Sunday, February 20, 2011

Want to Make Profit Every Day?

Have you ever wondered why daytraders loved to have more than one screen for their works? Is it really necessary?

I must say it is. You can profitable with one screen anyway, but it's impossible to trade lot of symbols with just one screen.

Now related to my title, every people in the world Iknow don't like to lose, especially losing money. We want to win everyday. If someone have to choose between the two system:
1. 99% winning ratio with average 1:1 Risk Reward Ratio
2. 40% winning ratio with average 1:5 Risk Reward Ratio

Let's simulate the result, for 100 trades executed, system one will produce 99 winning and 1 losing. Let's say 1 tick per trades, means it's 98 ticks profit.
The second one also 100 trades will produce 50 win 50 losses, but it may produce 140 ticks profit. The counting is 200 ticks profit minus 60 ticks losses. In the long run, the System Two will guaranteed outperformed the System One. But I definitely choose System One.

System Two indeed have superior results, but I doubt with me as executioner. I know it's hard for me to keep the game played in normal pace if I losed 5 times in a row. Is it possible for system two? It will happened definitely. But on System One, you may have piece of mind trading it. It's almost a sure winning trade on System One.

Now even though I doubt there's kind of system like that in this universe, both of the system, I wanted to have higher winning probability since it won't ruin my mental state too much.

Now what's the connection with winning ratio? Related to more screen, means more symbol. More symbol, more signals appeared. Let's take a math. I will say 70% winning ratio with 1:1 RR is achievable. Now let's say there're average 5 signal per symbol per day. If you trade one symbol, you can have losing day sometime. On average everyday you have 3 winning 2 losing. But how bout if you trade 5 symbol? It means 25 signal with average 17 winning and 8 losing. Is it higher chance to make profit every day?

So I shared one way to make profits every day, by trading more symbols than one. The downside is, there's no eternal system. You also need more works to backtest more symbols.
Someday it stopped working and you have to tweak or find a better one. The good side is you can make profit every day. The day you won't make profit is two: you broke discipline or black swan even happened.

But the flawless execution is more difficult on system two.

2 comments:

  1. Well, everything depends ..
    even the same system use for two different person can have different results, if one is more aggressive, or MM different, etc
    I trade more than one currency and I see no problem, and it's not about the profit, it's about how I develop my system .. and backtest, well I see no problem in that if the strategy is fine.
    I don't know is not for everyone trade more than 1-2 pairs ... depend of the style of trade. I have a total different type of manage my position and not based in how many pairs, sometimes for me 7 open positon I count as 1 trade because this pack of position is manage in a particular way and was open buy one particular reason ...

    see u

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  2. U're absolutely right Julia,
    I just trade 2 pairs at the same time, EUR and GBP. While on US session, I may trade soybean and crude oil.
    I think ur system used lot of pips for SL so it can be done for trading 7 pairs. BUt I jsut used less than 10 ticks for SL so I cannot trade lot of pairs. The posts just an illustration but in real time, execution sometimes much harder than the backtest work, especially with tight Stop Losses.

    Thanks for coming, ur advice really useful not just for me, but everyone out there traders

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