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Being right and wrong...


It doesn't matter how often you are right or wrong - it only matters how much you make when you are right versus how much you lose when you are wrong.

(How often have you seen trading services advertise that they have 85% of their trades as winners? It doesn't matter what your win to loss ratio is if you lose all your money on the 15% that are wrong.)
This is too true Mr Soros. Thank you for reminding us of that. I suppose that you can take the formula into infinity? e.g. 10% winners but each winner is 11 points and 90% losers but each loser is 1 point

OR

5% winners but each winner 22 points and 95% losers and each loser is 1 point etc. etc.

How does the psych handle 19 losers to each winner?
I just saw this quote again on another web site. This is such good advice when you are looking at stats which show the percentage of winners.

Percentage of winners is a great measure if the size of your loss is the same as the size of your win for each and every trade that you take. This is like betting on red or black at the roulette table. You win or lose $1 on each spin. Then the percentage of winners is important. In roulette the percentage of winners is about 52% - for the house - and about 48% - for you. So this is a good example of a losing betting scenario.

In trading, if you are making and losing the same amount on each trade then you need to have 52 to 56% of your trades as winners just to break even. i.e. to cover the costs of trading. After that you can calculate your profits.