If trend following, can money management save you in chop?

Quote from intradaybill:

If you trade with a win rate less than 50+% your risk of ruin is guaranteed no matter what your R:R is. You can only delay the inevitable if you risk a small percentage of your account. All trend followers with a win rate of less than 50% are doomed. It only takes a few months of choppy market action to cause a drawdown of 50% or more if fully invested. If invested with leverage, ruin is inevitable and fast.

Learn the facts before you end up ruined...This is simple algebra for high school students...
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Please stop peddling misinformation and distorting facts to fit your opinion.

While what you are saying is true in a scenario like a simple coin toss game, trading systems have other variables along with win rate that need to be considered to calculate risk of ruin. I can refer you to the proper material for reference if you will take the time to put down your 7th grade algebra book. It's written by a statistician with a PhD (who is NOT a trader) and includes tables that you can insert your win rate and easily calculate your risk of ruin in case you're not able to do the math on your own.

I've been trading a system with well below a 50% win rate (41% to be exact) for more than a decade and make my living doing so. My "win rate" on a monthly basis varies from 12% to 75%, and I've made money in months where my "win rate" is LESS THAN 25%... plus I've NEVER HAD A LOSING YEAR. How did you do in 2008? My account nearly tripled in value.

Until you are willing to admit you're wrong about your risk of ruin calculation for trading systems, it is you who are DOOMED to fail because you put your faith in incorrect information.

Perhaps you are familiar with the following quote:

To a man whose only tool is a hammer, every problem looks like a nail.
 
Quote from intradaybill:

Do you know what is a binomial distribution?

Do you know what starting capital means?

Do you know what drawdown is?

I guess you don't.
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Do you know what account equity is?

Do you know what profit factor is?

Do you know what risk/reward is?

Do you know how they are calculated into risk of ruin?

I guess you don't.
 
Quote from TrendTrader Jim:

My "win rate" on a monthly basis varies from 12% to 75%, and I've made money in months where my "win rate" is LESS THAN 25%... plus I've NEVER HAD A LOSING YEAR. How did you do in 2008? My account nearly tripled in value.
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There is no sush thing as a "variabe monthly win rate". So until you start using standard terminology people use on this planet please return to your fantasy land and talk about variable monthly win rates.

Win rate is = number of winners/total trades

Good trading systems are known to have a fairly stable win rate over their timeframe of operation.

A system with a variable win rate from 12% to 75% is a shi**y one, so please keep it as a New Year's present and good luck with it. A huge drawdown with your name on it is probably on your way. Remember that.

Now I have something important to do with you:

PLONK...like I did with your other names...don't think I do not know who you are...
 
Quote from intradaybill:

There is no sush thing as a "variabe monthly win rate". So until you start using standard terminology people use on this planet please return to your fantasy land and talk about variable monthly win rates.

Win rate is = number of winners/total trades

Good trading systems are known to have a fairly stable win rate over their timeframe of operation.

A system with a variable win rate from 12% to 75% is a shi**y one, so please keep it as a New Year's present and good luck with it. A huge drawdown with your name on it is probably on your way. Remember that.

Now I have something important to do with you:

PLONK...like I did with your other names...don't think I do not know who you are...
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I'm sorry, if you can't accept that the win rate of a trading system (especially a trend following system) can vary greatly from month to month then you are a CLASS "A" MORON. This statement alone shows you have no actual experience trading and shouldn't be here offering advice to novices. In case you missed it, the word variable was in there. I believe I had a 12% win rate ONCE out of the more than 10 years. The average win rate is 41% and the "mean" win rate of this system is 45%. (If you don't know what a mean is, look it up in your algebra book.) Also, the largest drawdown I've experienced is 22%... and I recovered from it in less than 5 months. So you can just keep sitting around waiting for me to "blow up" while you're flipping burgers or stocking shelves or whatever it is you do for a living... I'll keep buying new cars for cash with the profits from my account.

I don't know who you think I am, but I can guarantee you DON'T know who I am. Unfortunately for me I get bored sometimes and read trading forums, post something and end up being assaulted by idiots like you and then am reminded why I usually avoid them (and why less than 10% of traders are successful).

Here's some advice... you don't know it all. In fact, from what I can tell from your communications on this forum you really don't know much of anything as far as trading is concerned. But keep reading Wikipedia and 7th grade algebra books and regurgitating the information... I'm sure you'll impress those who stumble in here looking to learn. Unfortunately you'll also send them down the wrong path.

And oh yeah... if you are trading with real money please don't stop because those of us who know what we are doing will be there to keep taking it from you.
 
Quote from intradaybill:

A huge drawdown with your name on it is probably on your way. Remember that.
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BTW, you don't even know what my risk level is, so how do you know a "huge" drawdown is on the way? Just like risk of ruin you can't calculate drawdown on "win rate" alone. Not to mention that "huge" is a subjective term. To some 10% is huge... other's don't blink at 50-60%. One more way you show your complete ignorance.
 
If your win rate drops below 20% (4 losers in every five trades) you should quit trading not so much because you are risking ruin but because you are destroying your health with the stress.
 
Quote from TrendTrader Jim:

The average win rate is 41% and the "mean" win rate of this system is 45%. (If you don't know what a mean is, look it up in your algebra book.)
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Let us see now. We have an imbecile here who claims that the average is 41% and the mean is 45%.

Which mean imbecile? The arithmetic, the geometric, the harmonic, the interquartile?

Yes, imbecile, if you don't know that the arithmetic mean and the average are the same thing, look it up in an algebra book. Do us a favor, look it up...
 
It would be so nice if people wouldn't be so nasty to each other, nothing to be gained, only lost. If all don't like what someone writes, make a post offering your comments in a nice way, how hard is that? Just too many closed minded people.

In my youth, my win rate on long term trading in Commodities was horrible, many years of under 40% and some under 20% percent, but when reward to risk was often times 40 to 1 or better, win rate was least of my concerns. But I have never been a good trend trader in Commodities, so I became the guy searching for highs/lows. After a number of years, many reversions in my methods, my overall win rate has increased fairly well, but reward to risk has decreased. There is always give and take. Commodities seldom trend like stocks cause grains are planted yearly, meats are highly controlled, but stocks do trend more often.

There is no right way to trade, you could flip a coin for entries and with right money management rules, it can be a winning method.

So many traders complain about chop or low volatility, but if they studied Price Action, Markets most of the time shows it's hand, even some indicators will show chop such as MACD, RSI, when they tend to stay near the middle of it's range. Megaphone price patterns show when price is in chop, huge range bars then bars fall within that bar are in chop. Sustained uptrends must show higher lows. I think learning how to trade chop is the way to go, cause out of chop is the next trending move.

Happy New Year all.
 
Quote from Handle123:

I think learning how to trade chop is the way to go, cause out of chop is the next trending move.

Happy New Year all.
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yeah really, I think that was opie's original question, "How to trade the chop"

People (not even traders) who have made lot more money than me just simply don't trade it.

But since I am I trader I must always trade.

I want to turn the market into an ATM and I do fine when it's trending, so all I need to do is learn how to trade the chop.

Best idea I heard was just trade the chop since most of the time that's all it does.

Problem is, unless you are really good, you need a big trend to pay for all the commissions and the spread (and maybe a little left over to buy your girlfriend something.)
 
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