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Meditations on Extremistan - Nassim Taleb

  • #641
  • Edited 11:13am May 31, 2025 10:50am | Edited 11:13am
The Calmar Ratio

The Calmar Ratio is a performance metric used to evaluate risk-adjusted returns, particularly for trading strategies and hedge funds. It helps investors compare returns in relation to drawdown risk.

In Short:
Calmar Ratio = the cleanest “reward vs risk” metric for traders.
Unlike Sharpe or Sortino, it doesn’t punish you unfairly just because your returns aren’t smooth.

Formula
Calmar Ratio = Annualized Return / Maximum Drawdown (absolute value)

  1. Annualized Return: The compounded return over a year.
  2. Maximum Drawdown: The worst observed loss from a peak to a trough.

What It Tells You

  1. A higher Calmar ratio means better risk-adjusted performance — high returns with relatively low drawdowns.
  2. A lower ratio suggests that returns are being achieved at the cost of large drawdowns, i.e., higher risk.

Example
If a strategy has:

  1. Annual Return = 20%
  2. Max Drawdown = 10%

Calmar Ratio = 2.0
A ratio of 2.0 means the return is twice as large as the worst drawdown.

Compared to Other Ratios

  1. Sharpe Ratio uses volatility as a risk measure.
  2. Sortino Ratio uses downside deviation.
  3. Calmar Ratio uses drawdown, making it especially useful for traders and fund managers where worst-case loss is more important than day-to-day fluctuations.

Interpretation Guidelines

  1. > 3.0: Excellent
  2. 2.0 – 3.0: Good
  3. 1.0 – 2.0: Acceptable
  4. < 1.0: Risk may outweigh the return


If the total number of trades and the winning trade percentage are unknown, does it affect the Calmar ratio?

Yes, it does not directly affect the Calmar ratio, because the Calmar ratio is calculated using the annualized return divided by the maximum drawdown. However, knowing the number of trades and winning percentage can help in understanding the underlying risk and consistency, which may indirectly relate to the stability of the return and drawdown used in the ratio.

Is it possible that just a few large winning trades are the reason behind a good Calmar Ratio?

Yes, it is possible. The Calmar Ratio only considers the overall return and the maximum drawdown. So, a few large winning trades can significantly boost the return, improving the Calmar Ratio—even if most other trades are small or even losing. However, this can be misleading because it doesn’t show the consistency or reliability of the strategy. A high Calmar Ratio caused by a few lucky trades may not be sustainable in the long run.

ChatGPT made me laugh so hard tonight

  1. 238 trades
  2. Win rate 62.2%
  3. Avg Trade Return +0.2%
  4. Return 33.3%
  5. Annualized Return 171.2% (176.2%)
  6. Max Return Drawdown -3.1%
  7. Sharpe 0.84
  8. Sortino 0.63
  9. Profit Factor: 1.59 (1.65)

Quote
> 50 Outlier (very rare!)

Lol
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fooled by randomness in art
Meditation All Time Return: 8.9%
  • #642
  • May 31, 2025 11:45am May 31, 2025 11:45am
I’ve been reading about Nassim Taleb

You know, the guy who talks about Black Swans, fat tails, and how the world is more random and risky than most people think.
Some of his ideas are brilliant. Others… not so easy to apply if you’re actually trading day in and day out.

Here’s my honest take as someone who uses semi-automated systems, follows trends, and trades forex, crypto, and indices almost every day.

What I Agree With

1. Markets Are Wild : Not Normal
Taleb calls it Extremistan : a place where big, crazy events are normal. That’s exactly what trading feels like sometimes. One central bank surprise, one flash crash, one tweet... and boom : the chart breaks all logic.
So yeah, I agree : in forex, the “average day” doesn’t mean much. It’s the few big moves that change your whole month.

