All,
I am a bit of a newbie, and looking at some basic stats deviations in FX time series I am asking myself the following question. Let’s say that I have an indicator that gives a buy or sell signal at any point. What is the minimum success rate that this indicator should have in order to trade successfully and consistenly make some profit, taking into account spreads, slippage, etc on a very liquid pair (eg EURUSD)
Should it be 51%, 52% or should it be much higher 60-65%?
Reason I am asking is that on hourly bars (eg on EURUSD), it is fairly easy to see that there is a deviation and that on many time periods there is a tendency of a move in one direction to be followed by a move in the other direction. The statistical deviation is of the order of a couple of %, but it is statistically significant.
I am wondering whether a couple of percent is far or close to a profit threshold.
I know it depends on nothing. Any broker site can not guarantee to make a certain percentage of profit . They say that they would give you 90-95% probability to make profit . But , really they can ?
The Risk of Ruin is a statistical model which tells you the chances you will lose all of your account based upon your win/loss % and how much risk you put per trade. This is absolutely critical to know.
Case in point, lets say you are risking 10% of your capital per trade, and say have a 2:1 Reward to Risk Ratio or R:R, and have an accuracy rate of say 35%. Did you know you have a 60.8% chance you will lose all of your money?
Is this something you would want to know ahead of time? Lets hope so. But first, we need to talk about its history and how we can adapt it to trading.
A 50% win rate with 1 : 2 is a good stay in market. Any thing higher in winner percentage than 50% is a very good percentage. But its not easy to get a 1 : 2 reward in your every wining trade so a bit higher winning percentage is enough to keep you towards earning side.