market to make more than $70/contract per trade, then there must...

From Niederhoffer's wiki entry: "Niederhoffer Investments returned 35% a year from inception through 1996, when MAR ranked it the No. 1 hedge fund manager in the world. In 1997, Victor published a New York Times bestselling book, The Education of a Speculator. In statistical terms, I...

OK, so to amend my analogy, I could take the temperature of NYC every millisecond and average them out to find that it was 50 degrees. Should I therefore conclude that it is 50 degrees every day because I have hundreds of thousands of temperature observations? I admit that I don't find...

Why would you even want to try drawing conclusions from one day of observation? As an analogy, it was about 50 degrees in NYC today. Should I therefore conclude the temperature in NYC every day is about 50 degrees?

OK, I see a little more what your point is, although I would guess that there are many, many "tick or two"-seeking algos operating in almost every market, although with that type of algo, you better hope you don't experience any slippage. It would be surprising, though, if they really did...