Why Trading is so Hard
- Thread starter John9999
- Start date
I subscribe to someone who built complex algos and they posted something yesterday explaining that the markets use multiple timeframes to cause events along with shifting the entry points around. Basically if you do everything 100% correctly another timeframe may break it, if you don't use stops one day it will destroy your account, and if you do use stops it will be a slow drain unless you decrease the number of trades down to near zero. Meaning if you don't trade like you're in the slow lane at some point you will fail.
If another timeframe breaks it, it means you did not do everything 100% correct.
Sure. Quality execution is very hard. Yet I am somehow managing a fair amount of capital in a professional setting and seem to be eeking out a living. Could you boast the same, with your win rates and fries orders?
Back to the concept of the win rate. I've yet to see any institutional trader that tracks his win rates. Most people have an intuitive grasp of the skewed distribution and care about the overall expectation, sharpe/sortino and PnL/tradeval. In this business, a lot of times you have to figure out how to trade less, not more and optimizing for win rates is definitely not the way to get there.
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Lol i wouldn’t think optimizing to have a higher loss rate would very helpful. Certainly not the way to get there. Trading less is fine but losing more, while trading less, is generally not good. Nothing wrong with trading less and having a high win rate as long as one is not cutting profits short.
It is not a OR THIS OR THAT question. It is a THIS AND THAT question. You should trade less and have more winning trades.
I know you will learn nothing from me, so learn it from @volpri , who tells basically the same.
I posted already earlier that I try to reduce the number of trades and even increase profitability.
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This video shows clearly the idiocy of citizens with guns. There are millions of guns in the US to "protect the citizens", but not 1 of theses pranks got shot. Everybody ran away.
I would take my gun and shoot these clowns. They would quickly understand that what I did was not a prank.
It's not as simple as you make it sound. If you are trying to improve your win rate, chance are you will be increasing the degree of negative selection on your losing trades. I.e. the win rate comes at the expense of the skew because you are providing some form of risk premium to the market (liquidity, convexity, etc). If you are working to reduce negative selection, that improvement usually comes at the expense of your win rate.
For a strategy reasonable frequency of trading and reasonable probability of payoff you primarily want to optimize the trade-off between the risk-adjusted expectation (*) and profit per trade value. I'd only care about the win rate (a.k.a. probability of payoff) when you expect to have a really low trade count (e.g. corporate event strategies) or really low probability of winning (e.g. buying out of the money options).
(*) in whatever form you like, Sharpe, Sortino, Calmar etc
PS. The whole things sadly devolved into a shouting match, partly because of me and partly because of other participants.
How can you improve your winrate:
If you succeed in any of them or even in all of them, you will never be increasing the degree of negative selection on your losing trades. In fact that is the aim of the improvement.
If you are really successful your win rate will not take a dive. You will improve profits of winning trades and/or reduce the losses of losing trades. Or even delete losing trades completely.
Each trader should do his own job and see his results. Only if there is an improvement he should apply the improvement, if there is no improvement he should keep things as they are.
The logic to be followed is as simple as it sounds. Put it in practice is another piece of cake.
- Better entries and better exits. You will be stopped out less as the better entries give you more space, and maybe you can even use tighter stops. This can never have a negative impact on your trading.
- Trading less by eliminating bad trades by improving your selection criteria. This can never have a negative impact on your trading.
- Trading more by catching additional profitable waves. This can never have a negative impact on your trading.
If you succeed in any of them or even in all of them, you will never be increasing the degree of negative selection on your losing trades. In fact that is the aim of the improvement.
If you are really successful your win rate will not take a dive. You will improve profits of winning trades and/or reduce the losses of losing trades. Or even delete losing trades completely.
Each trader should do his own job and see his results. Only if there is an improvement he should apply the improvement, if there is no improvement he should keep things as they are.
The logic to be followed is as simple as it sounds. Put it in practice is another piece of cake.