71.2 % Win Rate

[NoDoji]

Quote from Huskeez:

Now, do you guys think its possible to use the strategy which gave the W/L % and apply a reward/risk ratio of 3:1

I am really confused by this thread. Isn't the win rate dependent on the R:R that's chosen? How can you determine a win rate in isolation from the R:R?

For example, I have a particular setup/trigger that tells me to put on a trade, but the win rate depends on how large a profit target I aim for and also on whether or not I choose to use a trade management strategy other than a fixed stop loss/profit target.

So for a particular strategy the win rate might be 72% if 1:1, 55% if 2:1, 38% if 3:1 and so on.

 

[Swan Noir]

Exactly.

Quote from NoDoji:

I am really confused by this thread. Isn't the win rate dependent on the R:R that's chosen? How can you determine a win rate in isolation from the R:R?

For example, I have a particular setup/trigger that tells me to put on a trade, but the win rate depends on how large a profit target I aim for and also on whether or not I choose to use a trade management strategy other than a fixed stop loss/profit target.

So for a particular strategy the win rate might be 72% if 1:1, 55% if 2:1, 38% if 3:1 and so on.

 

[dbphoenix]

Quote from NoDoji:

I am really confused by this thread. Isn't the win rate dependent on the R:R that's chosen? How can you determine a win rate in isolation from the R:R?

For example, I have a particular setup/trigger that tells me to put on a trade, but the win rate depends on how large a profit target I aim for and also on whether or not I choose to use a trade management strategy other than a fixed stop loss/profit target.

So for a particular strategy the win rate might be 72% if 1:1, 55% if 2:1, 38% if 3:1 and so on.

That depends on whether or not the r:r is predetermined. There is no inconsistency between a high win rate and a high profit:loss ratio if one lets one's profits run. On the other hand, there is a fundamental inconsistency between wedding oneself to a r:r ratio and letting profits run. It's going to be tough to make a living at this if one is regularly cutting one's profits short.

 

[Swan Noir]

But the hypothesis the OP presents is a profit target of three times risk.

Quote from dbphoenix:

That depends on whether or not the r:r is predetermined. There is no inconsistency between a high win rate and a high profit:loss ratio if one lets one's profits run. On the other hand, there is a fundamental inconsistency between wedding oneself to a r:r ratio and letting profits run. It's going to be tough to make a living at this if one is regularly cutting one's profits short.

 

[dbphoenix]

Quote from Swan Noir:

But the hypothesis the OP presents is a profit target of three times risk.

That's why I asked the question I asked. If he's already considered trading without the r:r and rejected that option, fine. If not, perhaps he might want to think about it. Or not.

One can achieve almost any desired result via computerized backtesting, but that doesn't mean it will pan out in reality, or that any desired result will last for very long.

 

[Huskeez]

Hey all thanks for the helpful replys!

The back tests exit was not based on a r:r ratio, instead it was based on an indicator eg. Sell when price closes through indicator XYZ, which meant the exit was always different.

This was a trend following backtest but i noticed the entrys where usually followed by continual price rises.

So my idea of introducing an R:R of 3:1, could mean many high probability small wins regularly.... Or maybe not.

I am forward testing as of right now and will continue too, no doubt i will be back with more questions. The question i have for some of you experienced guys is am i on the right track ?


Appreciate you guys input.

Cheers Benji

Quote from dbphoenix:

That's why I asked the question I asked. If he's already considered trading without the r:r and rejected that option, fine. If not, perhaps he might want to think about it. Or not.

One can achieve almost any desired result via computerized backtesting, but that doesn't mean it will pan out in reality, or that any desired result will last for very long.

 

[dbphoenix]

Quote from Huskeez:

The question i have for some of you experienced guys is am i on the right track ?

That depends on what you want, but not likely. Instead of taking charge of your trades, you're leaving them up to an indicator and to the market, and the market is not known for being accommodating to those who seek leisurely and regular profits.

This will all become clear eventually. How much time do you want to devote to the effort?

 

[Huskeez]

Quote from dbphoenix:

That depends on what you want, but not likely. Instead of taking charge of your trades, you're leaving them up to an indicator and to the market, and the market is not known for being accommodating to those who seek leisurely and regular profits.

This will all become clear eventually. How much time do you want to devote to the effort?

Hey db,

The past backtests selling strategy was an indicator.

What I am doing now is using the same "entry" signal as the backtest, but changing the "sell" signal , from what was an indicator previously , to the 3:1 reward/risk ratio.

Aiming for many small wins often , risking $1 to make $3.

 

[Swan Noir]

I urge you not to think of a $3 reward based on $1 of risk as a small reward ... it is not; and conceptualizing it that way might lead you to believe it is easy to acheive. You must also keep in mind that a test implies you are testing something and that something by definition must have parameters that have meaning to a working trader ... a guy at a screen trying to wring a profit from his days work. In order for a test to have meaning you must have the risk/reward predefinined. As NoDoji pointed out earlier a 50% trade when executed for a three point reward may well be a 40% trade if you shoot for four points. On the other side of the equation a stop change will also drasticaly impact your win %. Make sure the equation is complete in that it has all the elements needed to justify calling it a test. Right now you have an indicator you think gives you good entries.

Quote from Huskeez:

Hey db,

The past backtests selling strategy was an indicator.

What I am doing now is using the same "entry" signal as the backtest, but changing the "sell" signal , from what was an indicator previously , to the 3:1 reward/risk ratio.

Aiming for many small wins often , risking $1 to make $3.

 

[dbphoenix]

Quote from Swan Noir:

In order for a test to have meaning you must have the risk/reward predefinined.

I disagree, which is the point I was trying to make earlier, but I don't want to make a big deal out of it.

If the guy wants to be a scalper, that's one thing. Otherwise, nothing is accomplished by predefining the reward. What is vastly more important is predefining the risk. Once that's done, focus on the win rate and trade management. If one wants to make a living at this. If not, then all of this is hardly worth the trouble.