What Win Rate can you live with?

[JJZ]

I have been reading, back testing and learning every chance I get. I am curious to know what sort of win/loss ratio are people comfortable with or what they are shooting for?

It appears to be a very individual thing, personally I am more conservative but what is conservative ratio?

Hope I am making sense, if I am back testing and getting say a 60% Win 40% Loss ratio will I struggle to deal mentally with the losses on a day to day basis?

Obviously the results from back testing are not 100% reflective of real trading results, but I curious of whats realistic when trading in real life. The last thing I want it to make the move to real trading with unrealistic goals.

What do people find acceptable?


Thanks
JJZ

 

[skyQuake]

I have been reading, back testing and learning every chance I get. I am curious to know what sort of win/loss ratio are people comfortable with or what they are shooting for?

It appears to be a very individual thing, personally I am more conservative but what is conservative ratio?

Hope I am making sense, if I am back testing and getting say a 60% Win 40% Loss ratio will I struggle to deal mentally with the losses on a day to day basis?

Obviously the results from back testing are not 100% reflective of real trading results, but I curious of whats realistic when trading in real life. The last thing I want it to make the move to real trading with unrealistic goals.

What do people find acceptable?


Thanks
JJZ

I think that'll depend more on timeframe and drawdowns.

If your system is say 60/40 and trades 100 times a day on futures (assume similar gain/loss) then its pretty easy to watch your acct tick up every day with minimal daily or weekly drawdowns.

However if it trades 9 times a year then you could be sitting in drawdowns for months or years... Personally, thats not something I can live with.

 

[JJZ]

I think that'll depend more on timeframe and drawdowns.

If your system is say 60/40 and trades 100 times a day on futures (assume similar gain/loss) then its pretty easy to watch your acct tick up every day with minimal daily or weekly drawdowns.

However if it trades 9 times a year then you could be sitting in drawdowns for months or years... Personally, thats not something I can live with.

Thanks skyQuake,

Good Point! Never even thought about considering time frames.

I would be trading EOD, ASX stocks, shooting for 40-80 trades a year.

 

[Gringotts Bank]

70% is the current "1 minute mile" for systems traders.

This topic has been trending on Yahoo AB lately.

70% for MR. Maybe 40-45% for trend following.

 

[Wysiwyg]

Win/loss ratio has nothing to do with profitability so why waste time considering this metric. (Tech/A would have already posted this)

 

[Roller_1]

Win/loss ratio is the amount you win when you win and win% is how often you win..
I think you will find the win % will depend on what style of trading you are doing. If you are looking for 40-80 trades a year, i am guuessing your holding times will be a decent amount of time then you might struggle to get >60% win rate as GB said.

 

[Gringotts Bank]

Win/loss ratio has nothing to do with profitability so why waste time considering this metric. (Tech/A would have already posted this)

A high % winners is always desirable because it shows you real edge, ie. repeatability. It helps psychologically. Good Sharpe ratio is impossible without a high WR%.

 

[Wysiwyg]

Win/loss ratio is the amount you win when you win and win% is how often you win..
I think you will find the win % will depend on what style of trading you are doing. If you are looking for 40-80 trades a year, i am guuessing your holding times will be a decent amount of time then you might struggle to get >60% win rate as GB said.

Sorry but you are wrong.

DEFINITION of 'Win/Loss Ratio'
A ratio of the total number of winning trades to the number of losing trades. It does not take into account how much was won or lost simply if they were winners or losers.

Read more: Win/Loss Ratio Definition | Investopedia http://www.investopedia.com/terms/w/win-loss-ratio.asp#ixzz3zw20G3yr

 

[Gringotts Bank]

A high % winners is always desirable because it shows you real edge, ie. repeatability. It helps psychologically. Good Sharpe ratio is impossible without a high WR%.

In addition, walk forward analysis of low win rate systems often fail on unseen data. High WR% systems are much more likely to pass this test (once again, because a real edge has been discovered).

 

[Trendnomics]

Guys, there is a lot of misguided information in this thread.

Let me simplify this matter with the following basic positive expectancy chart:

:

• The red zone is the zone of operation for most retail traders (i.e. negative expectancy);
• The large green zone is the zone of operation for trend following (or other similar strategies - less than 50% win rate with positive expectancy);
• The small blue zone is the zone of operation for mean reversion (or other similar strategies - more than 50% win rate with positive expectancy);
• The black zone is the zone of unrealistic expectations - "crystal-ball trading" (no long term records exist of a singular mechanical strategy falling in the "black zone").

For me green is easier to maintain than blue - particularly for a retail trader.

 

[minwa]

[*]The black zone is the zone of unrealistic expectations - "crystal-ball trading" (no long term records exist of a singular mechanical strategy falling in the "black zone").

Really ? If I am reading it correctly you are saying nothing over 50% win rate and with a higher than 1:1 RR ?

 

[Trendnomics]

Really ? If I am reading it correctly you are saying nothing over 50% win rate and with a higher than 1:1 RR ?

Correct, there is no mechanical system (or purely systematic trader) with a statistical significant record, that falls in the black zone. I'm sure there are short term "excursions" into the black zone, in particular for discretionary traders (i.e. lucky gut feelings), but over the longer term you require significant predictive capabilities to remain in this zone.

• Trend-following: Loss exit (stop/criteria) smaller than profit exit (criteria) - let profits run take losses early (~1L:3P) - losses occur more frequent (more than 50%);
• Mean-reversion: Loss exit (stop/criteria) larger than profit exit (stop) - take profits early loose less frequently (~2L:1P) - losses occur less frequent (less than 50%).

Hence, these systems have no predictive elements - the win rate is entirely dependent on the ratio of the loss exit stop/criteria and the profit exit stop/criteria.