2. Normal Stats Don’t Help in Chaos
A lot of traders use things like standard deviation, Sharpe ratio, or “95% confidence intervals” : like we’re in some university math class.
But in real life? That 5% “outlier” shows up every few months. Taleb’s idea of the “shadow mean” (the real risk hiding behind the data) makes sense. It’s like a volcano that hasn’t erupted in 100 years : doesn’t mean it’s safe.

3. Risk Isn’t Just Money : It’s Survival
He also talks about multiplicative risk : meaning one bad hit doesn’t just hurt your account; it messes up your mental game, your confidence, your future.
That’s real. I’ve seen traders lose once, then lose again trying to make it back. Not because their system failed but because they cracked.

Where I Disagree (A Bit)

1. Forecasting Isn’t Useless : It Just Has to Be Smart

Taleb says trying to predict the future is silly. But I think he’s talking about the wrong kind of prediction.
We’re not trying to guess what will happen. We’re trying to get in when the odds and the payoff make sense and manage risk if we’re wrong.
It’s like surfing. You don’t know which wave will take you far. But you position yourself well, wait for the right conditions, and when the big one comes you’re ready.

2. Psychology Still Matters
He doesn’t like behavioral economics says it’s full of bad lab experiments.
I get that. But in trading, psychology is huge. People overtrade. They revenge trade. They FOMO. That’s not theory that’s Monday morning on any retail platform.
Even if Taleb thinks these studies aren’t perfect, we still need to talk about mindset. Because even the best strategy breaks down when the trader breaks down.

3. Barbell Strategy Sounds Good — But It’s Tricky
Taleb loves this idea: put most of your money in safe stuff, and a little bit in wild bets with big upside.
That’s cool in theory but if you’re undercapitalized, that “wild bet” might just bleed you slowly. And if you go too hard, you blow up. The real edge is in building systems that can make money in trends and survive in chop, not just betting on crashes.

Final Thought: Taleb Thinks, Traders Act

Taleb is a deep thinker. No doubt. But he’s not a trader. He writes about uncertainty, we live inside it.
We don’t need to know if something is perfectly rational. We need to know if it keeps us alive, and if it makes us money over time.
If Taleb’s ideas help you:

  1. Respect risk
  2. Avoid overconfidence
  3. Question models that look too clean

Then awesome. But if you start fearing every big move, or avoid trading just because something might go wrong — you’ve missed the point.
Be smart. Risk consciously. And when the next Black Swan flies in… don’t be holding a martini on a speedboat.

Built in silence. Trained in chaos. Scaling in public.
  • #643
  • Edited 3:50pm May 31, 2025 3:34pm | Edited 3:50pm
Quoting TradeologiX
... Final Thought: Taleb Thinks, Traders Act Taleb is a deep thinker. No doubt. But he’s not a trader...
Well, of course there are pros and cons — that’s normal — but Taleb is actually a true trader, so you might want to revisit his (classic) background, more and more, and more. He wasn’t a forex trader like us, or a stock or crypto trader (he only buys those as a hobby), but he was an options trader and also traded currency futures, in addition to being involved in many other trading areas.

Quote
Nassim Taleb was a hedge fund manager and founder of Empirica Capital LLC. He later became a scientific advisor to Universa Investments, another hedge fund that uses strategies based on his work on black swan events

He’s one of the most successful traders and advisors in history, and one of the smartest minds in the world — alongside Jim Simons?
(Hello ChatGPT - This is for Taleb)

Yes, Nassim Nicholas Taleb had a very successful career as a trader — especially in options trading, where his focus was on profiting from rare, extreme market events (what he later coined as "Black Swans"). Here's a quick summary of his trading success:

Background in Trading:

  1. Taleb worked as a derivatives trader and quantitative analyst for over two decades.
  2. He held senior positions at major firms such as Credit Suisse, UBS, BNP Paribas, and First Boston.
  3. His specialty was options trading, particularly tail-risk hedging — betting on unlikely but devastating market moves.

