Does the Pareto Principle apply to your trading results?

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

  1. Daal

    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?
     
    murray t turtle and Peter8519 like this.
  2. piezoe

    piezoe

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

    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. Peter8519

    Peter8519

    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

    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.
  7. easymon1

    easymon1

  8. Well, it would really depend on how many setups you have. If you identify 10 trade setups, and 2 of them contribute the most profit, you could in theory stop trading the other 8.
     
    murray t turtle likes this.
  9. %%
    MSFT noted by fixing the top 20% of bugs; 80% of the remaining bugs + crashes would be eliminated in a system.........................................................................