Defining who is a better trader... | Forex Factory

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Defining who is a better trader...

  • #1
  • First Post: Edited 1:39pm Sep 9, 2009 1:21pm | Edited 1:39pm
I thought this question may bring up an interesting (hopefully) discussion - specifically - we have 2 traders:


Trader A takes 1000 trades a year and has a high win rate on a trade per trade basis (>90%) but is happy with 5 - 20 pips per trade

Trader B takes only 100 trades per year yet posts a good yearly ROI (>50%)....



who should be defined as the "better" trader? The one with the better win rate or the one with the better ROI?
Nihil inimicus quam sibi ipse Marcus Tullius Cicero
  • #2
  • Sep 9, 2009 1:51pm Sep 9, 2009 1:51pm
Quoting coscorp
I thought this question may bring up an interesting (hopefully) discussion - specifically - we have 2 traders:


Trader A takes 1000 trades a year and has a high win rate on a trade per trade basis (>90%) but is happy with 5 - 20 pips per trade

Trader B takes only 100 trades per year yet posts a good yearly ROI (>50%)....



who should be defined as the "better" trader? The one with the better win rate or the one with the better ROI?

The one with the best risk adjusted performance.

Individually it depends on the trader's risk profile and what he's trying to achieve, some traders may be comfortable taking higher risks for higher returns.
  • #3
  • Sep 9, 2009 3:10pm Sep 9, 2009 3:10pm
True - however I didn't offer that option as an answer on purpose...

my question was intended to be more basic...a trader that has a very high win rate per trades taken would appear to denotes he/she either has a good system in place (which would take skill and experience to develop) or has very good anaytical skills which allow him to correctly read the market as often as he/she does.

On the other hand we have a trader who has a "normal" win rate (put any number you choose in here) with only a fraction of the trades quantity wise but has a capability to let his trades run to the extent that he manages to get a better overall ROI...


they are both good traders...but which one has the edge (if any)- all else being equal?
Nihil inimicus quam sibi ipse Marcus Tullius Cicero
  • #4
  • Sep 9, 2009 3:24pm Sep 9, 2009 3:24pm
I made an EA that obtains 98% wins since 2002,

but it still loses money...
  • #5
  • Sep 9, 2009 3:43pm Sep 9, 2009 3:43pm
Quoting coscorp
they are both good traders...but which one has the edge (if any)- all else being equal?
If everything else is equal, including risk, then the one with the highest return.

I don't quite get what you're asking, sorry.
  • #6
  • Sep 9, 2009 3:53pm Sep 9, 2009 3:53pm
and I would agree as in the end one should be looking at the bottom line -

however one could also argue the one with the higher win rate is a "better" trader in that he can more accurately read the markets...

I decided to address this issue specifically after reading a thread and I wanted to encourage some to think more in depth in that there may more to a good trader than simply amount of trades taken and win rate....

Nihil inimicus quam sibi ipse Marcus Tullius Cicero
  • #7
  • Sep 9, 2009 3:56pm Sep 9, 2009 3:56pm
If they are both profitable, they both have an edge.

It really depends on how you like to trade. If you like to be stuck in front of your computer for 5-8 hours a day scalping, or if you simple check your charts 3-5 times a day withing 15mins to decide to hold or sell.

Personally i like the buy and hold method as it gives me more time to get out.
  • #8
  • Sep 9, 2009 3:58pm Sep 9, 2009 3:58pm
Quoting coscorp
I thought this question may bring up an interesting (hopefully) discussion - specifically - we have 2 traders:


Trader A takes 1000 trades a year and has a high win rate on a trade per trade basis (>90%) but is happy with 5 - 20 pips per trade

Trader B takes only 100 trades per year yet posts a good yearly ROI (>50%)....



who should be defined as the "better" trader? The one with the better win rate or the one with the better ROI?
The question is meaningless, they are both fantastic traders if they can do that over the course of a year, a better question is 'can they do it year after year'?
The breaking of a wave cannot explain the whole sea.
  • #9
  • Sep 9, 2009 4:06pm Sep 9, 2009 4:06pm
good - consistency has been brought into the equation...
Nihil inimicus quam sibi ipse Marcus Tullius Cicero
  • #10
  • Sep 9, 2009 5:31pm Sep 9, 2009 5:31pm
Quoting coscorp
and I would agree as in the end one should be looking at the bottom line -

however one could also argue the one with the higher win rate is a "better" trader in that he can more accurately read the markets...

I decided to address this issue specifically after reading a thread and I wanted to encourage some to think more in depth in that there may more to a good trader than simply amount of trades taken and win rate....

Usually the one with higher win rate and more trades has a lower dd -> therefore lower risk adjusted return so pipmutts first reply is still all there is.

