Walters Aproach

[Anonymous]

This is the bane of the day trader.

If you position or swing trade, you do not have to win more than you lose.

Suppose you have a system that wins only 4 out of 10 times, or 40%. On those winning trades you win 2000 each. Now on the other 6 times you lose 500 per.:

4 wins @ 2000=8000
6 losses@ 500=3000
net amount=+5000

You can be wrong more than you are right and still make money. Most of the "market wizards" fall into this camp. Long term position traders who don't have high winning percentages, but know how to keep losses small in comparison to winners. One thing that separates them from the newbies, and those that fail, they are willing to take that 5th signal even after the last four failed. By this time, the newbie is already looking for a new secret indicator or method to beat the market.

For the day trader things are inherently more difficult. The percentage of winners needs to be higher than the percentage of losers. This is basically because the wins will tend to be smaller and the amount of trades taken will increase. Which of course really means more opportunity to put capital at risk. Successful day traders have to have a better than 50% win ratio. If you position trade, yes you could basically throw darts at a board. As long as you had the ability to cut the losses and let the profits ride (sometimes a cliché is a cliché because it's true). As a day trader that number has to be around 65-70% winners. For scalpers it is even higher. Which is why so few people make it as scalpers.

While I would agree that most technical analysis does not work, I find it hard to believe that nobody can do better than 50/50. That is no better than flipping a coin. If you are a long term position trader that would be okay. Short term traders need more. That short term traders do exist and can achieve success would imply that it is possible to reach a higher percentage. 80-90%, well that's for the system vendors and holy grail hucksters..........

[walterw]

Pivotprofiler : My personal experience actually its a 50/50 performance on my technical aproach.... every 10 trades I normally get stopped 5 off them and the other 5 are succesfull, what keeps me alive and growing its that I am having quite tight stops "in the argument" and long lived trails that give me a very nice positive difference... I could still even have more stops and still be positive... the key is taking trades that will risk 1/4 off your normal positive trail average... if you dont have that RRR in view... I prefer not to take the trade... To establish this "potencials" I use S&R type studies... The truth is that very few good trades make me succesfull... the rest are just part off the promediating game... the most hard part for newbies its the psicological toll this takes... cheers Walter.