Some of the things I have learned from Nick:
- Higher avg. win/loss ratio is more important than win rate. This can be done with tighter protective stops. Don’t think of the win rate, there’s much randomness in the markets and 50/50 like a coin toss is normal. Just keep winners bigger than losers.
- Once you have an edge with net positive expectancy, the more trades you take the more profit you will generate. This is why HFT is so profitable even with a low % edge – the law of large numbers (like a casino). Mind the fees!
- Initial risk can be lowered with low-risk and partial entries. Let’s say you enter in 4 parts, initial risk being only 1/4, when price goes in your favor by X amount you add another part and move STP to breakeven. Then use trailing STP to ride the trend.
- You need to manage risk – both risk per trade and risk per overall account. Even 50/50 win rate can have 10 consecutive losses in a row, a coin toss will rather often produce 5 heads or tails in a row.
- You need to develop and test a systematic trading approach with high avg. win/loss ratio, win rate around 40% is fine and then execute this system as much as possible. Mind the diversification of how many positions at a time for example.
It’s not a long e-book but covers some good insights about robust systematic trend trading.Share this post