Insight Into Trading - What Percentage Of Your Trades Are Winners
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Insight Into Trading: What Percentage of Your Trades Are Winners?
Summary
Exploring Trading Systems, Money Management, and the Human PsychologyI recently participated in a seminar that sparked a fascinating conversation about trading success. Our focus was on the percentage of successful trades and the realistic accuracy you might expect in trading.
Focus on Accuracy
Our minds often gravitate toward accuracy as the primary measure of success in trading. However, this perspective misses the mark. Accuracy alone isn’t the key to making money.Reality Check
Historically, investment newsletters?"whether focused on commodities, stocks, or mutual funds?"haven't consistently delivered outstanding results. Examining the accuracy of these advisory services can be insightful.Analyzing Data
I explored various timeframes: March 1993, January 1996, March 1997, May 1998, and June 1999. Below are the results for the most profitable advisors during those months and their accuracy rates over the preceding year:- March 1993: Commodity Timing - $60,939, 51%
- January 1996: Moore Research - $84,643, 52%
- March 1997: Turtle Talk - $79,244, 42%
- May 1998: Commodity Timing - $90,430, 47%
- June 1999: Moore Research - $102,605, 54%
These represent the "best of the best." On average, they were accurate 49.2% of the time, highlighting that a high accuracy rate is not necessarily linked to profitability.
Key Performers
During this period, four advisory services stood out for their profitability. Notably, they didn’t rely on "magical" theories like Gann or Astrology, which typically performed poorly. Instead, they followed trends to varying degrees.Here are the top performers and their success rates:
- Commodity Research Bureau: $158,840, 48%
- Commodity Timing: $224,239, 47%
- Commodity Trend Service: $214,858, 32%
- Moore Research: $242,253, 51%
These services were not highly accurate but were highly profitable.
The Secret to Success
How do they profit with seemingly mediocre accuracy? The secret lies in the adage: "Let your profits run and cut your losses short." Their average profit per trade exceeded their average loss by a substantial margin.Key Takeaway
Real-world data shows that accuracy isn't crucial in trading success. The next time someone dismisses newsletters as ineffective, you can reference these figures. Remember, the goal is not to make small, quick profits; it’s to hold out for significant gains. Accuracy doesn’t guarantee earnings in trading.This article may be reproduced only in its entirety.
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