How important is the win percentage?

[ironchef]

Ed Thorpe had a high win rate in the number of months his fund was profitable, this in no way implies a high trade win rate. For him it was a numbers game, a small edge applied over a large enough number of trades to come out winning nearly every month.

Thorpe always emphasizes his fat pitch trades for the funds success, concentrated bets (Kelly), which by nature have low win rates - a small number of trades are big home runs, the smaller winners & losers typically scratch each other out.

James Simmons, the king of quants, with his army of PHDs and latency edge has a 50.75% win rate.

“We’re right 50.75 percent of the time… but we’re 100 percent right 50.75 percent of the time. You can make billions that way” James Simmons (pg 272)

I like your analysis better. Thank you.

 

[ironchef]

You have find a mentor and quality trading program/course and pay for it. That is what I am doing. This way you do not have so many opinions from alot of people. Because some people like to bullshit and mess around and just pull stuff out their ass. When I started buying trading courses, I started to learn more and more in an ogranized/structure way. And not waste alot of time with 20 different opinions.

I was just like you asking simple questions like win rate stuff, which is good always ask questions, but eventually you gotta stop bullshitting around and go buy quality trading programs and trading course and seek and pay mentors. This is the best way to get profitable. It is too much work trying to do it yourself and you waste alot of time, better to pay someone to teach you.

But don't pay too much. In this business, the amount you pay doesn't always equate how much success you will get.

Pay attention to some ET posters and you will pick up a lot of good trading ideas/skills.

If you have some time to kill and have not already done so, I suggest you read through this thread:

https://www.elitetrader.com/et/threads/why-is-the-obvious-not-so-obvious.151802/

There are a lot of trading wisdoms buried within the 6000+ posts. The beauty is each one of us will get something out of it but those something are all completely different. The OP and subsequent posters never really said what is "the obvious" but we each have our own version of why is the obvious not so obvious and benefited from that realization.

You are a good man. Good luck to you.

 

[Trade Prophet]

Counter-point: percentage matters less than expected value.

This is sort of the idea behind poker and other table games. Your edge might be 1%. But if the expected value of the game under advantaged play is positive you will make money so long as you have a bankroll to take in the volatility.

Win percentage is a nice metric to tell the props though, and to be fair expected value in a trade can be hard to nail down in concrete numbers. But again, if you win 98% of the time, but 2% of the time you lose more than you gain, you're in a negative expected value play.

Which brings back the topic of expectancy which is the combination of win percentage and average win amount, if your expectancy is positive then all you have to do is to continue trading, the math will take care of profitability

 

[Trade Prophet]

Counter point : Expected Value matters less than Betting Size.

You said it though:
You will make money so long as you have a bankroll to take in the volatility.

Do Not Over Bet.

"Betting too much, even though each individual bet is in your favor, can be ruinous"
-Edward Throp

Get profitable (Statistical expectaiton)
Size properly (Risk Management)
& Compound

See my comment on the counter point

 

[Trade Prophet]

You are GOLDEN if you win rate is 100% or goldman sachs.
Every trade is winning trade.
Like in sports it's winning streak or losing streak.
Like in Baseball a homerun on every hit.

Funny you mentioned Goldman Sachs, we did a research if the history of their K10, they have the most remarkable expectancy we have seen, I can upload the data to this thread

 

[Trade Prophet]

Ed Thorpe had a high win rate in the number of months his fund was profitable, this in no way implies a high trade win rate. For him it was a numbers game, a small edge applied over a large enough number of trades to come out winning nearly every month.

Thorpe always emphasizes his fat pitch trades for the funds success, concentrated bets (Kelly), which by nature have low win rates - a small number of trades are big home runs, the smaller winners & losers typically scratch each other out.

James Simmons, the king of quants, with his army of PHDs and latency edge has a 50.75% win rate.

“We’re right 50.75 percent of the time… but we’re 100 percent right 50.75 percent of the time. You can make billions that way” James Simmons (pg 272)

Exactly, be the house, 50.75% is enough to be consistently profitable, just keep on trading with positive expectancy, this is why trading in short time frames like day trading leads you to profit (or ruin..) faster

 

[Trade Prophet]

comagnum,

What does that mean by " but we’re 100 percent right 50.75 percent of the time."

Meaning std dev =0 on that 50.75%

 

[USDJPY]

Ed Thorpe had a high win rate in the number of months his fund was profitable, this in no way implies a high trade win rate. For him it was a numbers game, a small edge applied over a large enough number of trades to come out winning nearly every month.

Thorpe always emphasizes his fat pitch trades for the funds success, concentrated bets (Kelly), which by nature have low win rates - a small number of trades are big home runs, the smaller winners & losers typically scratch each other out.

James Simmons, the king of quants, with his army of PHDs and latency edge has a 50.75% win rate.

“We’re right 50.75 percent of the time… but we’re 100 percent right 50.75 percent of the time. You can make billions that way” James Simmons (pg 272)

He was talking about stocks in that statement and not future

Ed Thorpe had a high win rate in the number of months his fund was profitable, this in no way implies a high trade win rate. For him it was a numbers game, a small edge applied over a large enough number of trades to come out winning nearly every month.

Thorpe always emphasizes his fat pitch trades for the funds success, concentrated bets (Kelly), which by nature have low win rates - a small number of trades are big home runs, the smaller winners & losers typically scratch each other out.

James Simmons, the king of quants, with his army of PHDs and latency edge has a 50.75% win rate.

“We’re right 50.75 percent of the time… but we’re 100 percent right 50.75 percent of the time. You can make billions that way” James Simmons (pg 272)

I remember Simons was talking about stocks in that statement and not futures or currencies. Correct me if I'm wrong.

 

[ionone]

it reminded me of Adam Khoo, that said to win, you need "to trade like a casino"
you just need to make your wins bigger and your losses smaller. but the problem is the winrate is not 50/50 anymore if you do that. so it helps not.

actually losing twice as much is not good on morale I think

 

[guowei58]

How important is the win rate when trading stocks, futures or any other asset class?

If you lose more than 50% of the time, does that necessarily means that the strategy is a losing strategy?

https://www.alphaoverbeta.net/blog/

pick your poison:
1) Mean reversion: 65%+ win rate, low P/L. lose your money from a couple of horrible trades.
2) Trend following: 30-40% win rate, high P/L. lose your money from whipsaw.

you can try to control these metrics with stop loss rules/pyramiding, etc...but high win rate = low P/L and vice versa.