It's really very simple. If one is going to use an indicator as a trigger, then he must decide at the very least what bar interval he's going to use to determine whether or not that trigger has been pulled since the character of the indicator will change with each interval, that is, a divergence on a small interval will vanish if one uses a larger interval, e.g., the 5m and the weekly. If he is going to rely on divergence, he must be clear and specific on what he means by "divergence". In this case, is it the first uptick in the histogram? The first uptick in the MACD line? The first cross? Are there other factors which must be considered before deciding whether or not to act on this "divergence"? Looking at CL on the daily, for example, which is reasonable considering the desire to be in on "big moves", the divergences in the histogram and the MACD took place in December (the histogram diverged on the weekly in December as well, while the MACD did not begin to uptick until January)? If one just now started looking at them, that would explain why those divergences are being ignored. Otherwise, the reasons for their being ignored are justified, particularly since divergences can't be used as triggers if they are long past and are now irrelevant. On the other hand, if one had been following CL and had acted on those divergences, he would have been far too early. In this case, therefore, the simpler option is to ignore the indicator altogether since it has no demonstrable value in making a trading decision. It should be clear by now that indicators lag. They have to. As to their forecasting ability, that is in question as well (see above). If one were to rely on price action, on the other hand, the earliest he would have been in would be the higher swing high after the stride was broken (since it is the higher swing high that signals the break). This may or may not have been too early depending on the trader's risk tolerance, particularly information risk. But he would definitely have been in CL on or immediately after the double bottom at 44 which occurred three weeks ago and which exists regardless of the bar interval or whatever indicator one might be looking at. 44 is 44. To enter now puts one halfway up into the 44-56 range, which is much too vulnerable a position for a PA trader. Hindsight? No. I posted all this two months ago. Ahead of time. In advance. Professionals trade with the dominant market group, while beginners try to forecast the future. -- Alexander Elder
Most people trade fairly simple systems by using standard indicators and standard settings. For this group of people it is probably, but not necessarily, true that they have a lower win rate and try to make profits in a few bigger moves. There is a logical explanation for this: the system is only a basic system. Compare it to a switch on an airco that you can switch ON or OFF. If you have a more sophisticated system things can be quite different. In more sophisticated systems there are more rules and there is more information available. So evolution of win rate can be completely different. This is like an airco that you can switch ON or OFF, but you can also say how long he should work, at what temperature he should stop working or go to a lower regime..... One of the bashers showed an example of a divergence in a MACD and the signal what he should do. I checked that same signal and at that point I have 8 different possible trading scenario's I can enter into. Each scenario has a number of subscenario's. My systems gives me the optimal scenario based on the information it has. I know already more about the strength than the basher, have a more optimal tradeplan for this trade, probably a better entry price, and on top of that my systems monitors constantly the evolution of the market. If the situation of the market changes, which is many times the case, my systems propose to change to another, more appropriate scenario. Switching does not mean exit, but adapt the tradeplan to follow. Markets are dynamic, not static. What is OK now can be wrong in 10 minutes. My systems base everything on the probabilities of each scenario. Each scenario has it's own probabilities within the global system. My win rate is not inversely related to my profits for the simple reason that I can improve each scenario or subscenario without interfering in the results of the other scenario's or sub scenario's. So I improve only the concerning part and don't touch all the rest. For simple trading systems this is completely different. There mostly settings are changed for the whole system, which influences ALL the trades. So the behavior of the COMPLETE system changes, giving completely different returns, whereas in my case only a small (not well functioning) part is changed. I only try to change the not well performing (losing) parts into profitable ones if I can find them. That's why the bashers say there is an inverse correlation, and I don't agree. But I speak from my personal experience. The reason for this is very simple: I know only my own systems, so I cannot judge on other's. But there are bashers who are not only very good traders but they even have the ability to see into my systems. So they can judge everybody without any problem. LOL.
What is possible and what is not? There are always people who can achieve what most other's cannot. For some people this statement is not correct because, as they don't know personally anybody who could do this, it is impossible to be done (to quote Marketsurfer). 14 years old with BMW V8 4.4 liter +500HP Or a Moped beating a Lamborghini... The same applies in trading, as in everything else....
