What defines a successful strategy?

[kut2k2]

Quantitatively, I mean.

Here's an example:

Suppose you bought GE stock at the start of January 1999 and held it till yesterday (the highest adjusted close AFAICT). Your buy-and-hold gain would be 2.5% per annum.

So what is the smallest multiple of 2.5% per annum would you have to see from an active GE trading strategy to declare it a success (given all the commissions, effort, stress)?

Feel free to use another benchmark than buy-and-hold if you wish. But please stick to % gain rather than $ gain so everybody (rich, poor and inbetween) can benefit.

Thanks in advance for all constructive replies.

 

[2rosy]

> 2.5% per annum

 

[Metamega]

I've always considered the S&P 500 to be a good gauge. I think I saw the average gain on the S&P is between 7 and 8 percent per year. So in my mind, if you can't beat that return with active trading or investing, it's kind of a waste of time.

 

[kut2k2]

I've always considered the S&P 500 to be a good gauge. I think I saw the average gain on the S&P is between 7 and 8 percent per year. So in my mind, if you can't beat that return with active trading or investing, it's kind of a waste of time.

How much would you have to beat it by to consider yourself successful? Keep in mind all the commissions you'd be paying, as well as the stress of daytrading if you decide to trade that frequently.

 

[oraclewizard77]

Yes, but the point of trading is that you should make money if the market goes up, sideways, or down using margin to increase returns. If the market were to go down all of 2016, then a long only strategy would not work.

 

[DDR]

How much would you have to beat it by to consider yourself successful? Keep in mind all the commissions you'd be paying, as well as the stress of daytrading if you decide to trade that frequently.

What defines a successful strategy? :
Within each of us lies the answer, the success we lust for is a result and should not be the focus, focus on the process and success will follow. Great traders are not smarter they just have smarter habits. All master traders have mastered their impulses an inner conflicts. There are 4-5 stages in a traders progress read here and see where you fit in. http://vantagepointtrading.com/archives/10477
A successful strategy is based on the mindset of the trader, so what defines a successful strategy is how a trader prepares for a session how they think during it.
Following your trading plan is also part of the process. Understanding underlying price action on the left and seeing how it reflects to the right following and discerning what is happening in at moment. You and you alone are the strategy.
Apologies if I've not answered in the manner you were hoping. Peace

 

[Metamega]

Sorry, I should rephrase that. If I backrest a strategy which includes being short or long over multiple years, it should outperform the S&P per annum. This is of course over a period where the S&P has shown neutral, bull and bear markets.

I'd like to throw you a percent but I'm still a new trader myself and from what I've studied and seen. This number varies quite a bit.

Some traders do well with a wide array of strategies.

Maybe their system has a larger percentage of losers then winners, but their winners are larger then losers making them profitable. Some may have stategies where they might only make small profits on winning trades but their more right then wrong making them profitable.

This is a hard question to answer id say only having half a year of live trading under my belt.

This is just what I've grabbed from mostly chat with traders. A awesome podcast. I've learn that theirs multiple ways to trade profitable but most these traders have some of the same characteristics.

 

[kut2k2]

Yes, but the point of trading is that you should make money if the market goes up, sideways, or down using margin to increase returns. If the market were to go down all of 2016, then a long only strategy would not work.

True. During the 17 year span from Jan 1982 to Jan 1999, buy and hold on GE earned more than ten times as much per annum than it earns now. Ten+ times! The overall gain was 4,500%, compared to the measley 50% gain we've seen since Jan 1999. No wonder everybody was in the markets back then.

But market direction shouldn't matter to a good trader. So how much gain per annum (post-commissions) would you have to see for a trading strategy to be successful?

 

[kut2k2]

What defines a successful strategy? :
Within each of us lies the answer, the success we lust for is a result and should not be the focus, focus on the process and success will follow. Great traders are not smarter they just have smarter habits. All master traders have mastered their impulses an inner conflicts. There are 4-5 stages in a traders progress read here and see where you fit in. http://vantagepointtrading.com/archives/10477
A successful strategy is based on the mindset of the trader, so what defines a successful strategy is how a trader prepares for a session how they think during it.
Following your trading plan is also part of the process. Understanding underlying price action on the left and seeing how it reflects to the right following and discerning what is happening in at moment. You and you alone are the strategy.
Apologies if I've not answered in the manner you were hoping. Peace

Sorry but this is the nonsense I hear from some martial artists. "I don't study karate for fighting, I study karate for inner peace, self-awareness, yada, yada, blah, blah." That's a load of bollocks.

You practice martial arts for fighting skills.

You practice trading to make money.

All else is just static.

 

[kut2k2]

Sorry, I should rephrase that. If I backrest a strategy which includes being short or long over multiple years, it should outperform the S&P per annum. This is of course over a period where the S&P has shown neutral, bull and bear markets.

I'd like to throw you a percent but I'm still a new trader myself and from what I've studied and seen. This number varies quite a bit.

Some traders do well with a wide array of strategies.

Maybe their system has a larger percentage of losers then winners, but their winners are larger then losers making them profitable. Some may have stategies where they might only make small profits on winning trades but their more right then wrong making them profitable.

This is a hard question to answer id say only having half a year of live trading under my belt.

This is just what I've grabbed from mostly chat with traders. A awesome podcast. I've learn that theirs multiple ways to trade profitable but most these traders have some of the same characteristics.

Outperforming the S&P per annum (after commissions) is a worthy goal.