if one can predict market daily movement 55% correctly, how to profit from it ?

Discussion in 'Trading' started by jimshaw, Oct 4, 2010.

  1. jimshaw


    Dear All:

    If one can predict market daily movement 55% of time correctly, for example, SPY movement, how to profit it ?

    Beside trade index directly, what will be other ways to profit from it ?

    Other methods I can think of is:
    - trade emini
    - trade option on SPY

    What are other alternatives ?

  2. A 55% "win ratio" is more than enough to be a big-time winner... IF (1) you try to let winners run, and (2) limit losses.
  3. impossible,
    55% is probably 35% on paper,
    -10% spread+commissions.
    U down to 25%

    u ain't profitbale.

    strategies i trade have a 80% win ratio on paper, 50% in reality 1:30 risk reward ratio.
  4. If "commissions and spread" have a significant impact on your P/L, you're fishin' in a dry hole.
  5. jimshaw


    What do you mean "1:30 risk reward ratio" ?

  6. 51% and you can own the world in a year.

    many here have achieved this amazing performance.

    keep in mind that the boyz have already predicted YOUR movement.
  7. % doesn't matter. Did you get 55% on your Grade 1 spelling test or your License to practice medicine? The context matters ... you need also to know what kind of risk reward is involved in that strategy.

    I could buy out of the my options and win 10% of the time, but double my account every year... you see that % doesn't matter?
  8. Suggest you try to pick 90% losers. Many can and do.

    Then flip your trade.

    No need to thank me.
  9. Percentage win rate is not enough to make money. You must also have a sufficient avg win to avg loss ratio. The break even is shown in this paper to be equal to:

    w = 1/(1 + R), where w is the win rate and R the ratio. Solve for R and you get

    R = (1-w)/w

    if w = .55 then your R must be at least 0.81. If you factor in commissions, slippage and other unfortunate situations, to break even you will need an R of about 1.3. That is only to break even. If you want to make 1.5 times what you lose in total, a profit factor of 1.5 that is, your R should be equal to 1.3 x 1.5 = 1.95. This means that you should make on average $2 for every $1 you lose. This is becoming hard now. Profit factor 1.5 is minimum. If you raise that to a more reasonable 2.0, R becomes 2.6. This is becoming very difficult now. Your only way out is increasing w. The vicious circle is just beginning.
  10. You need to take into account other variables, and do an analysis of your method. The steps involved, how to do them, and why to do them, are described at:
    #10     Oct 4, 2010