Biggest Success:

  1. During the 1987 market crash (Black Monday), Taleb made significant profits by positioning himself ahead of the crash through long volatility bets.
  2. In 2007–2008, during the global financial crisis, his strategy again paid off massively. His fund, Empirica, and later Universa Investments (where he was a principal advisor), made triple-digit returns while the market collapsed.
  3. Universa reportedly gained over 4,000% in Q1 2020 — some reports cite 4,114%.

His Edge:

  1. He designed his trades to lose small most of the time, but win big occasionally — a form of "barbell" strategy.
  2. Unlike most traders, he wasn’t trying to predict the market. He was trying to exploit the structure of risk itself — especially hidden risk in supposedly “safe” systems.

So yes — Taleb was not only a philosopher of risk, but a very successful practitioner of it. He's in the same league as people like Jim Simons, though they operate in very different ways: Simons built predictive models; Taleb profited from unpredictability.

fooled by randomness in art
Meditation All Time Return: 8.9%
  • #644
  • Edited 8:36am Jun 1, 2025 7:39am | Edited 8:36am
Quoting RoelsMajor
Gaming Prop Firm Rules Update Continuation from some good rules note here: https://www.forexfactory.com/thread/...5#post15175035 https://www.forexfactory.com/thread/...5#post15204055 https://www.forexfactory.com/thread/...9#post15219939 Blueberry Funded has updated their challenge rules, including the removal of the margin rule, a total lot limit of max 3 lots for position on a $25,000 account, clarification on the Martingale rule, and a total position limit of 7. These new rules don't affect my current trading system, but as discussed earlier, they don't bring any improvements and instead add more burdens. The new rules should focus on maximum open position percentage + maximum number of open positions only, rather than always being ambiguous. So still no 7-7 Rules too. So still no $100 for $700 or $100 for $1000 too. No need too much rules, essential rules say just 6 or 7 only needed, and still, even with just a few rules, you will 100% fail at least once, or maybe twice or even three times, because the key element lies in the Max Drawdown (Max DD), even though it's a static -6% to -10%, only truly exceptional traders can conquer it. So perhaps the mindset of all business owners hasn't reached that point yet—even though they have data, they don't analyze it properly, being too busy with meaningless promotions, unless they used to be a practicing trader. Note: Oh, and as an additional illustration for a 25 k account: for example, if you want to trade EUR/AUD, you could open a 3-lot position with a 67-pip stop-loss, which represents about 5.15% risk (exceeding the recommended maximum of 3% per position for forex) if your take-profit is also set at 67 pips too (RR1). That is one or two shoots Gung-Ho method. {image} {image} {image}

Old Model Challenge Vs New Model Challenge
Eval + Funded Challenge Vs Bet Challenge
1 Step Static Challenge
Gaming Prop Firm Challenge

Here is the comparison between the Old Model and the propose New Model, 1 Step Static Challenge. With the current model in CFDs and all the rules in place, it's no surprise that only up to 3% pass the evaluation, and only 3% manage to receive a payout.
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fooled by randomness in art
Meditation All Time Return: 8.9%
  • #645
  • Edited 9:19am Jun 1, 2025 9:03am | Edited 9:19am
Simulation of Expected Payoff

SIMULATION of 21 Trading Days
60% Win Rate
Risk Reward 1:1, 1%
Expected Daily Gain: +0.20%
Total Gain: ~4.41%
Compounding method

Inserted Code
+------------------+----------------------------+------------------+
| Starting Capital | Estimated Final Balance    | Total Gain (USD) |
|      (USD)       | After 21 Days (+4.41%)     |                  |
+------------------+----------------------------+------------------+
|     $1,000       |        $1,044.10           |       $44.10     |
|     $3,000       |        $3,132.30           |      $132.30     |
|     $5,000       |        $5,220.50           |      $220.50     |
|    $10,000       |       $10,441.00           |      $441.00     |
|    $15,000       |       $15,661.50           |      $661.50     |
|    $20,000       |       $20,882.00           |      $882.00     |
+------------------+----------------------------+------------------+
|    $25,000       |       $26,102.50           |    $1,102.50     |
|    $50,000       |       $52,205.00           |    $2,205.00     |
|   $100,000       |      $104,410.00           |    $4,410.00     |
+------------------+----------------------------+------------------+
fooled by randomness in art
Meditation All Time Return: 8.9%
  • #646
  • Edited Jun 2, 2025 12:50pm Jun 1, 2025 8:20pm | Edited Jun 2, 2025 12:50pm
Monthly Growth Rate & Annual CAGR (Compound Annual Growth Rate)

