Prudent Risk Management + No Edge = Positive Expectancy??

[ironchef]

In a coin toss situation, the $ of win and the $ of loss are equal, there is no difference.
In trading, it's not the case, cause we're buying at the offer and selling at the ask. So the spread makes the $ for losses more than the $ for wins. On top of that, the market can move quickly making the difference even bigger.
And we're not even talking about commissions and trading fees.
And all the emotions and feelings that go with trading (fear, greed, FOMO, etc.).

I actually tried to take profits and take losses roughly the same, because that increased the win rate to ~55% from < 45%, perhaps that is a bad idea.

True, it is more like playing roulette than a fair coin toss.

The more I day trade the more respects I have for day traders. It is a tough game. Hat off to you guys.

 

[tiddlywinks]

I am going to remove one of the constrains, #3 and replace it with a fixed # of trades, run that for a few weeks and see the outcome. If the only edge is risk management, then the outcome will be random.

I decided to pick ~25 trades each day as contrast to ~10 each day in the current situation.

Bad idea.

You seem to think you control the order/sequence in which gains and losses occur. You do not.
Using your 50/50 metric, using your 25 trades/day metric, are you prepared for 13 CONSECUTIVE losses in a day?

It is the order/sequence in which gains and losses occur that generates the 50/50 (W/L) metric. Not the other way around. And it applies to any measurement interval... Daily, 13/25, Weekly, 63/125, etc.

What if market(s) and/or trading instrument(s) do not offer "X" number of trades in a given day that are acceptable to you? So, yea, there's that too.

Better would be to analyze "streaks" and determine some squishy probabilities. But that involves knowing your set-ups, which you are reluctant to look at.

 

[ironchef]

But the point is net profits, not comfort.

It is not uncommon that investors prefer a steady 5% over a volatile 10%: risk adjusted return concept.

 

[ironchef]

Bad idea.

You seem to think you control the order/sequence in which gains and losses occur. You do not.
Using your 50/50 metric, using your 25 trades/day metric, are you prepared for 13 CONSECUTIVE losses in a day?

It is the order/sequence in which gains and losses occur that generates the 50/50 (W/L) metric. Not the other way around. And it applies to any measurement interval... Daily, 13/25, Weekly, 63/125, etc.

What if market(s) and/or trading instrument(s) do not offer "X" number of trades in a given day that are acceptable to you? So, yea, there's that too.

Better would be to analyze "streaks" and determine some squishy probabilities. But that involves knowing your set-ups, which you are reluctant to look at.

Thanks for your comments. Those are very constructive feedbacks that is needed.

You are right, my thought process may be flawed.

 

[SunTrader]

It is not uncommon that investors prefer a steady 5% over a volatile 10%: risk adjusted return concept.

Right - investors.

And why comfort and day trading are for the most part mutually exclusive.

 

[ironchef]

Right - investors.

And why comfort and day trading are for the most part mutually exclusive.

Good point Mr SunTrader. Thanks for the coaching.

I may have to learn how to be uncomfortable, just like learned how to take lots of small losses and not be too upset.

I was hopping to have my cake and eat it too.

 

[hilmy83]

I remember the days when I traded manually. Some days I would get nervous just cause I traded a little big.

But I liked that feeling. Somehow the nervousness gives me a little energy. When the trade ends in profit, it's like a little climax.

Nowdays, it's boring. Like watching paint dry kind of boring.

Even after almost a year not trading myself, I still have the feeling to just put on manual trades...

 

[ironchef]

Bad idea.

You seem to think you control the order/sequence in which gains and losses occur. You do not.
Using your 50/50 metric, using your 25 trades/day metric, are you prepared for 13 CONSECUTIVE losses in a day?

It is the order/sequence in which gains and losses occur that generates the 50/50 (W/L) metric. Not the other way around. And it applies to any measurement interval... Daily, 13/25, Weekly, 63/125, etc.

What if market(s) and/or trading instrument(s) do not offer "X" number of trades in a given day that are acceptable to you? So, yea, there's that too.

Better would be to analyze "streaks" and determine some squishy probabilities. But that involves knowing your set-ups, which you are reluctant to look at.

Based on your input, I changed my approach.

Instead of getting a fixed # of trades, today, I kept trading based on price movement, stopped when price started to consolidate and range and there were no more entries I like.

Called it a day, another positive day.

Thanks @tiddlywinks.