The thing about edge

[xelite777]

Quote from kut2k2:

trend following strategies tend to have low winrates and counter-trend strategies tend to have high winrates.

That's true, most trend following systems average about 30 to 35% winrate. But in and by itself, the winrate is meaningless.

Quote from kut2k2:
If true, perhaps this is an argument to stick to counter-trend strategies or to automate tf strategies as much as possible..

Your deduction is incorrect.

Trend following systems have a low win rate but they are much more profitable than counter-trend strategies, in the long run.

In fact, you could lose your shirt if you constantly trade/bet against the trend.

 

[dbphoenix]

Quote from kut2k2:

Rumor has it (and I have no idea how true this is, just commenting on the "conventional wisdom") that trend following strategies tend to have low winrates and counter-trend strategies tend to have high winrates.

If true, perhaps this is an argument to stick to counter-trend strategies or to automate tf strategies as much as possible..

I suppose it depends on how one defines "trend" and what his "trend-following strategy" is. But if it tends to have a low winrate, more likely that particular strategy just sucks, not trend-following strategies in general.

 

[kut2k2]

Quote from xelite777:

That's true, most trend following systems average about 30 to 35% winrate. But in and by itself, the winrate is meaningless.



Your deduction is incorrect.

Trend following systems have a low win rate but they are much more profitable than counter-trend strategies, in the long run.

In fact, you could lose your shirt if you constantly trade against the trend.

You should read the preceding posts before replying. Dp and I were talking about the psychological challenge of low winrates. Robots can ignore low winrates, human beings aren't typically as detached from repeated losses.

 

[kut2k2]

Quote from dbphoenix:

I suppose it depends on how one defines "trend" and what his "trend-following strategy" is. But if it tends to have a low winrate, more likely that particular strategy just sucks, not trend-following strategies in general.

I think the most popular form of trend following is breakouts and I don't think their winrates are anything to brag about.

 

[dbphoenix]

Quote from kut2k2:

I think the most popular form of trend following is breakouts and I don't think their winrates are anything to brag about.

Breakouts? No. But that's not where trends begin.

Of course, this is arguably off-topic, but you're the OP so I guess it's up to you to decide where this goes.

 

[xelite777]

Quote from kut2k2:

You should read the preceding posts before replying. Dp and I were talking about the psychological challenge of low winrates. Robots can ignore low winrates, human beings aren't typically as detached from repeated losses.

The low win rate is challenging because most people follow the trend the wrong way, often with nothing but a rudimentary dual moving average cross over system.

If they could only "qualify" the trade before initiating a position the winrate would jump to 60% or more, and the "psychological" problem you are talking about, while real, would disappear instantly.

 

[kut2k2]

Quote from dbphoenix:

Breakouts? No. But that's not where trends begin.

Of course, this is arguably off-topic, but you're the OP so I guess it's up to you to decide where this goes.

I was thinking in terms of strategies with positive expectation that have the added challenge of low winrates. Tf strategies do appear to have the highest expectations as a rule but traders still fail for the reason we discussed previously: the challenge of a low winrate. I'm just positing automation as a possible solution.

Of course a better strategy is always best but not many "gurus" are passing out high-PE-plus-high-winrate strategies like party favors.

 

[tradingjournals]

Here is another thought: The probability of success is the product of the probabilities of the logical AND conditions needed for success. Example: If one has 10 conditions w/ 80% prob each, the prob. of success of the whole would then be: (0.80)^10. Any shortcoming in this logic? If you agree with it, you could say it, and if possible why? Any additional insight?

 

[bighog]

There is no edge in trading. There is no perfect signal. There is no single way to make money because money comes minus instructions. So if no instructions, what makes some think trading has instructions?

Ever fall in live? Why? Falling in love is suspect from the beginning, why you two, how come no one grabbed up either one first? Makes you think, huh?

Edge is something that resides only in your mind, it is what floats your boat, that same edge might not hold water in mine.

No figment of an imagination will make you a winner. To become a 10%er you need to find what a method, if it is ugly, so be it as long as it works for you.

https://www.youtube.com/watch?v=EEwA1ldUb60

 

[dbphoenix]

Quote from kut2k2:

I was thinking in terms of strategies with positive expectation that have the added challenge of low winrates. Tf strategies do appear to have the highest expectations as a rule but traders still fail for the reason we discussed previously: the challenge of a low winrate. I'm just positing automation as a possible solution.

Of course a better strategy is always best but not many "gurus" are passing out high-PE-plus-high-winrate strategies like party favors.

I don't know about gurus but the approach I detail in my threads has a generally high winrate and a generally high P:L ratio. All one has to do is follow it.

As for automation, I've never really understood all of that. But then I've never understood the lure of automatic transmissions either.