 

[minwa]

Correct, there is no mechanical system (or purely systematic trader) with a statistical significant record, that falls in the black zone. I'm sure there are short term "excursions" into the black zone, in particular for discretionary traders (i.e. lucky gut feelings), but over the longer term you require significant predictive capabilities to remain in this zone.

You haven't looked hard enough. For pure mechanical systems, Larry Williams for example have back tested systems with higher than 50% and 1:1 for 20yrs+. Definitely more out there.

 

[Trendnomics]

You haven't looked hard enough. For pure mechanical systems, Larry Williams for example have back tested systems with higher than 50% and 1:1 for 20yrs+. Definitely more out there.

The irony of using Larry Williams as an example of a "black zone" trader is astonishing.

Some information on him (note that I don't support SchoolofGann - but the information they have gathered is rather interesting):

http://www.schoolofgann.com/LinkClick.aspx?fileticket=RqQnbmNqeLs=

 

[minwa]

The irony of using Larry Williams as an example of a "black zone" trader is astonishing.

Some information on him (note that I don't support SchoolofGann - but the information they have gathered is rather interesting):

http://www.schoolofgann.com/LinkClick.aspx?fileticket=RqQnbmNqeLs=

I see Larry (and his daughter who traded Larry's newsletter) winning one of the most oldest and prestigious trading competition, not any Gann trader.

To quote that link "Let's look at Larry's world trading win in 1987 turning $10,000 into $1 million. It didn't happen without fraud. If you can make 11,000% why do you need to trade other people's money? Why isn't he on Wall St earning $500 million like the highest paid fund managers who return 24-35% PA"

This is obviously written by some idiot who thinks managing massive funds should be traded like a trading competition. Doesn't understand leverage/scalability/psychology/competition at all.

All that aside, his system are purely mechanical, Tradestation stats, the codes you can put into your own Tradestation and it will the spit the same results over 20+ years backtest. 50% win, higher than 1:1. His system isn't even that good, there are better ones out there. Saying they don't exist just because you haven't found any is ignorant. I believe even on this forum tech/a probably has something similar. Having 50.01% and 1.01:1 isn't even impressive, I wouldn't consider it "black zone".

 

[Trendnomics]

I see Larry (and his daughter who traded Larry's newsletter) winning one of the most oldest and prestigious trading competition, not any Gann trader.

To quote that link "Let's look at Larry's world trading win in 1987 turning $10,000 into $1 million. It didn't happen without fraud. If you can make 11,000% why do you need to trade other people's money? Why isn't he on Wall St earning $500 million like the highest paid fund managers who return 24-35% PA"

This is obviously written by some idiot who thinks managing massive funds should be traded like a trading competition. Doesn't understand leverage/scalability/psychology/competition at all.

All that aside, his system are purely mechanical, Tradestation stats, the codes you can put into your own Tradestation and it will the spit the same results over 20+ years backtest. 50% win, higher than 1:1. His system isn't even that good, there are better ones out there. Saying they don't exist just because you haven't found any is ignorant. I believe even on this forum tech/a probably has something similar. Having 50.01% and 1.01:1 isn't even impressive, I wouldn't consider it "black zone".

Larry is an excellent promoter and author, but I question his true trading ability (look at his past fund failure and lack of transparency).

Tech/A was a systematic trend-follower (i.e. Tech Trader 2001-2007) and at the moment a discretionary trader (as I stated before I'm sure there are short term "excursions" into the black zone for discretionary traders).

If you can list better examples or provide long standing actual trading records of "black zone" trading, then please do.

 

[minwa]

Larry is an excellent promoter and author, but I question his true trading ability (look at his past fund failure and lack of transparency).

If you can list better examples or provide long standing actual trading records of "black zone" trading, then please do.

If winning two third party verified trading competition is not some hint or at least capable trading then the only only thing able to convince is if he traded right infront of your eyes. Not gonna happen so nothings going to convince you.

Now you want to see actual trading records. Almost none exist on the internet that are auditted so nothings going to convince you again.

 

[Boggo]

Correct, there is no mechanical system (or purely systematic trader) with a statistical significant record, that falls in the black zone. I'm sure there are short term "excursions" into the black zone, in particular for discretionary traders (i.e. lucky gut feelings), but over the longer term you require significant predictive capabilities to remain in this zone.

• 
  [*]Trend-following: Loss exit (stop/criteria) smaller than profit exit (criteria) - let profits run take losses early (~1L:3P) - losses occur more frequent (more than 50%);
• Mean-reversion: Loss exit (stop/criteria) larger than profit exit (stop) - take profits early loose less frequently (~2L:1P) - losses occur less frequent (less than 50%).

Hence, these systems have no predictive elements - the win rate is entirely dependent on the ratio of the loss exit stop/criteria and the profit exit stop/criteria.

Yes.

My systems are disabled at the moment with an index filter.

For the report below I have disabled the index filter and ran the backtest over the last five years of data up to 31st Jan 2016.

It can still make double digit profits with over 60% losers as in the comment above that I have highlighted.

(click to expand)

 

[minwa]

If you can list better examples or provide long standing actual trading records of "black zone" trading, then please do.

From Myfxbook, lots of trading stats there and not many people question their authenticity.


Another one

 

[Trendnomics]

From Myfxbook, lots of trading stats there and not many people question their authenticity.

View attachment 65877
Another one
View attachment 65878

One of the trading records has 360 closed trades and the other has 88 closed trades - not enough trades to be deemed statistically significant (are there any records with +1000 closed trades?).

These are good examples of short term excursions into the "black zone".

The records depict high trade frequencies (+1000 closed trades should be achievable in a couple of months, unless the operator bails on the system - as usual) - please provide links to the records and we can monitor the outcome at +1000 closed trades (if achieved ).