Dear traders
This is a humble yet solid starting point for calculating our strategy. I am using simple straight forward statistical analysis that requires just common sense to understand.
Almost every trader agrees that "trading with the trend" is the best strategy. So let us analyse the succes rate of it statistically.
Statistically speaking there is 33.33% (100/3) chances for a trend either to continue OR reverse OR move sideways. (100/3 because there are three possibilities)
So at first look the strategy of "trade with the trend" has 33.33% success rate.
At a second look, assuming the trend continues, there is 50% chance that stop loss hits before the trend picks up. That means the success rate of the strategy reduces to
33.33/2 = 16.67%
How to increase the success rate?
There are a few ways to increase the success rate.
1. Identifying the trend early.
(It can increase profits and needs no indicators or patterns)
2. Waiting for the early support (or resistance)
(It can reduce the frequency of stop loss hits)
3. Avoiding extreme market conditions
With these fine-tuning probably the success rate may be increased to a decent 70% or even to 90%
I call this as Early-Trend-Support approach. For exit strategy I would suggest early identification of trend reversal or side ways movement.
My best suggestion is to trade options on major Index for better results. Early trend identification and early support are the key. Here the success rates drastically increases compared to other stocks and other techniques. Nothing can beat this time tested wisdom of traders across the world.
Please feel free to put your thoughts about it.
Thank you.
This is a humble yet solid starting point for calculating our strategy. I am using simple straight forward statistical analysis that requires just common sense to understand.
Almost every trader agrees that "trading with the trend" is the best strategy. So let us analyse the succes rate of it statistically.
Statistically speaking there is 33.33% (100/3) chances for a trend either to continue OR reverse OR move sideways. (100/3 because there are three possibilities)
So at first look the strategy of "trade with the trend" has 33.33% success rate.
At a second look, assuming the trend continues, there is 50% chance that stop loss hits before the trend picks up. That means the success rate of the strategy reduces to
33.33/2 = 16.67%
How to increase the success rate?
There are a few ways to increase the success rate.
1. Identifying the trend early.
(It can increase profits and needs no indicators or patterns)
2. Waiting for the early support (or resistance)
(It can reduce the frequency of stop loss hits)
3. Avoiding extreme market conditions
With these fine-tuning probably the success rate may be increased to a decent 70% or even to 90%
I call this as Early-Trend-Support approach. For exit strategy I would suggest early identification of trend reversal or side ways movement.
My best suggestion is to trade options on major Index for better results. Early trend identification and early support are the key. Here the success rates drastically increases compared to other stocks and other techniques. Nothing can beat this time tested wisdom of traders across the world.
Please feel free to put your thoughts about it.
Thank you.
Last edited:
identifying a trend early on while at the same effin time also avoiding extreme market conditions.
