Batting .500 in Trading

 

 

 

 

 

If you have not realized it yet, in trading you are not going to be right every time with your trades. You are not even going to be right the majority of the time. Most of the best traders in the world are only right 50% of the time, many of the most profitable traders in the long term are right even less but are still highly profitable. One shocking fact is that the vast majority of trading systems with the highest winning percentages are losing systems. This is because traders who tend to have high winning percentages cut their winners short to lock in gains but let their losers run hoping they will come back to even. This turns a small loss into a huge loss at times, and a few times is all it takes to wipe out many winning trades.  In the long term you can expect to have 50% of your trades to be winners and 50% be losers. Yes you will have streaks of 10 winners or losers in a row and at times even more than that in the right market conditions. However in your trading you must think long term and your winners all adding up to being much greater than all your losers.

Here is an example of the last four trades that I made  my accounts and how they have played out so far.

$YELP short lost -$650

$AAPL Long lost -$670

$PCLN long +$3840

$NFLX Short +$266

Profit +$2,786

This is how to really make money in the market: playing an edge over and over and let the probabilities play out in your favor. The secret to winning in the markets is small losses and big profits.

When I enter four trades I actually expect two to be losers and two to be winners. I expect two losses of 1% of my capital, one gain of 1% of my capital and one huge win with a trend of 5%-10% of my trading capital. That is what my trades are about; catching that monster win and getting out when it is not there to avoid any big losses. If the trades work out better than that it is just gravy.