This will be useful for all traders as a small math lesson

Inserted Code
| Monthly Growth Rate | Annual CAGR (Compound Annual Growth Rate) |
|---------------------|-------------------------------------------|
| 1%                  | 12.68%                                    |
| 2%                  | 26.82%                                    |
| 3%                  | 42.58%                                    |
|---------------------|-------------------------------------------|
| 4%                  | 60.10%                                    |
| 5%                  | 79.59%                                    |
| 6%                  | 101.22%                                   |
| 7%                  | 125.22%                                   |
|---------------------|-------------------------------------------|
| 8%                  | 151.82%                                   |
| 9%                  | 180.61%                                   |
| 10%                 | 211.70%                                   |
fooled by randomness in art
Meditation All Time Return: 8.9%
  • #647
  • Jun 2, 2025 8:40am Jun 2, 2025 8:40am
Quoting RoelsMajor
{quote} Well, of course there are pros and cons — that’s normal — but Taleb is actually a true trader, so you might want to revisit his (classic) background, more and more, and more. He wasn’t a forex trader like us, or a stock or crypto trader (he only buys those as a hobby), but he was an options trader and also traded currency futures, in addition to being involved in many other trading areas.
Thank you, RoelsMajor, for sharing those insights and setting me on the right path. Because of your information, I dove deeper into Nassim Taleb’s background and can now confirm the following details:


Early Career and Reputation for Tail‐Risk Hedging
Taleb began his journey in finance during the mid-1980s, joining derivatives desks at institutions like Credit Suisse First Boston and BNP Paribas. Early on, he distinguished himself by recognizing that conventional models severely underestimated the likelihood and impact of extreme market movements—“fat tails” in probability theory. By structuring positions that paid small, recurring premiums yet offered massive payoffs when rare events occurred, he developed a reputation for “buying insurance” on market crashes rather than attempting to predict day-to-day fluctuations.

Academic Foundations: Probabilistic Models and Extreme Value Theory
Taleb earned his doctorate in management science from the University of Paris. His dissertation examined probabilistic frameworks and extreme value theory mathematical tools that quantify the behavior of outlier events. This rigorous academic work became the bedrock of his trading philosophy and later informed everything he wrote in Fooled by Randomness and The Black Swan. In essence, his scholarship taught him that markets routinely misprice the risk of catastrophic events, and that this mispricing can be exploited.

The “Barbell” Strategy in Practice
The hallmark of Taleb’s approach is the so-called “barbell” strategy:

  1. Conservative Core: Allocate most capital (often 80–90%) to ultra-safe instruments cash, short-duration Treasuries, or similarly low-volatility holdingswhich forgo significant profit in calm markets but protect against ruin.
  2. Small, Aggressive Tail Bets: Reserve a small fraction (10–20%) for deep out-of-the-money options. These positions typically expire worthless in stable conditions, but when a shock hits, their exponential payoff more than compensates for months or years of lost premiums.

When Black Monday struck in 1987, Taleb’s long-volatility bets yielded outsized returns precisely because he refused to rely on the assumption that stock returns follow a thin-tailed distribution. Likewise, during the 2007–2009 financial crisis, Empirica Capital—his fund launched in 1997—produced triple-digit gains by capturing the divergence between implied and realized volatility.
D. Empirica Capital and Universa Investments

  1. Empirica Capital (1997): Though never large in terms of assets under management, Empirica became legendary for generating triple-digit returns during the 2008 meltdown. By maintaining disciplined allocations to extreme-downside options, Taleb’s fund withstood liquidity squeezes and enjoyed asymmetric payoffs when panic struck.
  2. Universa Investments (Co-founded 2007): In partnership with Mark Spitznagel, Taleb formalized a systematic tail-risk program at Universa. Under his advisory role, Universa’s tiny hedged allocations soared in value whenever the market collapsed. Most notably, in Q1 2020 when COVID-19 caused a rapid, global equity drawdown Universa’s deep out-of-the-money positions returned more than forty-fold on the hedged portion, validating Taleb’s thesis that true Black Swan events are both more frequent and more severe than most investors believe.

