Friday, July 26, 2013

Trade Distribution

Below is a chart showing the distribution of all trades forming the detailed performance statistics. The chart bears out the expected distribution in that the vast majority of trades cancel each other out - small winners cancelled by small losers. As it happens, in my e-book I stated that probably 80% of all trades would cancel each other out. The actual results show that the three tallest bars account for 66% of all trades.

As you can see, there were a small number of trades where losses were greater than 1R (as a result of gaps through stop levels following earnings), whereas there are a higher number of trades with a profit greater than 4R (the largest being almost 9R). So, even though the actual win percentage is less than 50%, the idea of restricting losses wherever possible, and letting profits run, creates the overall positive expectancy.

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