barjon
Legendary member
- Messages
- 10,752
- Likes
- 1,863
It's not so much the drawdown (although that may result) but the very limited margin of error as you seek to maintain 70%. That's where the extra risk lies.
It's not so much the drawdown (although that may result) but the very limited margin of error as you seek to maintain 70%. That's where the extra risk lies.
I am not in agreement with the notion of there being limited scope for error to maintain the 70 percent win rate. Trying to maintain the win rate itself is nonsensical. The only aspect where it makes sense is when you don't reward more than you risk. The way I trade, I generally only take 2:1 in a range condition and between 3:1 and 5:1on breakouts (referring to my intraday trades only).
Last week (Tue to Thurs) I did 12 trades and won 8. Half of the time when I close for a loss, I close before my stop. In last weeks trades i closed 3 before my stop was hit. This strategy does work against me with closed trades that turns in my direction. Oftentimes there are opportunities to get on board again so it is a winning risk reduction method as far as I am concerned.
Lets say I won 5 trades last week. Guaranteed I wouldn't have taken full hits on all of them which limits losses to an extent. I only take trades 2:1 in price ranges and that's only if I don't have any other opportunities. I look for anything with at least a 3:1 as my first preference.
You say its difficulty to maintain 70 percent due to limited margin for error. I say scr3w that, anything above paying for losers is all profit. You don't need to maintain it to be profitable unless you are operating with low risk reward.
70% it happens but is not usual for me, I oscillate between 50-60 %. I have a weekly goal and I am happy with 50%.
I do not have a set RR, I cover 1/2 at the next level and move my SL to BE and covered the rest if not stopped out at the end of the daily candle, once to twice a week I am lucky and I get rewarded with a good RR.
I think Fork's idea to get out before the SL is hit has merit but the all depends how we trade, it does not work for me because I am mostly looking for opening reversals or turning points, here after she reverses she can jiggle a bit or she can try to pick the "sitting duck" before she continues.
I think is hard to maintain 70% and that can be uncomfortable when the outcome is less, so I will opt for 30%.
I do not have a set RR, I cover 1/2 at the next level and move my SL to BE and covered the rest if not stopped out at the end of the daily candle, once to twice a week I am lucky and I get rewarded with a good RR.
I think Fork's idea to get out before the SL is hit has merit but the all depends how we trade, it does not work for me because I am mostly looking for opening reversals or turning points, here after she reverses she can jiggle a bit or she can try to pick the "sitting duck" before she continues.
I think is hard to maintain 70% and that can be uncomfortable when the outcome is less, so I will opt for 30%.
A little more info on why I cut before the stop. I like to get in at breakouts or reversals and most of the time price doesn't sit around for long. It only tends to hang around before big news or there is little interest in the move. When this happens I get out but I don't do it immediately, I use the wiggling about to my advantage and try get out break even but take what I can get.
barjon
Legendary member
- Messages
- 10,752
- Likes
- 1,863
I just reported what a professional commodity trader said. If he is right that professionals almost unerringly go for the 30% because of the risk factor then perhaps it's worth listening to.
Perhaps it's more applicable to commodities.
tar
Legendary member
- Messages
- 10,443
- Likes
- 1,314
Usually he is a commodity trading advisor aka CTA which doesn't necessarily mean that he just trades commodities but rather any futures contract and forex . Thats what they are called in the US .
http://www.nfa.futures.org/NFA-registration/cta/index.HTML
http://www.nfa.futures.org/NFA-registration/cta/index.HTML
No details, so obviously it's purely theoretical. If they perform equally well it's all the same isn't it.
“In theory, theory and practice are the same. In practice, they are not"
mb325
Well-known member
- Messages
- 473
- Likes
- 87
I wonder if you are barking up the wrong tree a bit here with regards to this 'commodity trader'. In some places he's called a 'professional commodity trader', in others he's called a CTA - these are completely different premises.
As Tar said above, a CTA is not restricted to just commodities but can delve into most financial instruments. More importantly however, CTAs are generally system-based trend-followers (in it's simplest form think MA x-over systems). They look to get on board trends early and ride them as far as they can. This explains the 30% as they will probably have multiple losing 'tests' of a new trend before latching onto a big winner which makes back their previous losses plus some. I'm not sure how relevant their system stats are with regards to your average retail traders risk management and would definitely prefer a 70% win-rate myself.
As Tar said above, a CTA is not restricted to just commodities but can delve into most financial instruments. More importantly however, CTAs are generally system-based trend-followers (in it's simplest form think MA x-over systems). They look to get on board trends early and ride them as far as they can. This explains the 30% as they will probably have multiple losing 'tests' of a new trend before latching onto a big winner which makes back their previous losses plus some. I'm not sure how relevant their system stats are with regards to your average retail traders risk management and would definitely prefer a 70% win-rate myself.
I don't know anyone with a 90 percent win rate. I p!55ed myself this week when browsing YouTube and finding some bloke stating he can show you how to make a million dollars in 3 years. His killshot was to say that you only need a 90 percent win rate and compounding.
barjon
Legendary member
- Messages
- 10,752
- Likes
- 1,863
The point is that from a risk management perspective it's not.
Interestingly, he went on to say that amateurs were even more likely to opt for 70% than did professionals going for 30%. I guess that points to the difference in the importance of risk management between the professionals and the amateurs.
Last edited:
How so?
barjon
Legendary member
- Messages
- 10,752
- Likes
- 1,863
Pretty much come full circle now
. http://www.trade2win.com/boards/psychology-risk-money-management/214600-30-70-a-2.html#post2726096
tar
Legendary member
- Messages
- 10,443
- Likes
- 1,314
Maybe you are not looking around enough , there are sh@@ load of traders with higher than 90% win rate but most of them are terrible traders . Go to zulutrade collective2 and the like you will see many traders with 90% win rate . Anyone can accomplish 90% win rate you just have to adjust your trading parameters its not rocket science .
You're not answering the question. You pointing me back to your original statement. The problem with the original statement is that it alludes to a win rate being directly related to risk management. So how is it directly related? Is it ones ability to manage a trade? Or is it the probability of the outcome? Or is it the risk reward ratio? Just stating a higher win rate comes with greater risk than a lower win rate is not enough.
I could even argue the other side of the coin. A 70 percent win rate would need to operate within the mean of an instrument's daily range. With that in mind it would need to operate around news events and not through them. A 30 percent system is probably a trend following system and therefore a position in that system is held through news events. By their nature, news events are the most risky time to trade, I am sure we all agree on this. So with that in mind, I could argue a point of the 30 percent win rate being accompanied by more risk than a 70 percent rate. The more time you spend exposed to the market, the more risk you have to survive through.
tar
Legendary member
- Messages
- 10,443
- Likes
- 1,314
Sure you can argue that but you are not a professional trader .
How do you know what I am or aren't for that matter Tar?
How can you generalise that a 70 percent win rate would be mostly in the red?
Do you have a crystal ball that shows you the parameters and statistics of every strategy in existence that might have a 70 percent win rate. (For the record I am not advocating 70 percent day in, day out, but it seems with you I need to be vibrantly expressive to leave little room for those assumptions you avidly make.
Please do spill the beans sir on your forecast for the next 10 years.
How can you generalise that a 70 percent win rate would be mostly in the red?
Do you have a crystal ball that shows you the parameters and statistics of every strategy in existence that might have a 70 percent win rate. (For the record I am not advocating 70 percent day in, day out, but it seems with you I need to be vibrantly expressive to leave little room for those assumptions you avidly make.
Please do spill the beans sir on your forecast for the next 10 years.
