Trading Articles
Article Categories
Article Tools

Why 7% is the Difference between Failure and Success in Trading
Updated December 29, 2020
Top Posters

looks_one
Anagami
with 32 posts (167 thanks)
looks_two
Fat Tails
with 21 posts (140 thanks)
looks_3
liquidcci
with 10 posts (19 thanks)
looks_4
Luger
with 6 posts (9 thanks)
Best Posters

looks_one
Fat Tails
with 6.7 thanks per post
looks_two
Anagami
with 5.2 thanks per post
looks_3
Jigsaw Trading
with 3.0 thanks per post
looks_4
liquidcci
with 1.9 thanks per post
trending_up
25,730 views
thumb_up
411 thanks given
group
55 followers
forum
109 posts
attach_file
7 attachments

Welcome to futures io: the largest futures trading community on the planet, with well over 125,000 members

Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to

register in order to view the content of the threads and start contributing to our community.

It's free and simple.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)

Why 7% is the Difference between Failure and Success in Trading

(login for full post details)

#101 (permalink )
BW, BW

Posts: 3 since May 2012

Thanks: 0 given,
1
received

Fat Tails
Would you please share this spreadsheet you use to calculate optimal F ? Thanks.

(login for full post details)

#102 (permalink )
Market Wizard

Berlin, Europe

Experience: Advanced

Platform: NinjaTrader, MultiCharts

Broker: Interactive Brokers

Trading: Keyboard

Posts: 9,850 since Mar 2010

Thanks: 4,238 given,
26,713
received

usfbzy
Would you please share this spreadsheet you use to calculate optimal F ? Thanks.

It is available here in post #65:

The following user says Thank You to Fat Tails for this post:

(login for full post details)

#103 (permalink )
Legendary Market Wizard

Cancun, Mexico

Experience: Advanced

Trading: Stock Index Futures / CFDs

Posts: 863 since Dec 2010

Thanks: 603 given,
1,949
received

Bau250
I'm probably reading your post wrong, but are you saying anyone who claims 60%

win rate is a liar?

For real?

Let's see if you're still around in a couple of years.
"The mind is its own place, and in itself can make a heaven of hell, a hell of heaven." - Milton

Thread Starter

The following user says Thank You to Anagami for this post:

(login for full post details)

#104 (permalink )
Market Wizard

Chicago Illinois USA

Experience: Advanced

Broker: IB, ToS

Trading: /ES, US Equities/Options

Posts: 3,330 since Aug 2011

Thanks: 1,960 given,
8,753
received

get caught up in theoretical in a way that is not meaningful to actual trading.
Trailing 12 months profit factor 3.1:1...I'm happy with that
Trailing 12 months %profit %60.5....I think that is something to work on.
20 days during that period where net loss days, 34 days where non trade days, 210 days where net positive days.
I suspect the main contributing factor is that markets are dynamic as is my response to the market. Discretion, what formula measures that?

The following 4 users say Thank You to wldman for this post:

(login for full post details)

#105 (permalink )
Legendary Market Wizard

Cancun, Mexico

Experience: Advanced

Trading: Stock Index Futures / CFDs

Posts: 863 since Dec 2010

Thanks: 603 given,
1,949
received

Yes, it seems some people miss the point of the thread completely, despite the fact I summarized it more than once. To each his own, I suppose.

"The mind is its own place, and in itself can make a heaven of hell, a hell of heaven." - Milton

Thread Starter

(login for full post details)

#106 (permalink )
Mercer Island WA

Experience: Advanced

Platform: Ninjatrader/Strategy Desk

Broker: Various

Trading: TF/NQ/ES/Stocks

Posts: 561 since May 2010

Thanks: 981 given,
1,551
received

Anagami
Yes, it seems some people miss the point of the thread completely, despite the fact I summarized it more than once. To each his own, I suppose.

@Anagami
Would it be possible to re-run your model based on different risk/reward numbers? For example insted of 2:1 use 1.5 and 1.25 etc so we can get a better feel of the sensitivities?
Thanks
DJ

(login for full post details)

#107 (permalink )
Legendary Market Wizard

Cancun, Mexico

Experience: Advanced

Trading: Stock Index Futures / CFDs

Posts: 863 since Dec 2010

Thanks: 603 given,
1,949
received

djkiwi
@

Anagami
Would it be possible to re-run your model based on different risk/reward numbers? For example insted of 2:1 use 1.5 and 1.25 etc so we can get a better feel of the sensitivities?