Academic and Teaching Contributions
Beyond trading, Taleb has enriched academia through visiting professorships at NYU’s Courant Institute and the London Business School. There, he has taught courses on risk modeling, decision-making under uncertainty, and the mathematics of extreme deviations. His ability to translate esoteric probability theory into actionable market strategies earned him respect among both students and fellow researchers.

Literary Legacy: The Incerto Series and Beyond
Taleb’s writing spans ten books, five of which form the renowned Incerto series:

  1. Fooled by Randomness (2001)
  2. The Black Swan (2007)
  3. The Bed of Procrustes (2010)
  4. Antifragile (2012)
  5. Skin in the Game (2018)

These works seamlessly blend memoir, philosophical inquiry, and technical exposition. They challenge readers to question the assumptions embedded in modern risk models and to build systems (both financial and personal) that thrive on volatility rather than collapse from it.

Built in silence. Trained in chaos. Scaling in public.
  • #648
  • Edited 1:22pm Jun 2, 2025 12:42pm | Edited 1:22pm
Monthly Growth Rate Vs Months to Reach 20% Growth

This will be useful for cfd gaming prop firm traders as a small math lesson

Inserted Code
| Monthly Growth Rate | Months to Reach 20% Growth |
|---------------------|----------------------------|
| 1%                  | 18.2                       |
| 2%                  | 9.5                        |
| 3%                  | 6.4                        |
|---------------------|----------------------------|
| 4%                  | 4.9                        |
| 5%                  | 4.0                        |
| 6%                  | 3.4                        |
| 7%                  | 3.0                        |
|---------------------|----------------------------|
| 8%                  | 2.6                        |
| 9%                  | 2.4                        |
| 10%                 | 2.2                        |
fooled by randomness in art
Meditation All Time Return: 8.9%
  • #649
  • Edited 5:45pm Jun 2, 2025 5:25pm | Edited 5:45pm
Quoting RoelsMajor
{quote} I found through experience that opening 2 positions at the same time, or adding to a winning trade, is not very effective. It becomes difficult to manage the trades because the price of Gold can be highly volatile, and the breakeven point of the second position is more likely to get hit by stop hunting compared to the first position. Therefore, the risk has been adjusted to 1%, with only one open trade allowed at a time. Lets see later. 2. Risk 1/3 aDtr (21) in pips convert to 1 unit 1.0 %, TP/SL 1:1. Consider put SL to BE +1 after 33% TP...
Last Update 03/06/2025
PVSRA TVT 1/3 aDtr 21 – Daily Ranger Gold
Final Rules of 7

1. Pair Selection: Gold/USD.

2. Risk per trade (SL) 1/3 aDtr (21) in pips convert to 1 unit 1.0 %, maximum open position is only 1 unit.

3. Timing Entry and Exit:
a. Timing Entry: Enter better after London Open in Range 2.
b. Timing Exit:
1. Hit SL or Hit BE+1. Consider put SL to BE +1 after 1/3 of 1/3 (1/9) aDtr (21) gain.
2. Consider closing open trade at least 15 minutes before red news.
3. Consider closing open trade at least 15 minutes before trading day end (23:45 MT4 Clock).

4. Key Entry: The Blue Dragon serves as a trading direction guide.
a. Entry Long, Price is above The Blue Dragon, and The Blue Dragon forms a Convex curve. The entry position should not be too far from it.
b. Entry Short, Price is below The Blue Dragon, and the The Blue Dragon forms a Concave curve. The entry position should not be too far from it.

