Can Anyone Be Successful In Trading.... With Only About 50% Win-Loss Rate?

eganon69 said:
The key is to get win rate as high as possible and limit losses to as little as possible per trade.
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I agree for 100%, but most people say then "winning rate is not important". They copy what they hear or read and think they look smart. They give examples like 90% winning rate with average 1$ profit per trade and 10% losing rate with $100 loss per trade, result in a loss. This kind of examples is stupid.

In a good trading system the average profit per winning trade is bigger than the average loss per losing trade. If that's not the case you should work on your system and improve it.

You need a high win rate and a high profit per win, while reducing the losses to the minimum.
 
Mtrader said:
I have always a problem with Monte Carlo simulations. To me they sound like nonsense in relation to trading.
Why? Markets are not efficient, so these simulations are irrelevant to me as they assume perfectly efficient markets.

Monte Carlo simulations ignore everything that is not built into the price movement (macro trends, company leadership, hype, cyclical factors); in other words, they assume perfectly efficient markets.
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There is one critical difference here. Its the distribution of wins and losses that is simulated here.

If you have a 50% win system, where the reward is twice the risk, you clearly have an edge. But with a 50% win, its very easy to have 3 or 4 or more losers in a row. So if you run your system for 10 trades, you can just as likely with 7 times, or lose 7 times, and still have all of this be within the realm of statistical probability.

If you have 7 winners, you think you're a trading genius cause you did even better than your 50% win rate metric. And if you have 7 losers, maybe you'd blame it on some personal factor. But the truth is that both are possible.

So what these simulations do is show how your edge might play out depending on whichever distribution you fall into when trading real money.

Now with a 50% win rate 1:2 risk to reward, given enough trades, your edge will have you more than likely profitable. But things get a little more difficult if the profit factor drops to lets say 1:1.5. I don't have the exact numbers, but I've seen these simulations, and a small edge can sometimes turn into losses even over very many trades simply because you hit a few string of losers rather than a string of winners.
 
Gotcha said:
If you have a 50% win system, where the reward is twice the risk, you clearly have an edge.
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I would never trade a system that does not reach this score. This is for me the absolute minimum requirement. If you go lower the risk is indeed that you will end up with a loss. Although you can avoid this partially (or smoothen) with a good capital management.
 
Mtrader said:
I have always a problem with Monte Carlo simulations. To me they sound like nonsense in relation to trading.
Why? Markets are not efficient, so these simulations are irrelevant to me as they assume perfectly efficient markets.

Monte Carlo simulations ignore everything that is not built into the price movement (macro trends, company leadership, hype, cyclical factors); in other words, they assume perfectly efficient markets.
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I get what you are saying but a MC analysis actually assumes the same exact trades you enter in the analysis but assumes RANDOM trade wins and losses in the system. So it assumes you trade the system the same over the course of say 200 trades but it repeats that random wins vs losses 10,000 times.
 
volpri said:
Here is an argument for high win rate. Agree with the concept or not?

http://www.priceactionlab.com/Blog/2017/07/high-win-rate/
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This guy is an idiot. He is the one who puts down TA traders because he uses random entries and says it can't work.

I'm not nearly as smart as him, but I see two very big problems with the link. For short term trading, he uses the time from Jan 2016 to now to show how profitable he can be. Big fucking deal, look at what happened in Jan 2016... it was a market low and straight up since then.

For long term trading, he uses 1993 since the SPY inception. Once again, how cherry picked is this? Why doesn't he try his long only strategy in 2000, or in 2008? How long would it be until his funds recovered? Maybe he has a stop... great... but would the system try long again over and over? And if it didn't, then perhaps no trade can be placed for a year or two.

This article is absolutely horseshit. A high win rate in all market conditions is just not possible. Telling traders to search for high win rates is totally leading them down the wrong path. A 50% win rate can work just fine given the all important other parameters of average win and average loss.

Going forward, how do we know the market won't be flat for the next 5 or 10 years? On the long term chart, you have 2000-2003 that is sideways, and 2007-2009 that is also sideways. But, if you consider that from 2000 when it went down, until 2007 when it recovered, and then from 2007 when it went down again until 2013, then essentially, practically half of this chart is your investment going nowhere if you got in at the worst possible time.

In my opinion, lots of officials are worried about deflation these days, and for good reason, and I can imagine that perhaps we could be in for 10 years of the market doing nothing, although this isn't a prediction, but simply something to be aware of for the long only bulls.
 
Ok but what if a trader has devised methods with a high win rate in practically all market environments and does not use one system for all conditions? Could a high win rate be possible? Why shouldn't a trader try to have a high win rate?
 
volpri said:
Ok but what if a trader has devised methods with a high win rate in practically all market environments and does not use one system for all conditions? Could a high win rate be possible? Why shouldn't a trader try to have a high win rate?
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I think wanting a high win rate means that you're scared to lose, which then has you looking for what you're missing, which then has you want to add more stuff to your trading, and then it gets impossible to make a decision because nothing will ever line up perfectly. By looking for the perfect trade, you're bound to miss good trades, and the perfect trade will more than likely not increase your overall profit.

It sure would be nice to be able to always say, just buy at this swing low, or get in on this retracement, but many of these simple idea in my opinion do not lead to 80%+ win rates. Are they good enough for making money? Yes, and especially if taken within the context of the market and where price is in relation to key levels, but its still not the holy grail.
 
Should a trader try to have a low win rate? Would that mean they are afraid to win? Psychologically, it is possible to be afraid to win you know. Some don't think they deserve to win or should win and they end up sabatoging their own success. It does happen in other things..and i suppose it could happen in trading???

I would think striving for a high win rate doesn't mean you have to necessarily add more indicators for comfirmation but that one could be more careful and selective in their entries and exits. For instance, I personally like high probability trades with less reward. That means i may pass up several trades. Some traders prefer low probability trades with a higher reward because the risk is usually small. If their trade pans out they do very well. But it may fail to pan out more than it succeeds but because the risk is small they are losing small. You got three issues to consider for every trade. Probability..reward..risk. It is rare to find a trade that gives high probabilty..high reward..and low risk. You usually have to give on one or the other. I prefer high prob trades with high risk but lower reward. It generally means i am in the market and quickly back out again. I consider the fact that my funds are only at risk when they are in the market.
 
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