Yeah your right. You could make money with any win rate. Depending on your management of stops and profit targets
What Are The Odds Of Scoring A Winning Trade?
- Thread starter Stocktracker
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old saying:if the grandmother would had a beard she would have been a grandfather.
warren buffett makes 10:1 and 20:! over a long time. you think you are going to make it over the short term. try for a more realistic wet dream.
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L
lovethetrade
What Are The Odds Of Scoring A Winning Trade?
Approximately 63.3% for all traders and trading systems in all market conditions.
Approximately 63.3% for all traders and trading systems in all market conditions.
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Here is my thesis:
1. Because of the upward bias of the stock market, day trading should have a slightly better than 50/50 chance of making a winning trade. In fact I tried this back test sometime ago: Took the daily historical prices of SPY, bought at open and sold at close every day. At the end of each several 10 year periods I tested (including 2008-09), ignoring commissions, I was actually profitable! However, the odds of positive outcome was only slightly better than 50%.
2. Then why would 90%+ of traders lose money? I think most of them got wipe out by unfortunate random events of huge drawdowns which statistically is unavoidable and trading sizes.
3. So, I am beginning to appreciate those that expounded keeping their trading amount small (1%-2%) as risk management to reduce the risk of a wipe out.
4. The other day, in the post on Kelly Criterion, I finally found the mathematical support of those that said one should trade small: For a "coin toss" that has a ~ 51% winning (about what I found in my SPY daily back test), the optimal amount of each "toss/trade" should be = 0.51 - 0.49 or 0.02 of capital => no more than 2% of capitals should be placed on each trade!
So, it is not luck but mathematics.
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It was for the sake of an example, as you full well know.
If you want to lower the tone to derogatory comments then find someone else to talk to before making yourself seem quite so small
your example was a waste. you have a short fuse.it will not enhance your ability to trade.It was for the sake of an example, as you full well know.
If you want to lower the tone to derogatory comments then find someone else to talk to before making yourself seem quite so small
%%Here is my thesis:
1. Because of the upward bias of the stock market, day trading should have a slightly better than 50/50 chance of making a winning trade. In fact I tried this back test sometime ago: Took the daily historical prices of SPY, bought at open and sold at close every day. At the end of each several 10 year periods I tested (including 2008-09), ignoring commissions, I was actually profitable! However, the odds of positive outcome was only slightly better than 50%.
2. Then why would 90%+ of traders lose money? I think most of them got wipe out by unfortunate random events of huge drawdowns which statistically is unavoidable and trading sizes.
3. So, I am beginning to appreciate those that expounded keeping their trading amount small (1%-2%) as risk management to reduce the risk of a wipe out.
4. The other day, in the post on Kelly Criterion, I finally found the mathematical support of those that said one should trade small: For a "coin toss" that has a ~ 51% winning (about what I found in my SPY daily back test), the optimal amount of each "toss/trade" should be = 0.51 - 0.49 or 0.02 of capital => no more than 2% of capitals should be placed on each trade!
So, it is not luck but mathematics.
Start of a good system,ironC;
not that i would buy every day+ not buy in a bear market @ every open. So its better than 50%; some do much better with less a than 50% win rate. Markets do trend.............................................................................................