danielc1: I understand your pt about B and trend following. Yes, a few big winners make up for all your losses. But backtesting a very simple minded trend following system will results in NET negative gain because the 70% of the time you are wrong even with small stop losses it ADDS up. So, there's a little bit more to it though... Have you designed one that's successful? I'm assuming if you trade enough markets over long periods of time for certain trends to develop then it may work out.
At the time he wrote the book, he didn't trade. In fact, one of his trader students took him to the cleaners with bogus trades. And, no, he didn't teach anybody to trade (how could he since he wasn't a trader?). I understand he trades occasionally now, but there's no evidence he's any good at it. As for the importance of entries, you're exactly right. As you say, anyone who dismisses their importance isn't supporting himself off his trading income.
..it's Remiraz' thread. The rest of us are just clogging it. What was the topic? Regarding Tharp the elder, whether or not he traded or trades, the fact remains that "Trade Your Way to Financial Freedom" is a great book. I remember reading it and struggling with the idea of expectancy. Duh!
Misctrader: Here you have two example of systems that are only right for +- 35% of the time. The first one is a daytrading system.(only used when IBM is bullish) The second one is a longterm trend following system.(Bullish and Bear). The longterm trend following system adds to positions when right. Do not look at the numbers, look how it trades in the trades on the picture.
Hi Misctrader, of course we would all love to trade stuff that is right at least 60% of time or more. But please be aware that just switching the rules for a bad win/loss system doesn't necessarily give you a good system. The hidden variable is transaction costs and slippage. Most chart patterns with a good hit-ratio degrade significantly when ported to intra-day (noise). Most frequently trading systems with a 40% hit-ratio and a pay-off of 1.0 stay at 40% hit-ratio and pay-off 1.0 when rules are reversed. The cause is transaction costs and slippage which at least equal or even surpass the positive expectancy of the system. Hope that helps, Oliver
I don't think the good Doc trades.....which may be neither here nor there but I don't think I would take flying lessons from a guy who knows flying in theory but not in practice. Far as 50% winners are concerned, If you make twice on those winners as lose you are ahead of the game. As a matter of fact, the best traders I know are only right 50% or less of the time, but they are quick quick quick to stop out of losses and they really press the winners.