15% of my trades account for my net profitability

Discussion in 'Strategy Development' started by candletrader, Apr 18, 2006.

  1. I was just looking at my figures for year to date...

    In my swingtrading account, my net profits were the result of 15% of my trades... the other 85% of trades netted off against eachother to make breakeven...

    Despite this I am managing to win 50% of the time as a swinger, its just that 70% of my winners are tiny...

    It seems that in my daytrading account I am a base hitter but in my swingtrading account I am home run player (the nature of my strategy is such that most of my home runs are unintentional anyways!)...

    My edge (year to date) in swingtrading is tiny at 0.245R per trade, where R = risk per trade i.e. if I am risking 1% of equity per trade, I on average earn back 0.25% per trade... but I am quite a frequent swinger, so it adds up...

    Kindly share stats on your swingtrading accounts, as I would be most interested in some kind of comparison...
     
  2. thats the 80/20 rule, i see it a lot. Pareto's Law, Google it.
     
  3. In some cases, with SAC Capital, I've read that 5% of trades accounted for all profits. This was in Ken Grant's book "Trading Risk"
     
  4. I experienced similar Results as you candletrader. The largest portion of total profits resulted from around 20 - 25% of my trades over one year. As rhymeswithorang already mentioned, your results remain consistant with Pareto's Law.

    - Spydertrader
     
  5. Interesting spreadsheet Spyder...

    Although our overall return is in the same ballpark, I get many more losses (red entries) than you!!

    I hate the thought of a large loss, so I take lots of small losses... having said that, you don't seem to have any losses which are large compared to your running equity...
     
  6. ????........increase your position size and/or trade frequency.
     
  7. Cheese

    Cheese

    I am reminded of that old 30/70 business rule .. 30% of your clients provide 70% of your revenue and the other 70% of your clients provide just 30% of your revenue.

    Trading futures markets .. well, that is something else.
    :)
     
  8. Capital Preservation remains my top priority. As a result, I often exit a trade quite quickly when things don't work out quite as I planned. When I do have a winning trade underway, I look for opportunities to add on shares without significantly altering the risk / reward parameters. In addition, I consistently keep my overall risk well below 2% of equity. When overall risk approaches my 2% maximum, I alter position size accordingly. Lastly, position sizing significantly changes one's profitability. After running numerous tests in Wealth-Lab Developer, I have determined increasing my own use of position sizing significantly improves (tested) profitability.

    - Spydertrader
     
  9. Those other 70% of your clients are the source of 200% of your headaches and aggravation.
     
  10. Interesting, with me it's the same thing but perhaps even more extreme - I think perhaps 5% of my trades generates my profits. I have a few churn-trades, a few losers (some bigger than others), then some gainers and here and there I catch some amazing trends and manage to really ride them until they end.

    I guess it's overtrading, but thankfully I'm very, very profitable :)
     
    #10     Apr 21, 2006