To quote you, "Gold." Gabe is half right. You can make money with a system that has a 30% win rate. In fact, that is the typical win rate of trend following systems, eg volatitlity breakout, moving average systems, etc. What he is missing however is that these types of systems rely on a handful of enormous winners. You are not going to get those winners if you are exiting every time price ticks against you, or at the end of the day for that matter. I studied intraday stock index systems for a long time and concluded that there were no commercial systems that were reliably profitable. None. The other thing about low win rate systems is that they are best traded by someone who is trading them across a portfolio of commodities, not just one market. Like Cramer says, there is always a bull market somewhere. You might wait years for one to come to the one market you are trading. Even across a portfolio of tradeables, these systems have huge drawdowns, meaning you need a big bankroll and a lot of patience and trust. If you are trading intraday, you need a decent win percentage. You also need a way to let profits run without giving back too much.
I should have been clearer. The magnitude of the crisis was the Black Swan event not the crisis by itself. I have attached charts of how I do my back-testing. The 5min chart is the main chart and the 1min is used to find MAE and MFE. I don't understand. Gabe
Of course there will be differences but that does not mean the using an MA is causing me to enter into bad trades. I guess that was a rhetorical question. Let's say that I don't think that using an MA as part of my system is the reason I have failed so far. Gabe
If I may, Gabe, ask you a question: How did you determine this figure? On what basis have you found 60-70% to be "good enough"? And is there not a big difference between 60% and 70%? Over the course of 100 trades, a 60% win rate would have 14% fewer winning trades than a 70% win rate (assuming the back of this napkin is working properly). I do think you should read over nodoji's "higher power" post above, and really think about how you are approaching this section:
It was an off hand remark to the following If I remove the 4 days in which I totally lost control, my win rate would be just shy of 62%. This number, give or take 1%, has been my win rate for years. The large losing days were/are what prevented my equity to grow. I don't think that there is any win rate that is a correct number. Gabe
If you drop the losing days and retain the winning days, then you're right. But you still don't get it. On the other hand, you're not the only one reading this thread, and perhaps others will benefit, either now or in the future.
What a thread this has become!.... My questions... Without those big down days Gabe's method was making money right?? Why else are we trading? No matter what anyone thinks of the individual entries, it was making money.... for long enough? I don't know. Therefore what is Gabe looking for here??? If those down days don't dog him from time to time this would be a VERY different journal, if at all. So question to Gabe, you have a historical 62% win rate without the bad days, are you looking to improve the 62% (could be chasing something elusive) or eliminate the down days?
All I want is to eliminate those crazy days. I don't think that having no losing days is realistic. 62% is good enough for me. Gabe
In that case what lights the fuse on those days that makes a "normal" losing day become a monster? Maybe describing such a day is a good place to start.