Does the Pareto Principle apply to your trading results?

D

Daal

I just calculated some statistics on my historical trading results (mostly day and swing trading of american stocks) and I found out that:

My top 20% of gains account for 79% of all my gains
My top 20% of losses account for 75% of all my losses

The bottom 50% of all my gains account for 5% of all my gains
The bottom 50% of all my losses (meaning the smallest half of my losses) account for 7% of all my losses

My median trade is actually negative even though my average profit per trade is quite positive. Looks like all I need to do to improve my results is to focus on the top 20% of my trading setups and ignore everything else

Is this true in your own trading as well?
 
Yes. In fact, it's more extreme than that. At one point in the past, a handful of good trades account for more than 100% of the total profits! The rest was losers that dragged it down.
 
Vilfredo Pareto is a genius.
Taking time to enter a trade is the key as most trends die prematurely.
Jake said.... a few good trades.
 
Daal said:
My median trade is actually negative even though my average profit per trade is quite positive. Looks like all I need to do to improve my results is to focus on the top 20% of my trading setups and ignore everything else
More...
You might be onto something here , look for commonalities in both the best and worst though . The bottom 80% can be improved as well and the a lot of the bottom 20% discarded . I think the key is to get rid of the worst trades whilst keeping as many of the winners as possible . Home runs are nice but base hits pay the bills week to week
 
%%
MSFT noted by fixing the top 20% of bugs; 80% of the remaining bugs + crashes would be eliminated in a system.........................................................................
 
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