Does the Pareto Principle apply to your trading results?

Discussion in 'Trading' started by Daal, Oct 13, 2018.

  1. Daal


    I just calculated some statistics on my historical trading results (mostly day and swing trading of american stocks) and I found out that:

    My top 20% of gains account for 79% of all my gains
    My top 20% of losses account for 75% of all my losses

    The bottom 50% of all my gains account for 5% of all my gains
    The bottom 50% of all my losses (meaning the smallest half of my losses) account for 7% of all my losses

    My median trade is actually negative even though my average profit per trade is quite positive. Looks like all I need to do to improve my results is to focus on the top 20% of my trading setups and ignore everything else

    Is this true in your own trading as well?
    Peter8519 likes this.
  2. piezoe


  3. do not is a bunch of 2 bits stuff.
  4. trader99


    Yes. In fact, it's more extreme than that. At one point in the past, a handful of good trades account for more than 100% of the total profits! The rest was losers that dragged it down.
  5. Vilfredo Pareto is a genius.
    Taking time to enter a trade is the key as most trends die prematurely.
    Jake said.... a few good trades.
  6. PistolPete


    You might be onto something here , look for commonalities in both the best and worst though . The bottom 80% can be improved as well and the a lot of the bottom 20% discarded . I think the key is to get rid of the worst trades whilst keeping as many of the winners as possible . Home runs are nice but base hits pay the bills week to week
    trader99 likes this.