Which would you rather trade

Discussion in 'Strategy Development' started by BloodTrader, Feb 17, 2004.

  1. A mechanical system with an expected outcome of:

    33% profitable and 3 to 1 average gain to average loss ratio


    66% profitable with a 1 to 1 gain/loss ratio


    My impression from reading posts here on ET is that most people would prefer the 1st option.


  2. ges


    There are other factors, such as length of trade. But, if all else is equal, I'd rather trade the 66% profitable system. Seems like they should be equivalent, but in my testing it seems the higher win/loss percent gives a smoother equity curve. Or am I just imagining that?

  3. I will Never again underestimate the psycological effects of less winners to losers. So, 66 is fine by me.
  4. So you have fewer losers that average out about like all the winners, but that still means you might have some large individual losing trades.

    System I'm trading now is the 66% wins type. I'm finding it suits me better than the 'few big winners' type system.

  5. Absolutely. Thats why its not so easy!
    I have a system that produces 90 percent and higher winners (some markets return 97 percent over 5 years!). Winners are small, and, as you know, losers are bigger.
    I trade it, but with alot of trepidation. As soon as this system strays from the norm, i will pull the plug, or re-evaluate.
    But, on a day to day basis, 40 percent or less system, where i get return less then at least 3 to 1, does not work well with my personality (i need the WIN now, no matter how small). Trust is so hard (trust the system will work tommorow, when its not working today).
  6. funny, 66 percent of voters say 66, 33 percent say 33!
  7. No, this isn't funny any more. Vote is now 70-30.... :mad:
  8. I'm now long the '66 vote. Target is 80 percent, at which point i will exit.
  9. Since both have the same expectation, I'm guessing the poll differences are due to loss aversion and framing. We used this in marketing to get customers to make decsions which wouldn't be optimal for them. Here's a example

  10. I voted 33% but I wanted to add that if you are going to vary your size on any one trade, then the 66% win ratio gives you a higher probability of that single trade working out well for you and making a positive impact on your P/L. However, since I only trade one size, I like seeing smaller losses and bigger gains.
    #10     Feb 18, 2004