5. Key Levels, Volumes & Fractals: Pay attention to S/R Levels, to Consolidation above or below Whole/Half Levels, to High Volume activities and It’s Color (Climax Buy or Climax Sell, Raising Buy or Raising Sell), and to Patterns (Fractals) that are generally formed.

6. No trade before and during Red News events. Trade at least 15 minutes after it.

7. Patience and Discipline like an EA (Robot).
Attached Image (click to enlarge)
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fooled by randomness in art
Meditation All Time Return: 8.9%
  • #650
  • Jun 5, 2025 10:30am Jun 5, 2025 10:30am
Quoting RoelsMajor
{quote} Last Update 03/06/2025 PVSRA TVT 1/3 aDtr 21 – Daily Ranger Gold Final Rules of 7 1. Pair Selection: Gold/USD. 2. Risk per trade (SL) 1/3 aDtr (21) in pips convert to 1 unit 1.0 %, maximum open position is only 1 unit. 3. Timing Entry and Exit: a. Timing Entry: Enter better after London Open in Range 2. b. Timing Exit: 1. Hit SL or Hit BE+1. Consider put SL to BE +1 after 1/3 of 1/3 (1/9) aDtr (21) gain. 2. Consider closing open trade at least 15 minutes before red news. 3. Consider closing open trade at least 15 minutes before trading day...
Trading gold, upon observation, is very difficult to apply an asymmetry model to because the price is highly volatile. So change rules a bit, back to old style.

Last Update 05/06/2025
PVSRA TVT 1/3 aDtr 21 – Daily Ranger Gold

Final Rules of 7
1. Pair Selection: Gold/USD.

2. Risk and TP
a. Risk per trade (SL) 1/3 aDtr (21) in pips convert to 1 unit 1.0 %, maximum open position is only 1 unit.
b. TP 1/3 aDtr (21) in pips.

3. Timing Entry and Exit:
a. Timing Entry: Enter better after London Open in Range 2.
b. Timing Exit:
1. Hit SL or Hit BE+1. Consider put SL to BE+1 after 33% TP.
2. Hit TP
3. Consider closing open trade at least 15 minutes before red news.

4. Key Entry: The Blue Dragon serves as a trading direction guide.
a. Entry Long, Price is above The Blue Dragon, and The Blue Dragon forms a Convex curve. The entry position should not be too far from it.
b. Entry Short, Price is below The Blue Dragon, and the The Blue Dragon forms a Concave curve. The entry position should not be too far from it.

5. Key Levels, Volumes & Fractals: Pay attention to S/R Levels, to Consolidation above or below Whole/Half Levels, to High Volume activities and It’s Color (Climax Buy or Climax Sell, Raising Buy or Raising Sell), and to Patterns (Fractals) that are generally formed.

6. No trade before and during Red News events. Trade at least 15 minutes after it.

7. Patience and Discipline like an EA (Robot).
fooled by randomness in art
Meditation All Time Return: 8.9%
  • #651
  • Jun 6, 2025 7:23pm Jun 6, 2025 7:23pm
Well, stairstep to Earth in Friday.
I was joyfully celebrating Eid al-Adha and had a major technical issue with my Android, so I couldn't join the Gold sell party after London Open.
Attached Image (click to enlarge)
Click to Enlarge Name: XAUUSD.iM15.png Size: 23 KB
fooled by randomness in art
Meditation All Time Return: 8.9%
  • #652
  • Edited 2:56am Jun 7, 2025 2:46am | Edited 2:56am
Quoting RoelsMajor
Spread for Gold/USD I’ve been monitoring the spread for Gold/USD over the past few weeks on Myfxbook (which already includes commission). There are several brokers that are very stable, especially during market open and close. These brokers, ranked from the lowest spread onward, are: Blueberry JFD IUX JustMarkets BCR Lirunex Moneta StarTrader Fusion Markets Global Prime Oqtima IC Markets Doo Prime ThinkMarkets Axi Brokers ranked 6 to 15 tend to have poor stability spreads when the market is closed and are also less stable during market open. Below...
Spread for Gold USD on Market Closed
https://www.myfxbook.com/forex-broker-spreads

