Ghost of Cutten
Registered: Aug 2009
04-23-12 02:10 AM
Think of all the good trades you ever made. Take the top 10 or 20% of them. Think of every factor that makes a trade good, and consider those rare trades that had 80%+ of positive factors. Chances are, if you can trade reasonably well, those elite trades kicked arse (or ass, since this is mostly a US message board).
So, what about just being extremely selective with trades? Wait for the real 'fat pitch' setups, where almost everything is in favour? When I think back over my trading, each year there were maybe 3-5 truly great setups, but I did maybe 30-50 trades overall. The top 3-5 had great hit rates and payoffs...a usual record in one year would be 2/5 being huge winners, another 2/5 being solid winners, and 1 being breakeven or a small loser. The other few dozen would be maybe marginally profitable, or moderately profitable if I was lucky.
What's more, the really great setups had far less risk. A great example is Apple in the last 3 years. 2009, 2010, 2011, this stock just outperformed the market on the way up, during flat periods, and in bearish periods. It's only recently that it started acting shitty. That whole 3 year period, it was cheaper than the market, growing much faster, much better balance sheet and management and products, a real no brainer.
Other trades - shorting silver in spring 2011, going long bunds short BTPs (or Greek bonds) in 2010 and 2011, shorting Yen round about now, going long BP during the peak panic in 2010, and so on.
So, the question is - why not just be super selective? Take the best 5-6 trades each year and forget the test. Or at the very least, only take a trade if it has a seriously good chance of being a 'trade of the year' candidate.
Any thoughts? I know the system traders will (of necessity) disagree, but for us discretionary guys, shouldn't we be about 5-10 times more selective and only take the very best setups?