When it comes to the trading system with a high success rate, it is the Martin strategy in the foreign exchange market.
This strategy originated from casinos. In layman's terms, it is to make a profit in the market callback through different average prices of margin calls; there is no market that can only fall but not rise. Theoretically, if investors have unlimited money, this method can definitely make money in the market. money; but the reality is by no means like this, no one has unlimited money.
This strategy of covering the average price against the trend is effective in most cases; the phased success rate is very high, and it can also make steady profits; and once it encounters a market that does not turn back, it will be very heavy loss. It is really possible that out of 100 transactions, 99 times are "right" and one "wrong" can kill you.
The figure below is a capital curve of a Martin strategy. It looks good, it keeps climbing, and the retracement is small, indicating that the success rate is very high. But the risk hasn't actually materialized yet.
I have two opinions on the question of success rate:
First: The staged high success rate is of little significance
Since we are talking about the success rate, it is necessary to consider the issue of statistical quantity samples; within the period of time, the market cooperates, and the trading traders handle the orders well. It can also be said that good luck can obtain a relatively high success rate. But this is a phased thing after all; the more samples are counted, the more you will find that this probability does not exist.
Just like we flip a coin; there may be many consecutive positives or negatives; there may also be many consecutive positives and negatives. But in the long run, the probability of flipping a coin is 50%. A coin toss cannot be defined as having a high probability of heads up or a high probability of tails up just because there are more phased heads or phased tails.
This is a mistake many traders make, and looking at it from a statistical point of view; the number of statistical samples is too small to be statistically significant at all. There is a kind of mistake that traders often make in trading, which is called recent preference; a simple understanding is that the recent trading results or the performance of the recent trading system will affect the trader's judgment on the trading system or the market, and the recent success rate will be one-sided. exaggerate. And modify the trading system settings according to the performance of the recent trading system.
Second: The profit-loss ratio and success rate determine the profitability of the trading system
Mature traders understand that the pursuit of trading profits should not only focus on the success rate, but also consider the profit-loss ratio. . Everything has two sides, and the result of a transaction must be composed of right and wrong transactions; wrong transactions and stop-loss transactions are inevitable in transactions; accept these mistakes and accept a reasonable success rate; use the profit-loss ratio in exchange for profits.
A table needs 4 legs to be stable; we need two legs to walk to go far; the relationship between profit-loss ratio and success rate is just like our two legs; only two legs work together to go far.
The setting of profit-loss ratio and success rate in actual combat: Don’t deliberately pursue the success rate. If the profit-loss ratio is unreasonable, one mistake will require many transactions to make up for the loss, or even busy for a month. If a transaction mistake returns to before liberation, the trader’s psychological gap will fall It is very large, and it is easy to trade out of shape. Don't deliberately pursue the profit-loss ratio. If the profit-loss ratio is too large, the success rate is too low. There are too many wrong transactions in the transaction, and the account risk is too large. The psychological changes of traders affect the execution.
Summary: The profitability of an account is determined by the success rate and the profit-loss ratio. Setting a reasonable profit-loss ratio and success rate, and the smoothness of the fund curve of the hedge account are conducive to the execution of transactions.
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