This thread reminds me of the blackjack strategy where if you keep doubling your bet you're bound to win eventually. Well, I tried that once on some damn riverboat in Biloxi waiting for the waitress to come back with a pack of smokes. It doesn't work. F'rs ended up costing me like $2400.
Exactly. THAT is why Win Rate is so important. Because the lower your win rate the more STREAKS of losses you have and more potential drawdown. People mistakenly think win rate is all about profit but it's really about LOSSES and capital preservation. Yes you can have a wildly profitable system that has a 10% win rate but this is not a favored approach. Taken to the extreme you could have a 1% win rate....but then that becomes more like a LOTTERY. Think about it. Would you say the Lottery is a good way to trade??...NO... If you have 99% losers and they each lose say $1000 for a $100k account. But you have 1% winner that makes $750,000 you would think it's a profitable system because you ON AVERAGE bet $99k for every $750k made. BUT... you still have too high of a risk of ruin because of the high likelihood you will have 150 losses OR MORE in a row before you win even one time. If you can't trade because you have NO money you can't make money either. Again each prior trade has ZERO impact on the subsequent trade (assuming you trade PERFECTLY) but after a streak of 80 losses in this system do you think you will trade perfectly???....doubtful. So win rate can also effect you overall psyche and trade mentality. I hope that clears it up. Eganon69
I like to think of a high win rate as a form of utility value. If I give you 1 billion to one on a 1 million to 1 shot, and you get to play once a day for the rest of your life, how much can you bet. No need to thank me.
I agree completely ... there are often a lot of "strange" comments about win rates in trading forums, that are perfectly mathematically valid and also dreadfully misleading. Even if a profitable system with a 25% win rate has higher net expectancy than a profitable system with a 65% win rate (which is easily possible), the latter is still the better one to trade, for most people, most of the time, and especially for someone not too experienced. The (often missed) point is that it's essential to avoid from the outset a situation where you may have a longer losing patch than expected and simply don't know whether it was just "very unlucky indeed" or "it's just stopped working", and therefore you don't know what to do about it.
No, but you need to understand a thing or two about nutrition, body composition, muscle building and cardio training to be a top athlete in golf or basketball or any sport. You are committing the error of false equivalency my friend.
Coins don't have three edges and coins never land on neither head or tail. But that's not relevant. What is relevant is that one must possess a very good understanding of statistics, for risk and money management alone to succeed in this field, long term. Anyone who contests that does not seem to understand that trading is nothing but probabilities of future events, = expected values
I respectfully disagree, partly at least. It is about expected value not just win rate. One can have a fantastic trading strategy with a 25% win rate when the avg win more than makes up for the lesser winners than losers. Which brings me back to the point that a solid understanding of expected values, probability distributions, joint probabilities and the rest of the arsenal are absolute key.
Simply not true. The strategy with the higher expected value is the better one, always. If there are some people who cannot handle such then that's a problem with the person not probability theory.
Here's the math koan I know you all were waiting for...... Student: "When is a coin toss binomial, and when is it Poisson?" Master: "God." I gave that as an extra-credit once. The student with the best answer is now an actuary. Cracks me up.....
Warren Buffett's Probability Analysis is His Key to Success http://www.investopedia.com/article...etts-probability-analysis-his-key-success.asp