Tips: Can you win with a successful trading system?The answer is possibly no.
Here is an example.Jerry’s strategy: win twice in each three trades with same stop loss and take profit of 1%. Jerry trade 3 times a day. So his average gain is 1.01×1.01×0.99-1.00=0.98% per day. And 34% per month, 3367% per year.
Tom thinks Jerry’s strategy is good. He asks Jerry to make the lots ten times as large to Jerry. Therefore the trades’ stop loss and take profit are 10%. Tom’s gain is 1.1×1.1×0.9-1.0=8.9% per day. 1190% per month. And 21 trillion times of deposit per year.
Bob thinks Jerry’s strategy is good. He asks Jerry to make the lots 100 times as large to Jerry. Therefore the trades’ stop loss and take profit are 100%. Bob’s gain is 2x2x0-1.0=-100% per day. He has to deposit some more money every day to continue.
In the story, who will be the richest in the end of the year?
The answer is Jerry. To Tom, even if he bears 3 continuous losses, the total losses will be 27% of his balance. He will think the strategy is rubbish and stop to use it. Meanwhile, Jerry can bear at least 11 continuous losses and the total losses will be 10% of his balance.