22 Nov The Problem With High-Percentage Systems
The Problem With High-Percentage Systems
Nov. 22, 2023
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In our last Newsletter, we looked at how to get out of slumps.
Or trade in a terribly twitchy year.
And a possible solution was using a high win-rate system.
Even when a high-percentage system loses, it’s easier to continue on because winning is probably just around the corner.
Going through a drawdown with a trend following system with a 38% win rate can be very tough proposition.
The problem, though, is that to get a high win rate system, we need a big stop.
And a big stop can be horrifying.
One loss can erase a handful of wins. And multiple portfolio losses can wipe out several handfuls of winning trades.
So, is there a way to keep a slump-busting high win-percentage but not suffer the heartbreak of massive stopouts?
We could decrease the stop.
And, as you know, this hypothetical portfolio has 9 currency pairs in it. (Note: my live Hornet account only has 8. I don’t trade the EURAUD.)
How would a smaller stop have done so far in twitchy 2023?
After a tumultuous start, Portfolio Architect shows it would have hypothetically done better than the 100-pip stop portfolio.
And it would’ve maintained a win rate over 65%.
It seems that, at least this year, having a big stop isn’t as necessary. If if a trade going to win in 2023, it’ll win.
It apparently doesn’t need a lot of wiggle room.
Or does it?
In our next Newsletter, we’ll do something I actually haven’t done before.
I’m going to use a massive stoploss.
Talk to you soon.
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