Guaranteed Long-Term Profits?

[TalonD]

one advantage casinos have is thousands of transactions (bets) per day. Even with a small percentage like around 1% at blackjack, 2.5% at roulette, it all adds up !

[ttbisco]

Originally Posted by TalonD

one advantage casinos have is thousands of transactions (bets) per day. Even with a small percentage like around 1% at blackjack, 2.5% at roulette, it all adds up !

That's a good point, but none the less you could still apply the same basic principles to Forex and have a good chance at success.

[wuhongfa]

Originally Posted by o990l6mh

Absolutely. Patience is the hardest part in trading it seems.

I read a post somewhere from a guy who said something worth thinking about. He said something like: if I lose a trade I don't allow myself to complain or get upset about it. I just calmly state that I followed my plan. If I win I don't congratulate myself, I just say to myself: I followed my plan.

When we get to that state of having emotional control, that's when we have what it takes to make it. That's when we can calmly sit back and let the 51% wins make us rich slowly.

That's the holy grail if there is one. Inside every traders mind.

The calculation is totally wrong. We must consider Risk/Reward Ratio too.
For example: Let's say winning rate is 60%, which means in long run, every 10 trades will have 6 winning trades and 4 losing trades.
Based on the above assumption, and if Risk/Reward Ratio is 1:2 (SL:TP=1:2), then you win FOUR TP pips for every 10 trades in the long run (6xTP-4xSL= 6xTP-4x(TP/2)=4TP).
However, if Risk/Reward Ratio is 1:1 (SL:TP=1:1), then you win ONE TP pips for every 10 trades in the long run.
And, if Risk/Reward Ratio is 2:1 (SL:TP=2:1), then you LOSE TWO TP pips for every 10 trades in the long run (6xTP-4xSL= 6xTP-4x(2xTP)=-2TP).

As I know, for many EAs, SL is bigger than TP, so if winning rate is only 60%, you definitely will lose.

For generic calculation, let assume winning rate is A, and Risk Ratio is B, then we know SL:TP=B, or SL=BxTP, so for every n trades, we will have nxA winning trades, and nx(1-A) losing trades, the profit is calculated as follows:
Profit for n trades (in pips)=nxAxTP - nx(1-A)xSL
=nxAxTP - nx(1-A)xBxTP
=(A - (1-A)xB)xnxTP
So, in the long run, if A>(1-A)xB, you will win, otherwise, you will lose.

[o990l6mh]

Originally Posted by wuhongfa

The calculation is totally wrong. We must consider Risk/Reward Ratio too.
For example: Let's say winning rate is 60%, which means in long run, every 10 trades will have 6 winning trades and 4 losing trades.
Based on the above assumption, and if Risk/Reward Ratio is 1:2 (SL:TP=1:2), then you win FOUR TP pips for every 10 trades in the long run (6xTP-4xSL= 6xTP-4x(TP/2)=4TP).
However, if Risk/Reward Ratio is 1:1 (SL:TP=1:1), then you win ONE TP pips for every 10 trades in the long run.
And, if Risk/Reward Ratio is 2:1 (SL:TP=2:1), then you LOSE TWO TP pips for every 10 trades in the long run (6xTP-4xSL= 6xTP-4x(2xTP)=-2TP).

As I know, for many EAs, SL is bigger than TP, so if winning rate is only 60%, you definitely will lose.

For generic calculation, let assume winning rate is A, and Risk Ratio is B, then we know SL:TP=B, or SL=BxTP, so for every n trades, we will have nxA winning trades, and nx(1-A) losing trades, the profit is calculated as follows:
Profit for n trades (in pips)=nxAxTP - nx(1-A)xSL
=nxAxTP - nx(1-A)xBxTP
=(A - (1-A)xB)xnxTP
So, in the long run, if A>(1-A)xB, you will win, otherwise, you will lose.

What calculation would that be? I can't see any in my post. Also, I said nothing about Risk:Reward.

[profitforextrader]

Originally Posted by wuhongfa

The calculation is totally wrong. We must consider Risk/Reward Ratio too.
For example: Let's say winning rate is 60%, which means in long run, every 10 trades will have 6 winning trades and 4 losing trades.
Based on the above assumption, and if Risk/Reward Ratio is 1:2 (SL:TP=1:2), then you win FOUR TP pips for every 10 trades in the long run (6xTP-4xSL= 6xTP-4x(TP/2)=4TP).
However, if Risk/Reward Ratio is 1:1 (SL:TP=1:1), then you win ONE TP pips for every 10 trades in the long run.
And, if Risk/Reward Ratio is 2:1 (SL:TP=2:1), then you LOSE TWO TP pips for every 10 trades in the long run (6xTP-4xSL= 6xTP-4x(2xTP)=-2TP).

As I know, for many EAs, SL is bigger than TP, so if winning rate is only 60%, you definitely will lose.

For generic calculation, let assume winning rate is A, and Risk Ratio is B, then we know SL:TP=B, or SL=BxTP, so for every n trades, we will have nxA winning trades, and nx(1-A) losing trades, the profit is calculated as follows:
Profit for n trades (in pips)=nxAxTP - nx(1-A)xSL
=nxAxTP - nx(1-A)xBxTP
=(A - (1-A)xB)xnxTP
So, in the long run, if A>(1-A)xB, you will win, otherwise, you will lose.

there are no wrong calculations, only wrong assumptions that all traders use EA's with larger stops than take profits when in reality most SUCCESSFUL traders do NOT use EA's and generally have larger TP's than SL's

lee

[JFXnc]

Also with any system that you only have a slight edge with lets say 60%
If we trade this system 100 times then in theory we should win 60 times right.
But how many losers in a row will we have??? At only 2% a trade, lets say you lose 10 times in a row( it will happen!!). How many trades do we have to win just to make those 10 loses up?? Its more then 10. Me personally I would never think about trading some thing unless it has at least a 85% chance of turning a profit. You can invest in a lot of other things that have a higher chance then 60%....House flipping, ect ect ect

[pipso facto]

Great post!

I agree that a simple system with positive expectancy, including spread/slipage, applied consistently is the way to go.

Sticking to that system... now that's the true holy grail, for the reasons mentioned by the other posters.

Backtesting can help give one the confidence in one's system that will be required when the inevitable drawdown occurs.

[hess]

Originally Posted by ttbisco

So when it comes right down to it, Discipline, is the single most important factor, am I right?

before that you need to find or discover something that actually works. If a system has a negative expectancy no amount of discipline or money management in the world will help