You just registered last month, how do you even know who JH is?
What are the general Win rate and RR of professional/Full Time traders?
- Thread starter iamnewuser911
- Start date
what's your fav measure of risk adjusted ?
50/50, same as a coin-toss. On numerous occasions, "professional" traders, mutual fund portfolio managers, hedge fund managers have been beaten horribly by animals like monkeys and cats and by dart-throwing.
Just to show you that the "professionals" do NOT know better and they do NOT trade better. The only difference between us and them is:
1) They are playing with other people's money and win or lose, they get paid whereas for us, unless you have a day job, if we don't make money in the market, we get paid. And if you make losses, then like my mother would tell me, you are paying to trade.
2) They also have money to play with, so if something doesn't work, they have the money to try something else and eventually something will stick and they get lucky and they profit more to cover their losses just on the principle of limit theorem. For us, if we lose our investment, we won't have any more funds to trade to make back our losses; we are forever stuck with our losses and the conclusion that we are bad traders.
Just to show you that the "professionals" do NOT know better and they do NOT trade better. The only difference between us and them is:
1) They are playing with other people's money and win or lose, they get paid whereas for us, unless you have a day job, if we don't make money in the market, we get paid. And if you make losses, then like my mother would tell me, you are paying to trade.
2) They also have money to play with, so if something doesn't work, they have the money to try something else and eventually something will stick and they get lucky and they profit more to cover their losses just on the principle of limit theorem. For us, if we lose our investment, we won't have any more funds to trade to make back our losses; we are forever stuck with our losses and the conclusion that we are bad traders.
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From an article: http://www.lonestocktrader.com/make-money-trading-positive-expectancy/
The truth is that the very best traders out there are right only about 50% of the time or less: William O’Neil, Mark Minervini, Peter Brandt, Bill Lipschultz, Colm O’Shea, Ray Dalio, Bruce Kovner, etc…
Steven Cohen, one of the best stock traders out there who was also features in Stock Market Wizards and is mentoring traders said: “My best trader makes money only 63% of the time. Most traders make money only in the 50% to 55% range. That means you’re going to be wrong a lot. If that’s the case, you better make sure your losses are as small as they can be, and that your winners are bigger.”
The Profit/Loss Ratio
If we can’t achieve a consistently high win rate and are doomed to be right about 50% or less of the time, the secret simply is to make more money when you are right, than lose money when you are wrong.
The profit/loss ratio is your average win to your average loss. And if over a sequence of trades, you, on average, make more money than you lose, you make money over time despite being right only 50% of the time. This is how professional traders make money consistently.
And as opposed to the win rate which is outside of your control, you have much more influence over your profit/loss ratio. Indeed, you can control how much you will lose on a trade by using stop losses. You are the one who decide to enter a new position at a certain price following a certain setup and you are the one who decide where to place your stop loss. If like all the successful traders, you keep a neat track record of your trades, you should know your average profit % and average loss %. Based on that, you can easily adjust your stop loss level and type of trades you take, and put yourself in a position to make much more money when you’re right, than lose when wrong.
The truth is that the very best traders out there are right only about 50% of the time or less: William O’Neil, Mark Minervini, Peter Brandt, Bill Lipschultz, Colm O’Shea, Ray Dalio, Bruce Kovner, etc…
Steven Cohen, one of the best stock traders out there who was also features in Stock Market Wizards and is mentoring traders said: “My best trader makes money only 63% of the time. Most traders make money only in the 50% to 55% range. That means you’re going to be wrong a lot. If that’s the case, you better make sure your losses are as small as they can be, and that your winners are bigger.”
The Profit/Loss Ratio
If we can’t achieve a consistently high win rate and are doomed to be right about 50% or less of the time, the secret simply is to make more money when you are right, than lose money when you are wrong.
The profit/loss ratio is your average win to your average loss. And if over a sequence of trades, you, on average, make more money than you lose, you make money over time despite being right only 50% of the time. This is how professional traders make money consistently.
And as opposed to the win rate which is outside of your control, you have much more influence over your profit/loss ratio. Indeed, you can control how much you will lose on a trade by using stop losses. You are the one who decide to enter a new position at a certain price following a certain setup and you are the one who decide where to place your stop loss. If like all the successful traders, you keep a neat track record of your trades, you should know your average profit % and average loss %. Based on that, you can easily adjust your stop loss level and type of trades you take, and put yourself in a position to make much more money when you’re right, than lose when wrong.
This is what gives the No. 1 Golden Rule of trading: Let your profits run and cut your losses short. I think the difference between traders really comes down to who can let the profit run most frequently and by how much and who can correctly deduce it's a loss and cut it short most often.
You missed out the most critical factor I think, the risk department is in full swing at a firm. The new trader only has margin calls, or not enough margin to put on the next trade to "protect" him.
I could've been low balling the buy and hold investor, but I'm not backing down on the "day trader," claim. With a long enough time line, the variance on trading strategies employed by regular joe will kill almost all.
All over the range since returns only count.