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Articles
Trader's Equation statement
 
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BornInWinter
75 Points

Spain
PostYou have posted in this forum: Sat May 09, 2020 10:34 am   Post subject:  Trader's Equation statement Back to top 

Hello!
On the book of reversals I've found the sentence A: "To be consistent you need to trade a positive trader's equation more than half of the time" but I've figured the sentence B: "To be consistent you don't need to trade a positive trader's equation more than half of the time if when it's positive, it's average outcome is enough times bigger than the outcome of when it's negative". For example: take a total of 10 trades, 6 having a negative trader's equation that makes -1% on average per trade and 4 having a positive trader's equation that makes 2% on average per trade I end up making 6*-1+4*2=-6+8=2%.
Is sentence A wrong, B can't exist or am I missing something?
Thank you and regards!

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ludopuig
9180 Points

Spain
PostYou have posted in this forum: Sat May 09, 2020 12:29 pm   Post subject:   Back to top 

I think your logic would be correct if your numbers were not absolutely unrealistic in practical terms: the losses will be much bigger than 1% and the winnings much less than 2% with this approach. The reality is that you will lose big if you start trading before you can catch mainly trades with a positive trader's equation because, even then, you only make money if you manage them correctly!


Last edited by ludopuig on Sun May 10, 2020 2:49 am; edited 1 time in total

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MR03
1182 Points

Australia
PostYou have posted in this forum: Sat May 09, 2020 10:14 pm   Post subject:   Back to top 

BornInWinter wrote (View Post): ›
Hello!
On the book of reversals I've found the sentence A: "To be consistent you need to trade a positive trader's equation more than half of the time" but I've figured the sentence B: "To be consistent you don't need to trade a positive trader's equation more than half of the time if when it's positive, it's average outcome is enough times bigger than the outcome of when it's negative". For example: take a total of 10 trades, 6 having a negative trader's equation that makes -1% on average per trade and 4 having a positive trader's equation that makes 2% on average per trade I end up making 6*-1+4*2=-6+8=2%.
Is sentence A wrong, B can't exist or am I missing something?
Thank you and regards!


I don't know the book or the passage you quote however having studied Al's method I believe that there should never be a time that you take a trade that doesn't have a positive traders equation

Cheers

MR03

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BornInWinter
75 Points

Spain
PostYou have posted in this forum: Tue May 12, 2020 6:38 am   Post subject:  Re: Trader's Equation statement Back to top 

Thank you for your replies!

I guess that the problem with my logic would be the unrealistic output needed for it to work. Anyway it's not to important when it comes to trading, I was curious about it.

Regards

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MyKQ
86 Points

France
PostYou have posted in this forum: Tue May 26, 2020 3:57 pm   Post subject:  Re: Trader's Equation statement Back to top 

BornInWinter wrote (View Post): › For example: take a total of 10 trades, 6 having a negative trader's equation that makes -1% on average per trade and 4 having a positive trader's equation that makes 2% on average per trade I end up making 6*-1+4*2=-6+8=2%.

You could immediatly improve your average return by simply not taking the 6 trades that have negative average.
I don't see how it would be rational to willingly take trades that have a negative expected value (negative trader equation).
Cheers
Michel

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