How to Make A 26 percent Gain with a 50 Percent Win Rate

I have updated my 2010 trading stats featuring trades documented in the Trade Report. Here is a quick summary along with analysis presented to Trade Report members.

Trade Speadsheet

The hard numbers through 7/23/2010:
Total Trades: 64
Wins: 34
Losses: 30
Win Rate: 53%

Average Win: $1424
Average Loss: $743

Total gain– $26,163 (two trades still open, commission not included)
Approximate percent gain to date: 26%

Analysis:

I have stated many times that the most important aspect of trading is managing risk. With my trades, I almost always try to get at least a 2:1 reward to risk ratio from my target to my stop. When you do this, you can have a 35 percent win rate and still make money. My average win vs loss rate gives my a 2:1 ratio right now. I am vey happy about this. I could have a 40-45 percent win rate and still have a decent year so far. With the win rate at 53 percent, I’ve had a pretty good year (up 26 percent with 5 months to go).

My win rate is lower than it has been, however considering the tough market and the way risk has been managed, I’m okay with the 53 percent win rate.

Note that I have not made as many trades as I normally do. I have made 66 trades (2 are open), which is much lower than normal. The reason is simple: I am not seeing a ton of great setups in this market. When I do, I’ll up the trade frequency. Until then, I’ll stay patient. I am not interested in making bad trades for the sake of staying active.

For the most part, I am fine with the trades I made. The losing trades were based on quality setups and offered good risk ratios. There is one trade that bothers me, the most recent NFLX trade. The entry was okay, but the way I handled my exit is exactly what I warn against. I loosened my stop, created a poor risk ratio and ended up with a loss 2-3 percent bigger than I would have liked. I’ll learn from that one.

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