Round and Round Over Accuracy
The following email conversation with a new trader is useful education for all.
My website was up briefly in February 2006 but I felt it was not ready for public consumption. My accuracy was only 50% and that is not up-to-par in my opinion. Now my accuracy is +75%.
My response: Ok. But great traders are not aiming for “accuracy.” You are on board why that is not a wise pursuit? You see what I have said about it?
My financial goal is 3% return per month. I must make profits is the name of the game. My trading model must be better than 66% accuracy to be worth its salt. It has to be reliable.
My response:
Listen: http://www.turtletrader.com/mp3/tips.mp3
Read: http://www.michaelcovel.com/archives/000161.html
Read: http://turtletrader.com/babe-ruth.html
Michael, The advice you gave me was for a rank amateur.
My response: You were emphasizing percent accuracy and how important it was. Why? It’s not.
Michael, I’m sorry for taking too much of your time. I can see you don’t believe (and why should you) that I have the goods to be an effective trader. The 6 month (or 3 Month test) would be the proof in the pudding but…..I will be on CBNC next week on Fast Money @ 8 P.M as a webcam guest.
My response: Why are you so defensive? Why don’t you address the accuracy issue I have raised - and stop the other stuff. I know of NO successful hedge fund manager who shares your view on accuracy.
So does Paul Tudor Jones, Bruce Kovner, and Steve Cohen win on less than 20% - 33% of their trades?….I DON”T THINK SO. Because, if this is the case, then they are fundamental traders, which they are not, and would just run with the pack of Mutual Fund traders who barely beat the SP 500 yearly. Astute Technical Analysis will generate better than 50% efficiently.
My response: Winning percent doesn’t matter in the abstract. You are up with the concept of expectation? That’s what they worry about.
You said “Do you understand the concept of expectation?” I played Division 1 football, Was the top rated 100 meter runner in the State of Michigan and was my High School’s 1st track captain in the 10th grade. We call it “PUT UP or SHUT UP”. In sports, the skilled position players cannot hide. In the 100 meter sprint there is no excuses. Either you beat the field or you lose…Period. Of course I understand expectations. Everyone loves a winner and expects him to keep winning. Napoleon said “a Winner has a thousand fathers…a loser none”. Also, Steve Cohen has 20+ years of consecutive winning years. His fund has been closed off since 1998. This has earned him legend status and people want in. WHY? They EXPECT THAT HE’LL WIN. Simple. This is Wisdom.
My response: We are missing each other. There is a fair example of mathematical expectation in my book Trend Following.
