Michael Covel

Feedback from an old pro trader who has made some great contributions over the last year:

Hi Michael-As always I continue to enjoy some of the exchanges you have with both seasoned and new traders. Early in my trading career I found myself hung up on the “need” to be right rather than the “desire” to make money. I learned early that being “right” of having a high % of winners had very little to do with my overall trading success. Those who have a need to be right with a high % of winners will find themselves passing on their best trading opportunities assuming they use some degree of discretion in their trade selections. One of my trading buddies enjoys a trading success rate annually of around 15% winners with 50% losers and 35% breakeven trades. In 2005 he made over 300% on his initial beginning of year trading capital and we are talking a 7 figure account not $10,000 so this guy is the real deal. He chooses not to trade public money for several reasons not the least of which is occasional drawdowns. This is a risk/reward numbers game and most who think it is something else usually face a “forced awareness” at some point in their trading careers. To further emphasize my point everyone has seen ads on the internet for systems being promoted for say a 90% accuracy. I bet 3/4 of these systems are based on a set of past criteria that have very little to do with their future performance. Let’s say we do 100 trades in a calendar year. The average winning trade makes a net $100 so we make a net $9000 in the “winners”. Now the bad news is the 10 losing trades are for $1000 so we lose a total of $1000 for the year in a system that had 90% winners. Now I realize this is a stretch from reality BUT mathematically this is what happens once a trader commits capital to the so-called “sure thing” trading systems! Have a great day!

The comment above brought in this feedback from the “trader” who originally talked of how important accuracy was:

I enjoy fanciful stories that say “My buddy made 300% on his intial capital”. HAHAHA! LOLROF! This is a retort that is suppose to hold merit. That was Stand Up comedy. An this guy go on to say: “This is a risk/reward numbers game and most who think it is something else usually face a “forced awareness” at some point in their trading careers. To further emphasize my point everyone has seen ads on the internet for systems being promoted for say a 90% accuracy. I bet 3/4 of these systems are based on a set of past criteria that have very little to do with their future performance.” He is saying “SHOW…ME…THE…RESULTS!” I’ll show them NOW criteria. Let’s do the experiment now Michael. TAKE THE CHALLENGE. I done this for 6 years and lost my trading account over 7 times from 2001 - 2004. This puts hair on your chest. Now my trading system is “Cut mine losses short” and “let’s my profits run”. Now I win and PROFIT consistently. You refuse to address PROFITABILIY! You only want to focus on accuracy. You ignore PROFITABILITY. PROFIT. PROFIT. +3% per month. Is this simple enough for you? Blake

Don’t worry, I won’t torture anyone with more from Blake. It is useful to see how the zero sum game works though.