Win/loss ratio?

glassinc · May 8, 2005

Quote from Cre8UrF8:

YES!!!!! YES!!!!! YES!!!! 3/1 win/loss ratio is very good and very doable with 20 roundtrips a day. With a 3/1 ratio your winning percentage only has to be 30% for you to be profitable. I average a 3/1 ratio and do between 10 to 40 roundtrips per day. However I strongly advise you not to try this with GOOG!! You can't control or limit your losses to 10cents or any preset loss limit because it is way to volitile and bids and offers disapear too quickly. You want to limit your losses to 10cents but you don't have to limit your winners to 30 cents if you can get more out of them. Win/loss ratio determines wether a trader is profitable or not, strategy(winning percentage) is what determines how much money they make.
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Hello,

Neither your ratio of wins to losses, or your winning percentage determines profitability or money made. One could have a low win rate say of 25 - 40% and be a profitable trader, while another could have a 65- 80% win rate and still be loser.

A positive expectancy determines profitability. The higher the average expectancy per 1.00 risked times the amount of trades over a given time determines the amount of money made. Frequency also plays a large part. A lower winning % with a higher expectancy could be as good as a higher winning % with a lower expectancy. There are many variable and this is where record keeping, and testing is vital to determining the probability, and profitability of your system or systems.

May this be of benefit.

Good Luck & Good Trading

Kelly

Cre8UrF8 · May 8, 2005

Maybe I didn't communicate myself well. By win/loss ratio, I didn't mean the number of winners to losses, I define that as "winning percentage". What I mean by win/loss ratio is your avg. $ profit per winning trade to your avg. $ loss per losing trade. 3/1 win loss ratio, your avg. winning trade makes $300 while your avg. loser loses $100, and your winning percentage is the number of winning trades out of your total number of trades. Winning percentage rate of 30% of 20 roundtrip trades is 6 winning trades and 14 losing trades. 6 x $300=$1800 14 x $100=($1400) $1800-($1400)= $400 profit

weewilly · May 8, 2005

Sound like you are asking for "expectation":

This is the key formula in all of trading:

(avg $ won x prob of a win) + (avg $ lost x (1-prob of a win)) - trading costs > 0

You make money in trading by making this formula "true" for you. This is done by trying to maximize avg $ won and/or minimize avg $ lost and/or minimize trading costs and/or maximize your prob of a win. People familiar with this idea would think of win/loss ratio (IMO) as prob of a win/(1-prob of a win), not as avg $ won. For example if you expect 1 winner and 2 losers every three trades, your prob of a win is 33% and thus your "win/loss" ratio would be 1/2. Of course in this case you want the avg $ won to exceed twice your avg $ lost + your trading costs.

Of course real traders concentrate more naturally and intuitively on "expectation" by "cutting losers quicky" (minimizing avg $ lost); "letting winners run or adding to a winner" (maximizing avg $ won); "finding better entries" (maximizing prob of a win) and of course "lowering trading costs."

ElectricSavant · May 8, 2005

1:3 seems reasonable. Only enter between S/R when you can achieve this...You may trade less, but the trade must make sense..

coolweb · May 9, 2005

My proft / lost is usually around 10 : 1

But I do not day trade, I trade around once every 7-10 days.

I find this "patience" and "Waiting"

allows me to have:

1) VERY low draw downs, maybe 0.3-1%

2) I only trade when the market MOVES , not choppy.

3) When I put on a position it either makes money immediately like in 5 minutes, or I'm probably stopped out in 30 minutes at 0.3% (manual stop not hard stop)

4) Very low risk 0.3% insanely low! I sometimes feel like I can put on 5-10x margin although it doesn't let me.

I find this kind of trading keeps me sane, and keeps me very confident, very low losts, high profit and quick profits as well because I only trade when the market moves.

Any questions feel free to ask.

PitchBlack · May 9, 2005

Quote from coolweb:

My proft / lost is usually around 10 : 1

But I do not day trade, I trade around once every 7-10 days.

I find this "patience" and "Waiting"

allows me to have:

1) VERY low draw downs, maybe 0.3-1%

2) I only trade when the market MOVES , not choppy.

3) When I put on a position it either makes money immediately like in 5 minutes, or I'm probably stopped out in 30 minutes at 0.3% (manual stop not hard stop)

4) Very low risk 0.3% insanely low! I sometimes feel like I can put on 5-10x margin although it doesn't let me.

I find this kind of trading keeps me sane, and keeps me very confident, very low losts, high profit and quick profits as well because I only trade when the market moves.

Any questions feel free to ask.
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Coolweb,

what are you trading? Stocks, futures?
And what leverage do you use.
0.3% seems so low you probably don't leverage at all.

coolweb · May 9, 2005

You are correct, I'm only trading equities at the moment but am experiemienting with SIMULATION with nasdaq future indexes.

I would like to use more leverage, but Shorting stocks doesn't allow me to use much if any leverage,

mustang · May 12, 2005

I find that if I have a win/loss ratio of 50% and I have a better than 2-1 points gained vs. lost I come out on top. The key is to always cut your losses and run with the winners.