The real problem is that there is really no good way of calculating risk adjusted return (yes I know about sharpe and sortino but martingale shows excellent results in both until the point when it crashs and burns).
  • #11
  • Sep 9, 2009 6:12pm Sep 9, 2009 6:12pm
thanks for the input Mikkom - let me use an analogy to give a better idea of where I'm trying to head with this, perhaps - I'll admit - a bit unconventionally..

when we were young and would see or read of a car that had tons of horsepower went 300+ km/h, we had all the information we deemed necessary to decide IT was the best car around....as only it's power and how fast it went was what mattered to us...

but then, growing up, we started to realize that top speed was only a small part of the equation.... getting around corners was a nice feature to have and actually quite important, as was the possibility to actually stop soon enough if necessary....


similarly defining that a trader is good simply by the number of hits in relation to trades taken over a given time period is only looking at one factor...like looking solely on a cars' declared top speed forgetting everything else to decide it's THE car.......
Nihil inimicus quam sibi ipse Marcus Tullius Cicero
  • #12
  • Sep 9, 2009 6:43pm Sep 9, 2009 6:43pm
Quoting panguFX
I made an EA that obtains 98% wins since 2002,

but it still loses money...
then you are doing something really wrong.

m
  • #13
  • Sep 9, 2009 9:43pm Sep 9, 2009 9:43pm
Quoting coscorp
I thought this question may bring up an interesting (hopefully) discussion - specifically - we have 2 traders:


Trader A takes 1000 trades a year and has a high win rate on a trade per trade basis (>90%) but is happy with 5 - 20 pips per trade

Trader B takes only 100 trades per year yet posts a good yearly ROI (>50%)....



who should be defined as the "better" trader? The one with the better win rate or the one with the better ROI?
The math geeks will answer with equations and talk of ROI and winning percentages and the like . I look at it from another perspective.

The real question that has to be asked, is trader A taking 1000 trades for 5-20 pips BECAUSE he is afraid to be in the market when he makes a trade? In other words, is trader A so worried about loss that he scurries in and out of the market for a few pips when there are potentially greater pips available if he felt comfortable being in the market?

If this is the case, clearly trader A isn't even being the best trader he could be. Why compare him to someone else? The battle is still within.

As for trader B, the real question is whether he takes 100 trades a year because he has such a strict entry requirement that so few trades qualify and is this the case BECAUSE he is afraid to be in the market when he makes a trade? So rather than subject himself to the fear and anxiety of being in the market often, he creates multiple layers of trade entry criteria. With every loss, one more indicator is brought into the mix.

If this is the case, clearly trader B isn't even being the best trader he could be. Why compare him to someone else? The battle is still within.

So if both traders A&B need to work on being egoless treaders, then there is no point in a comparison. If both are already egoless traders, there is no point in a comparison.
Without VSA, you're playing checkers while the Smart Money plays chess.
  • #14
  • Sep 9, 2009 10:05pm Sep 9, 2009 10:05pm
use sharpe ratio to define the better one..
To Live is the rarest thing in the world , Most people exist , that is all
  • #15
  • Sep 9, 2009 11:42pm Sep 9, 2009 11:42pm
Quoting HiddenGap
The math geeks will answer with equations and talk of ROI and winning percentages and the like . I look at it from another perspective.

The real question that has to be asked, is trader A taking 1000 trades for 5-20 pips BECAUSE he is afraid to be in the market when he makes a trade? In other words, is trader A so worried about loss that he scurries in and out of the market for a few pips when there are potentially greater pips available if he felt comfortable being in the market?

If this is the case, clearly trader A isn't even being...
Use the Force, Luke. Let go, Luke. Luke, trust me.
The breaking of a wave cannot explain the whole sea.
  • #16
  • Sep 10, 2009 1:17am Sep 10, 2009 1:17am
Regarding a good ROI per annum for what we do........

A good ROI minimum of 70% Per annum to make the kind of risk we take on in FX worthwhile.
Really should be making 90% plus to justify the high risk nature of speculative Fx trading (or any speculative trading for that matter)
  • #17
  • Sep 10, 2009 1:27am Sep 10, 2009 1:27am
Quoting Rise
Regarding a good ROI per annum for what we do........

A good ROI minimum of 70% Per annum to make the kind of risk we take on in FX worthwhile.
Really should be making 90% plus to justify the high risk nature of speculative Fx trading (or any speculative trading for that matter)
Why is there a "kind or risk"? Due to the high leverage in forex, it is possible to almost completely control the level of risk you take. The speculative part is another story.

By the way, we know nothing of Trader A's risk/reward structure so its pretty hard to comment on his performance. For all we know he might be consistently losing.
The nail that sticks out gets hammered back in
  • #18
  • Sep 10, 2009 1:52am Sep 10, 2009 1:52am
Tell me how you trade FX at low risk using leverage .... real example
  • #19
  • Sep 10, 2009 2:43am Sep 10, 2009 2:43am
nology...good point....
Nihil inimicus quam sibi ipse Marcus Tullius Cicero
  • #20
  • Sep 10, 2009 2:45am Sep 10, 2009 2:45am
i like trader B..less trade more time with family/friends...
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