The 50/50 reality?

[Sunnyside 10]

The trading club that I belong to has guests from time to time. We had a mathematician and professional trader who was speaking extensively about backtesting systems. After speaking for an hour he finally admitted that technical systems really only have a 50/50 win/loss ratio on an average. This leads me to definetely take faith in the idea of money management and RRR. I really enjoyed Walters way post which brought me to the same conclusion as our guest speaker. How do other successfull traders here feel about the 50/50 ratio?

[walterw 10]

Hi Sunnyside (I like your nickname ¡¡)... its a great truth the 50/50... you have to be VERY GOOD plus some luck if you get to 60/40 ... so the RRR its a basic fundamental strategy for any trader... I remember my first post here on TL was about that jejeje... maybe you readed that one...

 

But basicly stops should be tight and normal average exits (even on scalping )should have at least a 1:2 ratio... some times on scalping that comes down to 1:1.5 but the ideal is 1:2 .... now outside from scalping if you get above 1:3 you are in good shape...

 

nice topic you bring back here Sunnyside... cheers Walter.

[TinGull 10]

Hey sunnyside (got your PM). Regarding the 50/50...I think that in day trading it applies more so than how I trade. The way I trade I look for around an 80% probability rate, but the risk/reward sucks so bad I have to do that. I'm usually risking 7 to make 3 sort of thing. The odds absolutely play in my favor, and I have rules in place so that I would NEVER take that full drawdown...

 

In day trading, then yea, I'd say a 60/40 is a very nice ratio to have. at 50/50 it's all about the RRR. I mean, having 50% of your trades work out while youre winning twice as much as your losing ones...you're in business I'd say.