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what can keep a working strategy to always have a high probability to win each trade?

  • #1
  • First Post: Edited 8:32am Nov 26, 2009 7:46am | Edited 8:32am
I have a question:
As we know, to trade successfully, we need to find out a good signal with high probability to win each trade.
For example, in 100 trades with (stop loss) : (take profit) =1:1, 70 trades are right, and 30 trades are wrong, so, in genaral, we can earn money.

But, I just wonder, if the signal is logically right, why sometimes it gives us wrong trades. (why there are 30 wrong trades). Maybe in the future, the number of wrong trades becomes 40, or 50, or 60. what can guarantee the signal always have a high probabily to win.
  • #2
  • Nov 26, 2009 8:02am Nov 26, 2009 8:02am
There is no guarantee, no easy way.

It's simple. The wider the stop in relation to the target the higher is the probability of the target to be hit. But of course this increase of the win rate comes with a decrease of the risk/reward. So it's a trade off.

Personally I often trade really the worst risk/reward stuff (small targets, big stops), so things no good trader would do.
  • #3
  • Nov 26, 2009 8:10am Nov 26, 2009 8:10am
Quoting bobowang
I have a question:
As we know, to trade successfully, we need to find out a good signal with high probability to win each trade.
USDJPY at 14 years low. That's the high probability that it would reverse

soon. Japanese YEN valuation is out of whack to EURO or to GBP

or To CHF. Otherwise there is only good guess with all those indies,

as they all working after the fact. IMHO.
Viewer Discretion Advised: Shall we shag now or should we shag later? :-)
  • #4
  • Nov 26, 2009 1:08pm Nov 26, 2009 1:08pm
Quoting bobowang
But, I just wonder, if the signal is logically right, why sometimes it gives us wrong trades. (why there are 30 wrong trades). Maybe in the future, the number of wrong trades becomes 40, or 50, or 60. what can guarantee the signal always have a high probabily to win.
The reasons are:

(1) There is a certain amount of random noise in the market.
(2) There simply are not many mechanical systems for exploiting the ever changing little non-randomness that will continue to work forever without the need of constantly changing their parameters, some people even say there are no such systems at all. I'm not totally sure about that, but i would not be surprised at all.

Some traders will now disagree with me, arguing that they have been trading the same system profitably for years, but this does not prove that it will continue to work forever, it will instead prove something else: There are systems that work for some time. Even some very long time sometimes. Some systems are flexible enough to be continuously adapted to changing market conditions, the average volatility, the longterm trend, certain cycles, best times to trade etc.

Some traders will slowly change their system or it's parameters over time, their growing experience over all the years will make small differences sometimes even without them consciously noticing it, they dont call it "change" or "new system", they call it "improvement" instead, but it is the same thing.

Use a system that works as long as it works and stop using it when it stops working. Monitor it's performance to tell random fluctuations, temporary drawdowns within the expected range from general system failures because of changes in the market.
  • #5
  • Nov 26, 2009 3:23pm Nov 26, 2009 3:23pm
Quoting bobowang
I have a question:
As we know, to trade successfully, we need to find out a good signal with high probability to win each trade.
For example, in 100 trades with (stop loss) : (take profit) =1:1, 70 trades are right, and 30 trades are wrong, so, in genaral, we can earn money.

But, I just wonder, if the signal is logically right, why sometimes it gives us wrong trades. (why there are 30 wrong trades). Maybe in the future, the number of wrong trades becomes 40, or 50, or 60. what can guarantee the signal always have a high probabily to win.
This is a very comon trader's mistake
Don't search for high probability hit if you want to consistently win in forex.

The best advice is allways "cut your loses fast and let your profits run". You can have only 40% of wining trades and still be very profitable. But a proper money management is a MUST.

-If you have a TP of 10 pips and a SL of 100 pips, you will need 10 winners to archive 100 pips, but one to lose 100 pips. No good.

