Is a 97% Win Rate Legitimate?

Is a 97% Win Rate Legitimate?

Feb. 28, 2024

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I’ve spent some time recently defending systems with “negative” reward-to-risk ratios.

“Positive” isn’t better than “negative”. It’s just math.

But how far is too far?

On one hand, it’s nice to have a system win all the time.

Who doesn’t love seeing money constantly going into their high-yield savings accounts, right?

High-yield savings accounts are the epitome of a high win rate.  And winning is fun.

But people also warn us about high win rates.

If it’s too good to be true, it’s not true. And those magical high-yield savings accounts aren’t going to be around much longer!

Okay, Negative Ned. We got it.

And, unfortunately, both of those statements are mostly true.

Mostly.

Today, we’ll look again at the CCI High-Percentage system on the Performance Page. This uses a 240-minute chart and you can get all the details for free in this video.

This system uses a filter to only take Long trades. It exploits stocks’ upward bias. And then it gets in on a pull-back and uses a small target with a bigger stop.

Here’s the Equity Curve since 2007 trading 1 lot each time with no compounding:

And here’s the percentage Curve via Portfolio Architect:

That’s a hypothetical return of almost 800% on a sample $15k account. With a win rate of 97%:

Yikes.

So what are the danger zones?

The first is if someone shows you something like this and doesn’t have trading costs built in. For my live trading, a $22 round turn has shown to be worse than real-life results. And this has costs built in.

The second is if we can lose it all. Nobody wants 97% if one of the 3% means we lose everything.

This system seems to avoid that. It has a stoploss and also a timed exit. Yes, it can have a big loss and a drawdown. But it probably won’t go to zero.

Third, if a system has only one set of inputs, it might be bogus. This has a small target based on a multiple of the ATR, but many different combinations are profitable.

So that means it’s not fit to just one setting.

As a rule, high win rates can be suspect.

But this one has held up so far. And I’ll be tracking this one for the inevitable future to see if that changes.

We’ll see.

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Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.