Thanks for the long, meaningless post. You still don't get it. But nice xmas tree in the graphic. Big profits are linked to big profits, whether or not by a high win rate. Always, always. There is no linkage. Now is it possible to win big with a high win rate. Sure. Is it likely, no. Read any of the Market Wizard books. Most of the all time best traders ever explain why they don't try for a high win rate. They try to win as often as they can within their system. But high profits are a sign of success not a high win rate. WTF does it matter to win 90% of the time if the wins are comparatively small dollarwise to someone else who doesn't have a high rate. Two traders do a 100 trades apiece - one wins 84% of the time for a total of $1000 - the other wins 48% of the time for a total of $3000. Who did better? Here is a quote from New Market Wizards (that I was lucky enough to do a screen grab from another site rather than type the whole damn thing) which maybe will make the point clearer: One common adage on this subject that is completely wrongheaded is: you can’t go broke taking profits. {often trying to have a high win rate*} That’s precisely how many traders do go broke. While amateurs go broke by taking large losses, professionals go broke by taking small profits. The problem in a nutshell is that human nature does not operate to maximize gain but rather to maximize the chance of gain. The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance. – William Eckhardt *I added this
Thanks for the long, meaningless post. You still don't get it. But nice xmas tree in the graphic. The fact that it is meaningless for you tells a lot about your ability to read and understand English. You clearly said there is an inverse correlation, so lower win rate means higher profits. But with a very low win rate (ZERO) you get in trouble. Your silence and inability to give me some answer tells a lot if not everything. Maybe try to find the answer in The Market Wizards. Or in the Wizards of Oz??? Big profits are linked to big profits, whether or not by a high win rate. Always, always. There is no linkage. It is not because YOU don't see the link that there cannot be a link (depending from the trading system used). I don't go for high win rates, high win rates are the result of the way I organize my trading. I explained why most people don't see this phenomena in their win rate. You spoke clearly many times about an inevitable inverse correlation. And now you say:There is no linkage. LOL. You should know what you want: or there is an inverse correlation , or there is no linkage at all. Or did you change your opinion after reading The Market Wizards? Now is it possible to win big with a high win rate. Sure. Is it likely, no. Is it impossible? NO! But for you not likely equals impossible. This (lack of) logic will get you in trouble when trading if unlikely equals impossible. Read any of the Market Wizard books. Most of the all time best traders ever explain why they don't try for a high win rate. They try to win as often as they can within their system. But high profits are a sign of success not a high win rate. High profits combined with high win rates are a sign of improved success. It shows that first of all there are big profits, and secondly that these big profits come from very good entry- and exit signals. If not the win rate would be much lower. Don't take The Market Wizards as a good reference. Markets are now completely different. What was possible at that time is most of the time not working anymore. It is even not sure that these traders can make nowadays the returns they made at that time. The Rothschilds made also a huge fortune in trading a few hundred years ago. If they would use the same system now it would not work at all. Using pigeons, like the Rothschild did, to spread information will not work anymore. WTF does it matter to win 90% of the time if the wins are comparatively small dollarwise to someone else who doesn't have a high rate. Two traders do a 100 trades apiece - one wins 84% of the time for a total of $1000 - the other wins 48% of the time for a total of $3000. Who did better? It depends of the way you bring the story: Two traders do a 100 trades apiece - one wins 84% of the time for a total of $1000000000000000 - the other wins 48% of the time for a total of $3. Who did better? the first one!! Very clear! One common adage on this subject that is completely wrongheaded is: you can't go broke taking profits. {often trying to have a high win rate*} That's precisely how many traders do go broke. While amateurs go broke by taking large losses, professionals go broke by taking small profits. The problem in a nutshell is that human nature does not operate to maximize gain but rather to maximize the chance of gain. The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance. - William Eckhardt First of all: you, at least, manipulated the text. You add your personal statement to that of William Eckhardt and think it makes your statement valid? I can do that too. Can you tell at which page you found this? You should start your search at page 103 till 136. I have the book in front of me. I did not find the text that you posted here. So William Eckhardt did no make the point you want to make. You made it up. Second: I trade on mathematical models that use probabilities. First rule in probabilities is that you trade exactly as you did in your mathematical simulations. If not your testresults are not representative for the outcome you can expect. So your statement of going broke does not apply to me. I sometimes get out before the signal, if the move is at least 10 points, which in intraday ES is not a small profit but rather a huge profit. If I miss an entry, I NEVER jump after the signal. Except if I can later enter at the same price, or better. Your favorite, William Eckhardt, wrote on page 119 the following about that: Overriding is something that you should do only in unexpected circumstances ( which is what I explained)- and then only with great foretought. To know if my take profits are irresponsible behavior you should first of all know the distribution of my profits and losses. Which you don't know. Actually you know nothing about my trading, how can you judge then? This was my last reaction to you. You are intellectually dishonest (sample of who traded better), twist my words, twist the words of William Eckhardt and you are never able to counter my arguments. I like to discuss but not if it becomes meaningless. And that is what it is now.
Most traders with a low win rate are trendfollowers. Because they want (and need!) to take the big moves to make their money, they have to have a system that is suitable for this kind of trading. It means that the system should not be too sensitive because in that case the system would generate too much (bad) trades or trades that are too small to be interesting for them. So their system should filter the noise out of the quotes. Doing this means that the system will be slower in reaction time. They have to smooth things. Result is that many trades start fairly far away from the top or bottom. So it is necessary that the trades go far enough to generate profit. If there is no trend they get whipsawed, which is deadly for trendfollowers if this occurs too many times in a row. Markets are not always (enough) trending to make these profits. The combination of all these things make the weak point of trendfollowing. The challenge is to find a way to enter faster, but filter out all the noise, so that you keep the good ones, and stay long enough to take the biggest part of the trend. For most of the traders that seems to be impossible. Faster, and good entry is not compatible with trendfollowing, at least for most of the traders. That causes the low win rate. But there lies the answer to the higher win rates.
Those video clips are irrelevant, as your 100% parameter depends on actions of other people and not your own. You can only be certain that you can't be certain of anything. Carry on.