Is trading just a numbers game?

[Gaterz]

I'm new to the whole trading world so forgive my ignorance. I've read quite a few books already and have checked out so many websites that my head is a bit scrambled. I've only paper traded and that is only for about 2 months. However, let me tell you what I've gotten out of this whole thing so far and you veterans of the trading world can tell me if I'm in the ballpark or full of crap.

I'm going to just dumb it down for simplicity sake. I realize that there is more to this than how I'm going to write it but you experienced traders should understand what I'm trying to get across.

1) Find a trading time frame and system/strategy that you are comfortable with.
2) Input your criteria into a stock screener
3) Out pops 100* results
4) Go thru the 100 charts looking for the perfect setups for your "system"
5) Find 15-20* charts/setups/trades that you like
6) Put into play 10* of the best

From what I've read, winning trades range from 45%-65%, We'll use 50% (I know money mgmt has alot to do with this. You can have 45% wins and still make money and at the same time have 65% wins and lose money. THIS IS SIMPLIFIED)

7) 5 winners, 5 losers
(because of the stop loss that you've placed on your trades, all losses are in the single digits percentage-wise)

8) Of the 5 winners, you are hoping that 1,2, maybe 3 of them will be winners of some significance to not only cover your 5 losers, but to put you into the black for this session, or week, or month. Whatever your time frame may be.
9) Repeat

* all numbers and steps have been greatly simplified

Now I've not read the actual words saying that, but this is what I've garnered from between the lines.

Am I close or am I full of crap?

 

[P.I.T.]

You are close to it But you missed out a few important points, risk management, money management, objective and your backtesting.

Even you found a strategy/system that suits your personality, we still need to figure it out how much are we willing to risk at any given trade. Do you aim for income generated by your trading or do you treat it as an investment for your retirement account? If you demand for income, you might need to think of how often do you want to withdraw your profits? Monthly? Quarterly? Yearly?

Lastly, we need to backtest our system so that we know our max drawdown, profit factor, risk of ruin, profitability, winning percentage, etc. Without all these, we hardly able to determine how much risk we are willing to accept on each trade.

Just speaking with my limited experience. All the best, buddy

 

[Solas0077]

This is a little mathematical but it will give you a starting good idea in what type of game you are involved. Trading is exciting and those who succeed at it make it big but many lose everything. There are no guarantees, the risks are great.

One reason that scanning is problematic is because the defined criteria may point to a chart where other, undefined, criteria are more important and the correlation with the criteria used is spurious. For example you scan for 50 dma > 200dma today, but the rsi is at 85 and you did not include that. If you start including many criteria you do not get anything. Only if you can backtest the criteria you can be a little more certain but even then there is no guarantee. But definitively, this is a numbers game. Good luck to you.

 

[hkmt]

10 positions sounds a bit too much tbh… I would suggest the half of it at max.

The more positions you have, the more difficult it becomes to control..

 

[Gaterz]

10 positions, 5 positions, 1 position at a time, what's the difference? At some point you will be in X number of positions...

There was so much of the nuances that I left out just TO SIMPLIFY the gist of the whole trading game...I was hoping people wouldn't point out ALL the minute details of trading. This was GREATLY SIMPLIFIED.

The point to my post was the fact that trading is a numbers game. Like dating. You're going to have to date X number of girls until you find one that you can be with for a while. 1,2 winners out of X number. Most were bad, some were ok, a few were acceptable, and 1,2 were GREAT!!!

Got it? That make more sense?

 

[PieterSteidelmayer]

The point to my post was the fact that trading is a numbers game. Like dating. You're going to have to date X number of girls until you find one that you can be with for a while. 1,2 winners out of X number. Most were bad, some were ok, a few were acceptable, and 1,2 were GREAT!!!

Except when you go on a date there is a very low probability that the first girl you date will mug you for all your money and shove a large vegetable up your bottom. (unless you're in Kiev)

That's the difference between dating and trading.

Got it? Does that make more sense?

 

[Gaterz]

Ouch, sounds like you're speaking from experience. Hope lube was used.

It sounds like I should have included every minute detail of a trade in the OP.

Did I come to the wrong website?

 

[timsk]

Did I come to the wrong website?

Not at all Gaterz - welcome aboard!


The issue here, I suspect, is that it's all too easy to make sweeping generalizations about trading - generalizations that result in one getting egg on one's face. That comes from two sources: getting a pasting in the market or getting a pasting from our esteemed fellow members on forums like T2W. And, yes, I speak from experience in both instances!

Broadly speaking, I suspect that most subscribers to your thread can identify with your OP and agree with much that's in it. But members will, understandably, be very reluctant to say: 'yeah, you've absolutely nailed it - it's just a numbers game - now go make your fortune', because it just ain't that simple. Sadly. However, in an attempt to provide you with the answer your asking for: in so far as trading is about having a positive expectancy then, yes, it's a largely a numbers game.
Tim.

 

[kimo'sabby]

i've read quite a few books already and have checked out so many websites that my head is a bit scrambled. I've only paper traded and that is only for about 2 months. However, let me tell you what I've gotten out of this whole thing so far...


I think you've said too much. Good luck.

 

[PieterSteidelmayer]

Ouch, sounds like you're speaking from experience. Hope lube was used.

Never been in that position myself, but like to think, if I were, I'd take it as nature intended.

It sounds like I should have included every minute detail of a trade in the OP.

Wouldn't make any difference. Loads of detail, no detail. You're way too hazy for it to have made any difference. If you think it's a numbers game then go ahead and trade that way. Find out if you're right. No point asking people here and then telling them where they're wrong in content or style or manner of delivery or when they ask you to fill in the gaps that you don't even seem to know are there.

Did I come to the wrong website?

You came with the wrong attitude. In which case, any website will be the wrong one.

Check out your first sentence of the first post. Best thing you could of done after that was just keep quiet and see what anyone was willing to give you.

 

[brandmtrade]

Not a bad start. Personally, I don't put ~10 trades into play. I focus on one that I really like and fits my criteria best and study that chart like crazy. Also, sticking to your rules that you set is HUGE and has been a problem for me the last couple weeks and you know that it can be a problem for all traders at some point. Set your rules and stick to them! I mainly deal with stocks that are below $5/share (500-1000 shares held at a time) so a couple cents of an error is a decent blow to me. Really, setting well thought out rules and sticking to them is your key to success in this game. Also, trading with real money is A LOT different. The less emotion; the better. Good luck man!