60/50

[Porks]

I've been studying trading for a few years, and have finally decided to take the plunge and start trading.

There's a couple of reasons:

1) I know a highly successful trader who has consistently made big money for 2 1/2 years, so I've seen it can be done.

2) I believe you don't need to have a great system to make silly money, here's my thinking :

If you have a system thats
- right only 60% of the time
- wins 50% more than it loses (on average)
and
- risk no more than 5% of your capital
- 2 trades a week
- starting with £10,000

Week 1-5 £10,000
wins 750,750,750,750,750,750=4500
loses 500,500,500,500=2000
Profit 2500

Week 6-10 £12,500
wins 937,937,937,937,937,937=5622
loses 625,625,625,625=2500
Profit 3122

etc. up to week 50 = £74,506 or 745% return in under 1 year.



Are my calculations correct ?

Does anyone know a system that gives 50/60 performance ?

 

[JonnyT]

There's the crunch, you have to have a system...

JonnyT

 

[bracke]

Porks

Have you asked the highly successful trader that you know, he must surely be in an excellent position to advise you.

You appear to assume that wins and losses are equally distributed in time - they may not be and risking 5% at a time would halve your capital if you have 10 losing bets in a row and yes it can happen.

Why don't you paper trade your system for a while and observe the results.



Regards

bracke

 

[divinci]

Porks have a look in the systems forum :
http://www.trade2win.co.uk/boards/forumdisplay.php?s=&forumid=90

 

[Porks]

Thanks for the quick responses.

Bracke, I'd love to trade his way but alot of what he does is instinctive, and he breaks a major rule ...

- If he makes a buy and the price falls, then he buys more

Everything I've read says this is a big no-no, what do you guys think ?

 

[divinci]

very big no-no

The price is falling......... what does he say justifies him buying stock? Would he buy it if he didnt have any of that stock already?

 

[TheBramble]

Regardless of whichever system(s) you choose, with the risk and money management criteria you propose, you'll be broke within 12 months.

5% is WAY too high a percentage to be risking on any trade. Even if it's got a 60% chance of winning.

Think about it - How many losing trades in a row do you need to get wiped out?

And even if you don't hit that losing streak, how about just a few losses in a row.

With such a VERY low Reward/Risk ratio it would take you along time (never?) to recover.

Work on your Risk & Money Management (plenty of good posts on t2w on that subject) and worry about a system as of secondary importance.

BTW - Your trader friend is on the road to being an ex-trader if he/she's averaging down. Big mistake.

 

[bracke]

Porks

I can state from experience that averaging up/down is a dangerous game. On occasions it worked for me which with hindsight was a pity because I thought that it was the correct thing to do. Eventually it caught up with me and cost me dearly.

You get into a mindset that it can't go up/down anymore but beleive me it can!

Maybe my instinct is not good enough. I have learned the hard way not to do it again.

The best thing that has happened to my trading was finding this site I suggest you spend several months visiting it before you start trading and in the early days look at 'first steps' they could save you a lot of money.

Regards

bracke

 

[BBB]

Yea - averaging down doesn't sit with me either. But I'll tell you one thing, a lot of what I do may not apper to be common sense at first glance and often goes against what we intuitively would think.

May be this guy knows something we dont? May be he only does so under circumstance. e.g he may buy 1 at $4 and 3 at $2, with his stop at $1 for the whole lot. He gets in at $4 to make sure he's in. If price goes down, then buy more if still within his risk tolerance to be 'loaded up'. If he's right....bingo, if he's wrong he loses - it happens. If price rockets before he gets the rest on, at least he's got a bite hold????? Just thinking...

 

[Porks]

BBB,

I agree that you must do something different to conventional wisdom in order not to be in the 95% group of traders who lose money.

Just yesterday my trader friend entered a the market prepared to buy down to a support level from 3 months ago, it fell a couple of points before bouncing, closing today with a over 2% profit.

He sends me all his trades real-time, and his success ratio is unbelievable. His main play is in only one share, which he studied non-stop for 6 months before starting to trade.

I'd love to dare go against convention and trade his method, but I can't get Jesse Livermore's statement 'Never average down' out of my mind.

What would you do ?

Thanks for everyone's input.

 

[TheBramble]

Porks, averaging down, in the long run, does not pay.

You say they're giving you their trades n real-time. I doubt it. Having experienced real-time trading in PalTalk rooms, it's almost impossible to trade AND say/type what you doing. Not at the same time. And those seconds/minutes do make a difference.

And do they also give you the exit signals in real-time? They're just as important as the entry.

The other factor of following someone else's trading signals (real-time or not) is (a) what fun is that? It's just money. And (b) what if they get hit by the Clapham Omnibus...

Back to stacking shelves in Tesco for you...(or brain surgery or whatever it is you would otherwise be profitably doing with your time...)