Winners / losers statistics

[backman]

so what am i missing here?

"To make money you need a system that generates profits. A risk management will never do that; it will only limit losses."


"To trade profitable you need a "system". The system should generate profits. But as systems are never perfect and markets can be unpredictable one needs a system to get out of a trade when the system fails."


If it's a "system", then, to my way of thinking, profit targets and risk managment are simply opposite sides of the same coin....elsewise, one could sit in positions with 20%+ drawdown, not call them a loss until the trade is closed, wait for breakeven (3 months? 2 years?...), and claim some elusive win rate, ignoring the drawdown sustained.....

and, by "system" do you mean "rules could be written to autotrade it", or something more discretionary, like shorting ABLE at 14.5, and closing one's eyes for 6-10 days, waiting for retracement to the 8's

of course, my time frame ( day to 3 days) may be different from yours, and perhaps that would explain the difference in perceptions, or am i missing something more straightforward

 

[Alexis]

Are "losers" only day traders, or swing traders as well?(for the 95% figure)

 

[eitanhir]

read this
http://faculty.haas.berkeley.edu/odean/papers/Day Traders/Day Trade 040330.pdf

the abstract of this paper says it all. (80% losing money)

 

[Ripley]

The question comes down to, would you rather be in the 5% that splits the 95% of the money, or the 50% that splits the 50% of the money.

 

[nononsense]

Quote from FuturesTrader71:

Not likely. The biggest reason for failure is risk management.. period. This may mean taking small winners and many big losses. However, the average guy does not account for the fact that to win in this you have to always protect the down side first and the upside takes care of itself. This means that you cannot be undercapitalized, you cannot continue to trade while losing, you cannot risk much on every trade, etc etc. The specifics of these depend on the market, product and style traded.

As I have said many times here, a trader's worst enemy is longevity (time). For most traders, by the time they think they have it figured out, they have run out of money. The only way to control this is through diligent risk management.

Candletrader wrote: "Running profits is an often quoted but all too vague term..."
Put "risk management" into the same holy cow category. It's a crutch for people of the 90-95% batch. Don't need risk management at all in a well designed trading system. Simply put, you could say that it's built into the strategy. Don't need to stick anything on, it will simply make you a loser.

 

[nononsense]

Quote from spike500:

The only thing risk management does is manage the risk. That's why it's called risk management.

To make money you need a system that generates profits. A risk management will never do that; it will only limit losses.

To trade profitable you need a "system". The system should generate profits. But as systems are never perfect and markets can be unpredictable one needs a system to get out of a trade when the system fails.

So a bad system with a very good risk management might never be profitable.

RIGHT!

 

[FredBloggs]

Quote from Alexis:

Are "losers" only day traders, or swing traders as well?(for the 95% figure)

style has nothing to do with it. its all in the attitude & discipline.

 

[illiquid]

When I was still trading "systems", there was always that question in the back of my mind as to what I would do if my perceived "edge" went away, as they all inevitably must. Now I trade fully incorporating that expectation of change into how I perceive markets and how they function, e.g., as discounting mechanisms. In terms of edge, I think that's my best bet for longevity.

 

[FuturesTrader71]

Quote from nononsense:

Candletrader wrote: "Running profits is an often quoted but all too vague term..."
Put "risk management" into the same holy cow category. It's a crutch for people of the 90-95% batch. Don't need risk management at all in a well designed trading system. Simply put, you could say that it's built into the strategy. Don't need to stick anything on, it will simply make you a loser.

Hmmm.... now that is news to me. I would like to hear about a successful system that does not have a stop order and an exit plan. That is part of risk management. We can go in circles forever with the meaning of this term. The fact is: every system has losses. You have to manage these and be diligent about addressing them more aggressively than whether or not you left a few ticks of profit on the table on your exit. Come on.... anyone who is making money understands that not having a per trade loss limit, daily loss limit, account loss limit, etc is sooner or later going to hit a rough patch and must fall back on that plan. Systems work and then they don't and then they might work again. Your risk plan prevents you from keeping a system at play when it is clearly not working.

I agree with candletrader in that "Letting profits run" is a vague term. That is a cliche and is not specific enough. At the same time, it can only be specific to the particular trader. There are many such cliches in trading. However, managing your risk is not one of them. How many guys have discovered an edge, made millions and then dumped it back into the markets? Again, this is a high loss probability game and one must be on guard to protect his account/profits before he dreams about his next home-run trade.

 

[Alexis]

Look,

I'm not particularly rich or clever.

I "swing" trade for nearly two years and I'm making little money.(30% in 20 months). And it's not especially difficult, I follow (and make evolve, but it's not compulsory) my rules.

You won't make me believe that 95% of swing traders lose money. ID is probably harsher...