I had a 30% win rate last month and still made some profit but

Beginner Questions
1

Hi,

I have started trading a new system in November and came out with around a 30% win rate, but I still made a very small profit of around 1%. This strategy trades reversals with divergences against the current timeframe trend. When I look back at my trades, I can see that a lot of the losers were the ones that I did not trade with the trend on the higher timeframes. So for example, my results tell me that I should only take bullish divergences on the 1 hour timeframe of EURUSD, because the 4h, Daily and Weekly charts are generally bullish.

Do you think that if I trade with the higher timeframe trend for this month that my win rate should improve? I know I said from my trades that it looks like this is the case, but can anyone confirm this with their own experience?

Thanks!

2

Trading reversals is never going to have the highest of win-rates.

Breaking even (virtually) on a 30% win-rate doesn’t sound unreasonable.

Yes. I’ll be amazed if it doesn’t.

Of course, your trading frequency will reduce (maybe a lot), too.

You need to monitor carefully over hundreds of trades whether that works out well, overall.

My guess is that it will.

From mine, yes.

I trade 3 different reversal patterns, but never without a directional bias from higher time-frames.

3

Excellent reply, thank you. I took around 20 swing trades in November (these were mostly 1 hour and 4 hour timeframes) and I did feel like I was taking too many trades, so I am happy to cut this amount down if it means taking better probability trades.

4

Cutting the obvious losers is hands down one of the best ways to improve profitability. While I don’t use trend based methods anymore, requiring correlation with a higher time-frame trend - assuming you define that clearly - significantly improved my win rate.

However, as @LaughingCharlie suggested, my trade signals dropped significantly, too. This makes sense if you think about it. Always requiring a higher time-frame trend means you never open a position when:

  1. The higher time-frame is ranging; or
  2. The higher time-frame trend is reversing (because your lower time-frame movements will be opposite to the lagging higher time-frame indicator).

Overall, my profitability was a little higher, but not nearly as much as you might think; there were simply for fewer opportunities to make money. There was also a lot of sitting around watching the markets, which does not suit my psycology.

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