-If you have a TP of 100 pips and a SL of 10 pips, you can lose 9 and win 1 and still be profitable.

Of course, this is only an example. Every pair need his own sl and tp coz they don't move in the same range and way. So, every pair need his own strategy/indicators.

So, the other conclusion is: trade only one pair (or the ones you know most and your strategy work better and tailored specially for them).
  • #6
  • Nov 26, 2009 4:49pm Nov 26, 2009 4:49pm
Quoting bobowang
I have a question:
As we know, to trade successfully, we need to find out a good signal with high probability to win each trade.
For example, in 100 trades with (stop loss) : (take profit) =1:1, 70 trades are right, and 30 trades are wrong, so, in genaral, we can earn money.

But, I just wonder, if the signal is logically right, why sometimes it gives us wrong trades. (why there are 30 wrong trades). Maybe in the future, the number of wrong trades becomes 40, or 50, or 60. what can guarantee the signal always have a high probabily to win.
It's possible to have a low win rate, and still make money. Look at any profitable trend-finding (as opposed to trend-following) system.

Probability to win is only half the picture. You also need to figure out the size of the win vs the size of the loss.
  • #7
  • Apr 10, 2012 12:54am Apr 10, 2012 12:54am
Quoting bobowang
I have a question:
As we know, to trade successfully, we need to find out a good signal with high probability to win each trade.
For example, in 100 trades with (stop loss) : (take profit) =1:1, 70 trades are right, and 30 trades are wrong, so, in genaral, we can earn money.

But, I just wonder, if the signal is logically right, why sometimes it gives us wrong trades. (why there are 30 wrong trades). Maybe in the future, the number of wrong trades becomes 40, or 50, or 60. what can guarantee the signal always have a high probabily to win.
NO GUARANTEE!!! ask your broker...
100 trades: 70 percent winner, 1/1...youré a millionaire...chances are the other way...100 trades, 70 loosers in the long run...thatīs why almost everyone looses here...including the best....you better understand your odds properly...before putting any money on the table...your broker will marry you otherwise...
  • #8
  • Apr 10, 2012 9:49am Apr 10, 2012 9:49am
I guess thats the struggle of trading, some of us struggle to create systems that would LESSEN the probability of losing, others go for that one shot sure trade with big profits, its a hard combination of good knwledge of analytical and fundamentals and to be able to read between the lines since the market is not always as it seems. so there i go again posting without answering and just going in circles i guess
  • #9
  • Apr 10, 2012 12:29pm Apr 10, 2012 12:29pm
Quoting jiggz
I guess thats the struggle of trading, some of us struggle to create systems that would LESSEN the probability of losing, others go for that one shot sure trade with big profits, its a hard combination of good knwledge of analytical and fundamentals and to be able to read between the lines since the market is not always as it seems. so there i go again posting without answering and just going in circles i guess
100 trades win and loose, make an average of your Rīs (Risks), equalize that R on every trade...like the chip of a casino...you pick the size that suits you...always the same risk.
if you get an average of, letīs say 0,10 positive minimum...then you have an edge...play the game as many times as possible...makes $
Thatīs called expectancy...
0,10 means 10 cents per dollar risked, on average...
I scratch between 0,05 and 0,30....
One big mistake, blows maybe a month of work....no free lunch...
  • #10
  • Last Post: Apr 12, 2012 6:15am Apr 12, 2012 6:15am
Quoting jiggz
I guess thats the struggle of trading, some of us struggle to create systems that would LESSEN the probability of losing, others go for that one shot sure trade with big profits, its a hard combination of good knwledge of analytical and fundamentals and to be able to read between the lines since the market is not always as it seems. so there i go again posting without answering and just going in circles i guess
Hi jiggz,
If interested to see a profitable system from inside, there is a group of noSL traders from >Trading Systems>No SL No Leverage Strategy - working so far>who are gathering a group to see how it works for a month on individual demo accounts, trading starts this Monday, you may join in.
Regards
P.S. If interested at once, pls send a PM
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