Thanks

DJ

@djkiwi , yes absolutely.
"The mind is its own place, and in itself can make a heaven of hell, a hell of heaven." - Milton

Thread Starter

(login for full post details)

#108 (permalink )
madrid spain

Experience: Beginner

Platform: nt

Trading: None.

Posts: 1,311 since Apr 2013

Thanks: 16,557 given,
643
received

Fat Tails
The other book I have read by William Poundstone was a book on game theory. I enjoyed reading it as well.

i was searching for a recomendations of this book before to buy it, to learn money management , risk, and the advance search send me to this thread, that i find it very interesting, thanks
La lucha es de igual a igual contra uno mismo
The fight is fair against oneself

(login for full post details)

#109 (permalink )
Vendor

Posts: 26 since May 2013

Thanks: 17 given,
18
received

Fat Tails
As far as my understanding goes, @

Anagami has presented Monte Carlo Simulations. The worst path on the chart allows for an estimation of the maximal

drawdown .

Bad runs are accounted for in that simulation, as the order of the trades is different for every path. The point I am trying to make - and this is understood by very few traders - that the second system, the one with the high

win rate and the 1:1 average win to average loss is the better option because

-> it produces smaller

drawdowns (your intuition here is false!)

-> can support a higher leverage with equal risk (in particular in a bad run situation)

Both the model that I use and the Monte Carlo Simulation by Anagami have confirmed this with a completely different approach (one is theoretical the other experimental). Ralph Vince has written this again and again, but nobody seems to understand the mathematics.

Of course an edge is an edge, but look at the pictures of the simulation and you should understand. Two systems having the same

expectancy , but the second has the better Optimal F!

Hi @Fat Tails .
Years ago when reading Van Tharp's Definitive Guide to Position Sizing I found what in my opinion came as a surprise to this author and is aligned with your point here. Van Tharp -who was a fan of High R's trades at that time- showed two systems with equal expectancy, but the one with the highest Win% and lower R multiple had better SQN than the other with higher R multiple.
Don't hesitate, just trade!

The following user says Thank You to mzabarain for this post:

(login for full post details)

#110 (permalink )
Vendor

Posts: 26 since May 2013

Thanks: 17 given,
18
received

Fat Tails
Correct.

The 20/20 system cannot take the same

number of trades over the same time period, but I had already taken it into account! Based on the square root relationship between volatility and time, I had made an estimation that the 20/20 system will be able to enter only one trade, while the 10/10 system enters 4 trades. This assumption is realistic, you can compare the

average true range from N-minute bars with the average true range from 4xN-minute bars, and will find that it is approximately the double.

If you read my post attentively you will also understand that I have not directly compared the 6302 trades needed by the 10/10 system with the 218 trades of the 20/20 system, but I have used the above approximation to state that the 10/10 system will be able to take about 872 trades while the 20 /20 system takes 218 trades.

But even after 872 trades (4-times as many as the 20 point system) the 10/10 system is far from reaching the target. I will take about 7 times (!) as long to achieve its target, as it has to generate 28 times as many trades.

The 20/20 system needs 28 times fewer trades (218 versus 6302), and will reach its target about 7 times faster. It is therefore both faster in terms of trades and in terms of time.

Have added the 15 min charts of ES 06-12 from last Friday with the

ATR (256) calculated from the primary bars (red) and the ATR(25) calculated from 60 minutes bars (blue)=. The approximation which I have used postulates that the

ATR from the secondary bars should be about twice the size as the ATR from the primary bars, and this is indeed the case, as 3.16 is about the double of 1.64.

Hi @Fat Tails .
Although the relationship between volatility and SQRT (t) is something that I studied in a finance masters degree (in relation to the study of time series), the fact is that I had never considered this calculation for trading. Thanks for this contribution.
Don't hesitate, just trade!

The following user says Thank You to mzabarain for this post:

Last Updated on December 29, 2020

Right now
NinjaTrader Indicator Challenge!
Ongoing
Register to Attend
Jan 21
Coming soon
Journal Challenge!
February
Coming soon
Battlestations!
March