High Win/Loss gives you a better feel?

[lindq]

Quote from nitro:


I have a method that gives me 85% winners and about 50K a year. I trade this along other style(s.) Outside of the money, the one thing that it resonates mostly with me is the theory that the markets are efficient is CRAP.

nitro

The fact that you can beat the market averages does not mean the market is inefficient. It simply means that there is someone on the other side of your trades who is suffering from your system's efficiency. For every trader who is enjoying a nice income and lifestyle, there are 10 others who are contributing to it with their losses and suffering.

Don't believe me? Read the posts on this site.

 

[DHOHHI]

Quote from lindq:

For every trader who is enjoying a nice income and lifestyle, there are 10 others who are contributing to it with their losses and suffering.

Not necessarily true. People make and lose money without even executing trades. What about gap ups (or gap downs)? Individuals are making (losing) money as the market opens each day. So those who are suffering "losses" at the expense of a winner(s) may not be traders but could be longer term investors. I don't think trading is a zero sum game. Somehow I think my post is probably clear as mud.

 

[nitro]

Quote from lindq:



The fact that you can beat the market averages does not mean the market is inefficient. It simply means that there is someone on the other side of your trades who is suffering from your system's efficiency. For every trader who is enjoying a nice income and lifestyle, there are 10 others who are contributing to it with their losses and suffering.

Don't believe me? Read the posts on this site.

Hmmm,

I suppose in the AGGREGATE that could be true...

nitro

 

[harrytrader]

either the win/loss or the percentage ALONE are NOT important, the importance is to be consistent in gain. This means

percentage_win * unit gain + percentage_loss * unit loss > 0

AND

VARIANCE OF percentage_win * unit gain is stable

AND

VARIANCE OF percentage_loss * unit loss also is stable

If the condition on variance is achieved then you can draw 4 cases :

percentage_win > 0.5 and unit gain / unit loss > 1 (1)
percentage_win > 0.5 and unit gain / unit loss < 1 (2)
percentage_win < 0.5 and unit gain / unit loss > 1 (3)
percentage_win < 0.5 and unit gain / unit loss < 1 (4)

Case (1) you are sure a big winner
Case (4) you are sure a big loser
Cases (2) and (3) : it will depend so you must use the global equation above mixing percentage and win/loss ratio.

I put the conditions on variance because many people seem to ignore that it is the very condition to check in fact for consistency because if the variance is not stable you can calculate any average you want you are not sure that it will not make an excursion in negative territory.

Quote from ADX_trader:

I saw a lot of systems that gave you win/loss ratio about 4:6. Although they were quite profitable, for a newbie, the psychological impact of watching so many losses was quite big. Is it better for a newbie to use a system with high win/loss ratio first?

 

[ElectricSavant]

I can always count on Harry.......to give me another column in my spreadsheet....(I can't make the text any smaller in Excel, so now I gotta get a bigger monitor).

Michael B.

 

[-ooO-(GoldTrade]

Is it better for a newbie to use a system with high win/loss ratio first?

What matters is equity. Chart Equity.

 

[Bolts]

I think a 50/50 win/loss is optimal for monitoring your progress. If you have infrequent wins then you will look like a genius after a win, and an idiot just before one. Or the opposite for infrequent losses. So its hard to know if you are really doing well, or just getting lucky.

But this is only one advantage, of course there may be lots of disadvantages.

 

[ElectricSavant]

Being this is the appropriate thread:

I am happier with a high winrate and a lower avg. win/avg. loss ratio.

Naturally we are in this for the money. But I have learned over the years you must find what is comfortable for you, if you are going to last.

I have several systems and set ups. When I get a signal or one of my set ups gets triggered.......I have the statistics and excursions that I can expect from that BEFORE entering the trade. I have some favorites which have a high winrate with smaller targets. These, when used with a mathematical trade management bet-sizing formula work well for me.

I find myself using my Excel spreadsheet more and more....defining my set up.... from the entry to the exit and tracking the MFE and MAE.

I shut my feeds and charts off........no more expense......just gather the EOD 5 min bars from here each evening :

http://www.anfutures.com/index.html

I simply know what my target and stop is BEFORE entering the trade based on historical excursions. I measure volitility and ranges to adapt to the CURRENT character of the ES.

So, is it better to trade more contracts with less points in the target ad perhaps a wider stop.....well most would say no.....I say yes.

Michael B.

 

[Error 404]

Quote from Tech Analysis:

In my first year I was stroking my ego with 65-70% winners. Problem was, I'd book a winner - ANY winner - even 5 bucks, just to keep the winning percentage high and book a "winning trade". For every 5.00 winner, though, I had 20.00 losers.

Screw the win:loss ratios; keep your gain:loss ratios in check and you'll suceed.

Real life stats from my years trading at a big prop firm that tracked every imaginable statistic tells the story pretty much the way Tech Analysis summed up his own experience.

As for what Harry said, maybe someone can explain it to me (This is NOT a request).

Anyway, the guys that made the most money did generally not have outstanding winning percentages. They got out of losers quickly and often. (And frequently they soon got back into the very positions in which they had already booked losses). Rather than worry about their small losses, and rather than get into "wish and pray" mode, they just got out.

Trading is not baseball. Batting average is nice. But RBI's and runs scored are what matters. Even batting average can be misleading. In the NL, come to the plate with 2 out and the pitcher on deck, and it is unlikely you will not get something to take a whack at. Helps the average, but is unlikely to add up to big numbers that affect the outcome of too many games. Drop the same eighth place hitter to the middle of the lineup, and unless the manager was wrong about him all along, down goes his BA. (Here, maybe Harry can use an explanation)

It always seems to come back to "cut your losses, and let your winners run". This does not tend to help raise the average number of wins. It does, however, raise the average dollar per share, which is the only number that matters.

(An exception for Nitro....since he seems to predominantly scalp the minis..they always move....different style. So trading futures, or ETF's is a bit of a different story, and was not included in any of the studies I got to see).

Peace,
RS