Market Club Simulation DELL
Winning Percentage vs. Losers
This is a follow up article to my Market Club Trade Triangle Simulation Using DELL, which I added to Online Stock Trading Guide last week on August 26, 2010.
In the previous article I gave an example of how you can begin to use the tools that Market Club provides to its members and develop a trading system of your own.
I say "of your own", because we all have different circumstances and what works for one person, may not necessarily work for another. Things such as time restraints, personalities and willingness to put faith in your system, among other things, vary widely from one person to the next.
The basic simulation I displayed uses only Market Club's "Weekly Trade Triangles" using DELL. For this to work with other stocks or ETF's, further testing should be done. I have NOT looked into other results besides what I have provided.
Here's a review of the basic parameters I used (I suggest to review the original article from here before continuing for a better understanding) Market Club Trade Triangle Simulation Using DELL
the first signal I used in this example is labeled "Trade #1" in the end of August/early September, 2009 which is Red.
For Red Trade Triangles, I am selling any long positions that may be open, and at the same time opening a new Short position. When a green Trade Triangle appears, I am covering any open Short position and opening a new Long position. All positions are using $10,000 for each and no commissions are calculated.
Again, for simplicity, these are the only rules used in this example. All positions are opened and closed when new Trade Triangles are triggered. This takes a lot of the emotion out of this trading example.
For this follow up article, or rather continuation article, I wanted to look further into the results and my findings.
One of the findings that stuck out to me, and is of importance due to it not being understood by many, is the percentage of winning trades compared to the number of losing trades, as compared with the overall profitability. Let's take a closer look:
- There were 17 trades total, of which 16 have been closed out. The 17th trade is still open and profitable as I write.
- Out of the 16 closed trades, 7 were winners and 9 were losers. More on this below
- Removing the first Big Winner from the results would have produced only 6 winners and 9 losers.
As you see above, I highlighted the number of winners and losers based on this trading simulation. This is a big point to get across that we all should learn and remember.
Using all 16 trades, we had only 43.75% resulting in winning trades, and 56.25% resulting in losing trades. Removing the 1st big winning trade, we had 40% resulting in winning trades and 60% resulting in losing trades.
As you take a look at this, you'll see that as far as the number of winning and losing trades goes, overall we were Losers. Yet, we still managed to obtain a +145.94% return on our initial $10,000 investment (+30.94% if we remove the initial big winning trade).
It is often misunderstood that we have to have more winning trades than losers, to come out ahead when trading/investing. This is absolutely not the case and this is a perfect example.
Having more losing trades than winning trades and still coming out ahead is similar to a batter in Baseball. If someone gets a hit 1 out of every 3 times at bat, they're doing great and can usually make a lot of money.
The biggest problem that I've seen occur over the years, to myself and to others, is that the losing can take a toll on someone emotionally. Picture yourself in a fight and repeatedly getting knocked down by your opponent. Your opponent then says stay down, or I'm going to keep knocking you down. At some point, it gets very tempting and easy, to just give up and stay down. Without getting some type of edge, you'll eventually get knocked out.
This is where Market Club can come into play, by helping to give us an edge.... By coming up with a set of parameters to develop a system using their suite of tools available to members, we can remove many of the emotions involved with trading, and especially which come along with having losing trades.
You can use Market Club for 30 days during their free trial period to see if it's right for you and try to come up with your own trading system. One of the biggest benefits of using Market Club is the possibility to eliminate some of the emotions out of your trading.
More than just a charting service, only MarketClub gives you everything you need to trade with greater confidence -- including online chart portfolios... stock scans... online video tutorials... special reports... downloadable price data... custom trading alerts... and much more.
You can use MarketClub's Trade Triangle and other online tools for traders risk-free for a full month - and see the difference that it can make in your trading!
For a free online tour of MarketClub... or to arrange a risk-FREE 30-day test drive... visit Market Club Free Trial today!: