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Originally Posted by lynx
Well said, but not easy to follow unless you have a systematic way to handle those losses. Here's my 2 cents worth:
The most important thing to do is to select a trading system with at least a 60% batting average, not less. Don't trust the word of the developer. Verify this batting average by your own demo trading. You will have months of tedious, boring paperwork. If you don't come up with 60%, choose another system and start testing again...etc. Please bear with it, because it is will be much easier to be disciplined if you really know you got something that really works.
The next step is to learn the Essex System of betting. It uses a bit of strange arithmetic, but not difficult. I first came across this idea many years ago when Peter Eliades sold his stock trading system. It has nothing to do with Ryan Jones' position sizing, or martingaling, which can wipe out your account after 5 or 6 consecutive losses.
With a 60% batting average and the Essex System you now have a handle on those inevitable losses. Discipline and patience will come easily. You will relax and even enjoy the losses, knowing well in advance that the betting cycle will come to an end sooner or later. And when it does, you will profit handsomely. |
You don't care how much your winning trades average and how much your average size loss is?
It's not important how much drawdown to expect?
If you have 60% winning average and your average winning trade is 1/2 the amount of your losing trade, you are losing money.
I don't care what betting system you use, if the expectancy of system is negative, you lose money. If you win 60 trades $100 each ($6,000) and lose 40 trades $200 each (-$8,000) you are losing $2,000 after 100 trades with a 60 percent winning average.