Loosing 9 out of 10 times and still make money.Possible?

[Smart_trade]

i know that it is psychologically difficult to continue trading after a few consecutive loosing trades . But that is the edge some legendary traders have , remember what dennis richards said , 95 % of his profits has come in 5 % of his trades , if that is the case his system strike rate was even lower .But still they traded such systems and become legends.

That does not mean that 95 % of his trades were losers. It only means that 5 % trades are bumper profit trades which give 95 % of the profit....and 95 % trades are some profit, some losses overall giving only 5 % profits.

ST

 

[Smart_trade]

I think you have misunderstood the term.

Your defination contradicts in its own lines....but anyways.

ok...so as per the second half of your defination you mean suppose you take 10 trades out of which 9 loosers and 1 winner. So if you loose Rs 1 on average on a looser,on 9 you will loose Rs 9. And now on one winner you have to make 9X13=117 points to give 13 payoff ratio....117 bagger trade ,is that correct ? Now hopefully we are on the same page...

Now with these figures calculate the Payoff ratio as per the first line of your defination. What is the average amount made on a winner ? it is 117 and average amount lost on loosers = 9 devided by 9 = 1 per loosing trade...now calculate payoff ratio it comes to 117 and not 13.

Defination me contradiction hai...


ST

 

[nac]

I don't think 117 : (9/9) wouldn't be correct. Here I am attaching excel for your info... Just a sample I worked out for you.

I wish I know a simple formula for this. My bad, I don't know that or at least I don't remember...

 

[nac]

Large samples should be more accurate than a small one.

 

[jahan]

Large samples should be more accurate than a small one.

Hello Nac,

Did u studied the Books of VanTharp.......if not Take a look....if u already studied....did u devoloped any model/systems based on his Beliefs or ur Beliefs.

iam a great Fan of Vantharp...

see large Sample will provide u great insight.....but one thing always there in Trading,that is Uncertainity...bcoz market is Dynamic in Nature....(three dimensional)...and Mathematics models/systems are two dimensional....Static in nature.

so...yes ur right ......loosing 9 trades and winning only one trade with 1:13 R/R(risk/reward).u make money.

.....in ten trades...u can make 4 points(13pointswin-9pointsloosing).
in 250 trades...u can make 100 points with this system.....if u get the exactly 9 loosers and a win or a win and 9 loosers...but in reality in a sample of 250 trades there is a possibility of getting 225 loosers in a row and 25 wins... see its totally depend upon distribution of ur sample.thats why it is very difficult to trade and the only reason is dynamic nature of markets.

these kind of calculations are useful for gamblers thats why kelly developed formula's help only for gamblers not for Traders.

in my opinion....the only two Things are important for Traders 1)Psychology
2)Risk-management.

mathematical Calculations are only useful after the fact or when ur result is positive.

Regards,

 

[SaravananKS]

I don't think 117 : (9/9) wouldn't be correct. Here I am attaching excel for your info... Just a sample I worked out for you.

I wish I know a simple formula for this. My bad, I don't know that or at least I don't remember...

Nac,
I Just Went Through your file. The Total Profit is 420.7 and Total Loss is 306.4

and Pay off ratio is 12.4

This Does not means one would win Rs 12.4 for 1 rupee Risk

Since No of winners 24 Vs No of Losers 216
24*12.4=297

So The Trader Risks Rs 216 to Earn 297 ( In a Pay off Ratio 12.4)

 

[nac]

Did u studied the Books of VanTharp.......if not Take a look....if u already studied....did u devoloped any model/systems based on his Beliefs or ur Beliefs.

mathematical Calculations are only useful after the fact or when ur result is positive.

Nope, I haven't read van Tharp's books.

I just completed a book A TRADER'S MONEY MANAGEMENT SYSTEM - How to ensure profit and avoid the risk of ruin (ROR) written by BENNETT A. McDOWELL

The calculations in this thread are based on his book.

Now I am reading, PHANTOM OF THE PITS written by ART SIMPSON

mathematical Calculations are only useful after the fact or when ur result is positive.

Yeah, initially based on our paper trading results than with actual performance of ours.

 

[nac]

Nac,
I Just Went Through your file. The Total Profit is 420.7 and Total Loss is 306.4

and Pay off ratio is 12.4

This Does not means one would win Rs 12.4 for 1 rupee Risk

Since No of winners 24 Vs No of Losers 216
24*12.4=297

So The Trader Risks Rs 216 to Earn 297 ( In a Pay off Ratio 12.4)

The discussion is kinda going like this...

Three Friends wanted to buy a chicken. They collect 10$ each and go to a chicken shop and buy a chicken worth of 30$. At that time shopkeeper was not in the shop so they dealt with his servant. When shopkeeper returned then he told that chicken was of only 25$ worth and instructed servant to returned their 5$. When servant headed , He started thinking that he has to get change of 5$ to return each of the friends. After so much thinking he returned 1$ to each of the friend and kept 2$ in his pocket.

Now question is when servant has already returned their 1$ back then each friend's share in the chicken becomes only 9$. So if you calculate total expenditure, then this is like 3 multiplies by 9$(Each Friend's) and added by 2$ kept by servant. But Total becomes only 29 $ wherever actual spent was 30 $. Right. Where is 1$. Can somebody solve this Puzzle ??

No offense buddy...

 

[rohitsx]

The discussion is kinda going like this...



No offense buddy...

This is not a puzzle, this is just trying to confuse ppl.

Total money spent by 3 friends =9*3 =27 .
Total income = 25 to shopkeeper
2 to servant
25+2=27 .

 

[nac]

Yeah, it's kinda puzzle to confuse people.

But I didn't intend to confuse Saravanan.

I don't know why he multiplies winners with pay off ratio... :?: