Quote from austinp:
Everyone likes that approach... it meshes perfectly with basic human logic = emotion. Now here's the reality:
You need to sustain a 70% or greater average win rate over long periods of time, like six months, one year, two years before considering such an approach has staying power.
Invariably, the law of statistical probability dictates that somewhere along the line, you will surely experience 4-5-10 straight winning trades in a row. That feels great.
But the exact-same statistical odds dictate you will likewise experience 4-5-10 straight losses in a row. Regardless of your system or approach, statistical odds of probability and distribution make that a certainty. It cannot be overcome, period, end of story.
So how do you handle those periods in reality? If trading CL for example using -$150 stop / +$150 profit, you will run into sessions where five straight losses of -$150, -$160, -$150, -$160 and -$190 due to slippage has your account at -$810.
Now what do you do in reality? Do you steel yourself to trust the process, stick with your parameters and +1/-1 (or worse thru slippage) from there, or do you change the approach thru mental = emotional weakness?
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cut losses short, let winners run is a market adage that predates anyone in this site for good reason. Give that 1/1 (minus slippage) approach six months to a year of steady applicatoin thru all market conditions, and judge results after that.
Actually, if you price your trades to be truly 1:1, you need to sustain exactly a 50% win rate over the long run to break even. That is better than 95% of active day traders will ever do!
Of course there are strings of losses. That is why we have a limit to our risk per trade. No big deal. Fact is if you are shooting for a higher ratio you will have more losers and longer strings of losing trades. That is just plain statistics.
You are right that letting winners run is an age old adage. Most of those that teach these principles have never made money at trading. The overwhelming majority of the traders that follow this advice lose money.
I personally have read chess books, studied chess, and I eventually became a master. When I put the principles in books into practice, they worked.
I read poker books, studied it some more, and next thing you know I am winning, and made a living at it for 7 years.
I have been studying trading for 10 years. I have followed the advice of the "experts". I have worked damn hard at it. I don't tilt or double down on losses or anything silly like that. But nothing ever worked when it came to capturing larger swings. The only time I started making money is when I just started scalping momentum on stocks.
Why is it I have never seen a single "expert" produce a winning statement? Is it because they are humble and don't want people to know they've got some $$. Hell no! Look on the poker forums. Anytime one of them goes on a nice win they post that graph for all to see. I used to do it to too. People bragg all day long.
I'm sure some are good enough to predict trends. I am not. Most are not. You know I like you and have defended you in the past (not that you need it), but even you have been complaining for years that the tape sucks. I've seen you post a winning blotter with the promise to keep posting for x period of time and then you are gone. I can draw a conclusion from that.
Maybe the tape doesn't suck. Maybe that is just the markets. Mostly random, with some direction here and there.
Why put the pressure on yourself to predict, when you can start off just reading momentum, rolling with it, and letting randomness keep you from losing too much.