IUX, JustMarkets and Moneta win here on FF
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fooled by randomness in art
Meditation All Time Return: 8.9%
  • #653
  • Edited 4:56pm Jun 8, 2025 3:25pm | Edited 4:56pm
CAGR

After all the complicated calculations, traders often forget the simple math: if you invest $1,000 for 1 year and end up with $3,000 total, your CAGR (Compound Annual Growth Rate) is 200% per year or 9.76% monthly. That’s it — nothing complicated. If you’re not good at basic math, your assumptions and verbal exaggerations tend to be way too unrealistic or “sky-high.”

Unless maybe you're extremely bored because trading always starts with a small amount of capital, feel free to raise your risk to the sky.

Lol
fooled by randomness in art
Meditation All Time Return: 8.9%
  • #654
  • Jun 8, 2025 7:56pm Jun 8, 2025 7:56pm
For pure return projection over time, you only need:

  1. Initial Capital
  2. Risk per Trade (%)
  3. Risk:Reward Ratio (RRR)
  4. Win Rate (%)
  5. Number of Trades per Month (or per time period)

Expectancy per Trade:
Expectancy=(Win%×RRR)−(Lose%×1)

Projected Return per Month:
Monthly Return (%)=Expectancy×Risk per Trade×Trades per Month

Finally, apply compounding over say 4 months:
Capital-n=Initial Capital×(1+Monthly Return)^4

fooled by randomness in art
Meditation All Time Return: 8.9%
  • #655
  • Edited 10:18pm Jun 9, 2025 10:07pm | Edited 10:18pm
1/3 or 1/4 ATR over specific period

Using 1/3 or 1/4 of the ATR as a target profit in pips or stop loss in pips in forex trading is nothing new. The idea is based on many natural laws that exist today. For example, those who live far from the equator typically experience four seasons, while those living near the equator usually have two seasons with certain transitional periods. Also, in Europe or US, it's common to use the quarterly system to divide the year, while in other parts of the world, a four-month division is sometimes used. Also, there are some other words of wisdom that I can't explain here.

This idea was later incorporated into a system or method and observed over a long period of time, so it's no longer just a random choice. There are no specific tips for setting TP or SL based on ATR, but one thing is clear: don’t go for the full range. Using 1/3 or 2/3 is fine, but not 3/3. Similarly, 1/4, or 2/4, or 3/4 is acceptable, but not 4/4. More than 1/3 or 1/4 is usually more difficult to achieve.
fooled by randomness in art
Meditation All Time Return: 8.9%
  • #656
  • Edited 11:38pm Jun 9, 2025 11:20pm | Edited 11:38pm
80% Fail in Prop Trading Globally
80% Fail in One-Phase, Almost 90% in Two-Phase
Most Fail Within a Week, but Persistence Pays for Some

A study of nearly 10,000 traders conducted by Swiset
https://www.financemagnates.com/fore...rse-the-trend/

Quote
The findings underscore the competitive nature of prop trading funding challenges. Despite low overall success rates, the continual influx of new participants and frequent repeat purchases suggest an ongoing appetite for remote trading opportunities, especially as prop firms attract a global user base with varying preferences by region and challenge size.

