Tongue in cheek my friends... First, to those who were hoping for the grail, this ain't it. But if reading though discussion on this thread makes a few light bulbs turn on... That'll make my and your day alike I wanted to post this to Psychology because "the secret" deals with greed, fear, discipline etc. I think it is important to realize if the Holy Grail really did exist, some elementary school math teacher would have figured it out by now and made millions on a book deal. To those who are still looking, I hope your misery ends soon. For the time being, just take a walk with me! --For Discussion-- (below) Do you wanna know why (almost all) systems that have high win rates aren't profitable long term??Fat tails! Market returns ARE NOT normally distributed (proven). Markets are constantly in a state of being overbought or oversold, thus creating big fat tails. (If you are unfamiliar with the term I highly recommend reading about it.) The reason your 5 pip or 6 tick profit can not cover the occasional 100 pip/tick loss is because you (and every trader trading this way) will experience greater aggregate loss over the long run, due to these big fat tails. IF markets were normally distributed, your 5 pip profits would be eaten up by an occasional 100 pip loss, but only to the extent of breaking even over the long run (less commish and slippage). Yet almost ALL these systems loose money. And it is simply because you are guaranteed by fat tailed returns to hit that 100 tick loss more often than normal.. Are you ready for "the secret"? (And some of you might get mad since this isn't really a genius idea). Flip your profit/loss around. What does this get you? A guaranteed greater chance of those 100 tick winners paying for all those 5 tick losses, commission, slippage etc. All thanks to your friend the fat tail. YES risk management is still vital. YES discipline and sticking to the plan are vital. NO (in reality) it's not just as easy as a simple flip. But IMHO, when a trader lives and breathes the greatest trading advice of all time: "Cut your Losses and Let Profits Run"... This is when long term profitability sets in. I don't care where your entries are. I don't care what indicators you use. I don't care what markets you are trading. Tell your ego to shut the hell up! Who gives a crap about high win rates. You wanna make some money? HOLD THOSE WINNERS BABY! A system that wins 90% of the time with a 5 tick profit and a 100 tick loss is a looser long term. 90 * 5 ticks = 450 profit, 10 * 100 ticks = 1000 Loss. 450 - 1000 = -550 Flip that bad boy around.. 10 * 100 ticks = 1000 Profit. 90 * 5 ticks = 450 loss. 1000 - 450 = +550 (These numbers are just food for thought) I'd like to close with a few quote that mean a lot to me. These quotes are lifetimes of experience summed up in a few sentences (I hope they resonate with you too). "It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong." - George Soros "Watch the costs and the profits take care of themselves." - Carnegie "The elements of good trading are cutting losses, cutting losses, and cutting losses." - Ed Seykota For transparency I have a 28% win rate. My risk:reward is 1:Infinity (with trailing stop and a take half profit point, and on the rare home-run a discretionary full exit point).
Seriously, "looser"? It's "loser". I try and I try but I have to either petition the dictionary association to change the spelling or get everybody to learn and it's a lot on one guy's shoulders...