Average Losing trade Greater then Average winning trade:

Discussion in 'Strategy Building' started by amigasearch, Nov 22, 2003.

  1. I understand that when evaluating a system, these are very important numbers in validating a stragedy.

    As I have multiple strategies, and I am looking to pick one to use, the one I like the best has a very high winning percentage (over 1000 trades, 75 percent winners). It is very short term (avg time in trade is less then 20 minutes) (this is the system I want - very short term. I am factoring in commsions and overtrading).
    This is on emini.

    Now, everything looks positive - profit factor, Net profit (kachingos!), avg trade nets 13.10.

    BUT, the avg winning trade is HALF of losing trade. This makes sense, since this system main parameter is to cut trade off with, lets say with some kind of "special" situation. This usually nets trade very low profit, compared to me riding to the downside.

    So, I see the logic on why my avg losers are more ( i take less losers, (25 percent of all trades) taking many small gains.

    Is this a system you would trade, if you were willing to trade a short term system and such?
    Also, max DD is only 5 percent at any point.
  2. H2O


    Take into consideration the MFE / MAE and the time in trade.
    Perhaps you can work on your loosing trades using these numbers.

    If you want more info, PM me
  3. Any thoughts on my question (advice?)
  4. Here is a thought...

    (75 * .5) - (25 * -1) =

    Now are you absolutely sure that your commissions will not eat up the tiny edge that you have with this strategy???

    PEACE and good-specul8tion...
  5. The one profitable strategy I trade has losing trades that are several times larger than the average winning trade. I am just guessing here, but I probably have 90% winners at an average of 1.2 ticks and 10% losers of maybe 6 ticks average. It is also very short term. Just yesterday I was thinking, If only every second of the trading day could be like the one in which I bought and sold the same contract...
  6. Lobster it is good to know someone has success with a stragedy like this.
    I guess the huge item I must look at for is that my trades dont drift towards 50 percent win / loss (then, I will be losing more then I win overall).
    Thanks for letting me know about your experience.
  7. ig0r


    I also run a so far profitable strategy that takes 1 point profits and 3 point losses, it win about 80% of the time. There is nothing wrong with a system like this but you must be very careful with your observations on the actual performance of the system, be weary if when it goes live it begins to take on more losers than it should (more than the norm over a certain period of time in a large backtest).
  8. Backtest this all the way to the beginning of emini data. ( In TS in is 1/4/99. See if you get 75% on the entire frame. I suspect that you have not run this strategy back far enough.

  9. Very interesting, Lobster! My main strategy is very similar!

    I go for 2T target generally, with a hit rate of ~80%, but my average losing trade is only -2-4T

    Only just recently have I started taking longer term trades as well. I was "afraid" of anything more than 2-4T at a time for quite a while. Now that the larger swings bring so much opportunity, I'm getting my head around trading all fractals again, and it's really worth it... I can highly recommend it...

  10. I just bought futures back to '99 in ascii format from ANF futures. Just converting all the files to meet my app. requirements. I will let you all know of the results.....
    #10     Nov 23, 2003