I wasn't suggesting it as a strategy, gentlemen, I was pointing out the absurdity of arguing over win/loss ratios in a game that doesn't depend on win/loss ratios.
Dennis Gartman... GREAT Lesson In Trading
- Thread starter Scataphagos
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I wasn't suggesting it as a strategy, gentlemen, I was pointing out the absurdity of arguing over win/loss ratios in a game that doesn't depend on win/loss ratios.
Successful trading is not conditional on having a winning percentage. But it's also true that if you have a large losing percentage, it's going to be very difficult for your winners to offset all of your losers.
If your winning percentage is much below 50%, you need to work on your methodology. 55-60% winners is TERRIFIC... so long as you stop out your losers before too much damage. Any hope of 80-90% winners is "way out there" and riduculous. The markets are mostly a 50-50 proposition. (If YOU think it's correct to buy/sell, somebody on the other side of your trade is equally convinced of the opposite.... otherwise there wouldn't be a marketplace.) You're not going to get a 4 or 5 to one edge on success in a 50-50 market... no matter how smart you think you are.
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The problem I have with Gartman is they parade him out on Fast Money like he's some kind of genius, with never a mention of his record. Then he pompously expounds on something like he alone has the inside track. There's seldom any follow up or admission of being wrong.
Yes, it's a great lesson to respect stops and take small losses, but that's not what he's selling. He supposedly has insight, based on something. Perhaps the greater lesson is that the markets are very efficient and even the best-informed have trouble beating them.
Yes, it's a great lesson to respect stops and take small losses, but that's not what he's selling. He supposedly has insight, based on something. Perhaps the greater lesson is that the markets are very efficient and even the best-informed have trouble beating them.
I also find his attempts at sophistication "short oil in yen terms,etc" to be laughable if not insulting. Two bad trades linked do not make one good trade.
My reference to Gartman is ONLY that he has the sense to trade with stops.... no reflection on the accuracy of his calls.
Regardless of how smart a trader thinks he is or however convinced about a play, it's a mistake to not use proper stop discipline.
I have seen people have 100% profitable trades for years and still make less than some who had 10% win rate.
Win rate is absolutely useless no matter if you got 99% winners or losers.
What matters is the average size of winners and losers in combination with win %.
I cannot stop .....
ROFLMAO win rate is a very important metric $$$ wise ....psychological wise...keeping wife happy wise...
A trader can go ahead and lose 99.999% of the time if he/she wishes. That just tells me such a trader cannot correctly pick trades, is a loser, and will end up broke with a 99.9999% certainty.
The argument that win rate doesn’t matter usually correlates with traders who have not managed to accomplish a high win rate for one reason or the other. Bad picks...incorrect stoploss placement...scumbag strategies...non pragmatic tactics....etc...ad nauseum...
For deeper understanding you might just wanna read
http://systemtradersuccess.com/important-performance-measure-trading-strategies/
First most important metric: win rate
Second most important metric: average win vs average loss.
Third most important metric: biggest wins vs biggest loss
Fourth most important metric MAE vs MFE
Fifth most important metric: look on the wife’s face..frown or smile.
The rest of the metrics invented can pretty much be thrown in the garbage can by the trading desk.
Second most important metric: average win vs average loss.
Third most important metric: biggest wins vs biggest loss
Fourth most important metric MAE vs MFE
Fifth most important metric: look on the wife’s face..frown or smile.
The rest of the metrics invented can pretty much be thrown in the garbage can by the trading desk.
As usual I disagree with the underlying premise of a lot of these comments.
It isn't win to loss ratio that matters, what matters is the size of the average winning trades compared to the size of the average losing trades. In short.. all that matters is MAKING MONEY long term. It's totally normal for forex traders to have a 40% win rate compared with 60% loss, for example ... but even "worse" win rates are perfectly capable of making piles of money, and high ratio win rates are perfectly capable of losing money. Stories of traders making a lot of successful trades then not being able to cut their losses on losing trades are everywhere on this forum.
My thoughts on all of this, however, go even deeper than that .. because of the varying time scales on trades and positions, it doesn't even make sense to talk about "win rates". You are ALWAYS in a position, even if that position is cash. If you wake up tomorrow in cash and the SPX has gained against $us, do you count that as a "loss" since you were on the wrong side of the $us/SPX trade ? If you were in SPX and "won" vs the $us, do you consider it a loss if the big mover of the day was commodities and the SPX lost vs commodities ? Is your "win" rate always against $us ? How about when the $us is losing so much that even a "win" on SPX vs the $us is a losing trade against forex because it really means that U.S. stocks fell vs foreign currency, is that "loss" in your win/loss ratio ? The whole idea, in short, is arbitrary as hell, and basically pointless.
It isn't win to loss ratio that matters, what matters is the size of the average winning trades compared to the size of the average losing trades. In short.. all that matters is MAKING MONEY long term. It's totally normal for forex traders to have a 40% win rate compared with 60% loss, for example ... but even "worse" win rates are perfectly capable of making piles of money, and high ratio win rates are perfectly capable of losing money. Stories of traders making a lot of successful trades then not being able to cut their losses on losing trades are everywhere on this forum.
My thoughts on all of this, however, go even deeper than that .. because of the varying time scales on trades and positions, it doesn't even make sense to talk about "win rates". You are ALWAYS in a position, even if that position is cash. If you wake up tomorrow in cash and the SPX has gained against $us, do you count that as a "loss" since you were on the wrong side of the $us/SPX trade ? If you were in SPX and "won" vs the $us, do you consider it a loss if the big mover of the day was commodities and the SPX lost vs commodities ? Is your "win" rate always against $us ? How about when the $us is losing so much that even a "win" on SPX vs the $us is a losing trade against forex because it really means that U.S. stocks fell vs foreign currency, is that "loss" in your win/loss ratio ? The whole idea, in short, is arbitrary as hell, and basically pointless.
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