What did I find from a lot of data, including this one?
1. Almost all traders can't scale risk from pips or ticks to percentage.
2. Almost all traders are the opposite of what they claim—they're actually fast traders using a Gung-Ho method (big and very big bet sizes).
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Click to Enlarge Name: prop%20firms_id_c6273eec-63e1-486e-8653-8b51a788ac59_size975.jpg Size: 112 KB
fooled by randomness in art
Meditation All Time Return: 8.9%
  • #657
  • Jun 9, 2025 11:43pm Jun 9, 2025 11:43pm
Quoting RoelsMajor
80% Fail in Prop Trading Globally 80% Fail in One-Phase, Almost 90% in Two-Phase Most Fail Within a Week, but Persistence Pays for Some A study of nearly 10,000 traders conducted by Swiset https://www.financemagnates.com/fore...rse-the-trend/ {quote} What did I find from a lot of data, including this one? 1. Almost all traders can't scale risk from pips or ticks to percentage. 2. Almost all traders are the opposite of what they claim—they're actually...
What do you mean, can't scale risk from pips/ticks to percentage? That most traders knowing they want to risk 20 pips stop cannot change that to a certain percentage of their account size? i.e play around with lot size so that they risk say 1% of their account size?
Bullish on Heaven and Ruble
  • #658
  • Edited Jun 10, 2025 12:33am Jun 9, 2025 11:56pm | Edited Jun 10, 2025 12:33am
Quoting Urahara-san
{quote} What do you mean, can't scale risk from pips/ticks to percentage? That most traders knowing they want to risk 20 pips stop cannot change that to a certain percentage of their account size? i.e play around with lot size so that they risk say 1% of their account size?
Yes, they still can't adjust it properly. For example, in forex, they may want to take a 50-pip loss, but they can’t convert that into a percentage and lot size that matches the equity of their account. So they end up using a fixed lot size and just guessing the approximate risk percentage for their stop loss. Now, after the past 9 months, most of them have read up and become aware — they use certain tools for SL and TP that display percentage notifications, but even then, they still mostly estimate things manually (they still struggle to calculate it manually). I used to be like that too, and almost all traders on Forex Factory are the same, because they think it’s complicated. So they prefer to measure risk using RR, pip count, or dollar amount. They said they were risking 1%, but it turned out to be 7 or 11% in reality.

Some even risk tens of percent per trade — and I think, even Warren Buffett’s CAGR is only 10% per year. It’s not necessarily wrong to use a version of the Kelly Criterion to find the optimal bet size, but the risk involved with Kelly is usually very high and not recommended for day-to-day trading unless in special situations where mutual information exists — like Brexit or news events such as Trump’s tariffs — so, only occasionally, unless you are using the Kelly Criterion with certain modified criteria or a custom design.

That’s exactly what I’ve written several times in this thread — my findings. This contributes to the finding that the average trader is actually a fast trader who uses jumbo (fixed) lot sizes. And if they had earlier knowledge about this, they would talk more about percentage risk rather than pips, lot size, ticks, RR, or dollar amounts. RR has no meaningful value to be proud of if it's not accompanied by percentage context (I can risk only 1 pips after move SL below BE and gain 100 pips, thats RR 1: 100). Everything seems very clear if you have TE or similar tools, for example, from the maximum drawdown percentage and the average worst trade return in percentage.
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  • #659
  • Jun 10, 2025 2:02am Jun 10, 2025 2:02am
Quoting RoelsMajor
{quote} Yes, they still can't adjust it properly. For example, in forex, they may want to take a 50-pip loss, but they can’t convert that into a percentage and lot size that matches the equity of their account. So they end up using a fixed lot size and just guessing the approximate risk percentage for their stop loss. Now, after the past 9 months, most of them have read up and become aware — they use certain tools for SL and TP that display percentage notifications, but even then, they still mostly estimate things manually (they still struggle to...
This is true. Even I do that when using MT. On other platforms though I find it is easier to calculate risk based on percentage. And I know its true for most other traders because when I speak to my friends who also trade, they ask me what lot size I use and that changes depending on how big the distance to SL and how much I am willing to risk.
Bullish on Heaven and Ruble
  • #660
  • Edited 4:34pm Jun 11, 2025 4:17pm | Edited 4:34pm
True RRR

The True Reward-Risk Ratio (RRR) cannot actually be calculated solely based on a 10-pip stop loss and a 30-pip take profit. The stop loss (SL) and take profit (TP) will fluctuate throughout the trade. RRR can only truly be calculated as a percentage, since it involves the calculation that includes your lot size.
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