What is the Good Signal Trading Accuracy?
The question that I made the title above is the most frequently asked question to me, in addition to the same question as, ” What percentage of your trading signal accuracy? “
Many traders (usually beginners) are very fond of accuracy. So deified that they assume that a good trading strategy is the accuracy is 100%.
The question is, could the accuracy of the analysis of a trader (or analyst) reach 100%?
How come, how come? I have not said all this time that accuracy cannot be 100%, because humans cannot be all right?
“Can” here is certainly not unconditional and certain: not FOREVER right.
What’s the story?
Let’s take the case example. This is a true story.
There is a trader (beginner, of course), just call it Budi, come to us and tell him that he has followed the trading signal provided by someone with almost 99% accuracy. The news became more interesting when he testified that his capital could grow by more than 100% in just a week.
Frankly, a story like that is not a new story for me. I often hear stories that are even more fantastic than that.
Then does that mean it is impossible for capital to grow to 100% in a week? I did not say that. Maybe, even very possible.
It’s just that there is one thing that is often forgotten (or maybe even unknown) to traders, namely that the performance of trading strategies / signals in the present does not reflect performance in the past or in the future. That is, there is still a possibility that the trading strategy / signal will experience a “dark period” in the future. Nothing on this earth is perfectly perfect.
Top World Traders Have Ever Loss
In fact, even world-class traders have suffered losses. They are not careless people. They are people who are very dedicated in trading and their quality has been proven by the world. Call it a name like Ed Seykota, a seasoned trader who has been in the trading world since 1970. Check out his most famous advice, “The elements of good trading are: 1) cutting losses, 2) cutting losses, and 3) cutting losses. If you can follow these three rules, you may have a chance. “
So, according to Ed Seykota, there are three good trading elements, namely cut loss, cut loss and cut loss . We will have the opportunity to succeed in trading, according to Seykota, if we follow the three rules.
That is, even a trader of Ed Seykota’s caliber also admitted that it was impossible for him to always be right. There are times when the analysis is wrong and he must cut loss .
And Ed Seykota still survives as a trader who is not a regular trader. Even Jack D. Schwager , another trading expert who is also the author of the best seller book “Market Wizards “ , said that “his achievement (Seykota) should put him as one of the best traders of our time.”
Not only did Ed Seykota confirm that they had been “wrong”. Call it names like Victor Vic Trader Sperandeo, Marty Schwartz, Paul Tudor Jones, Randy McKay. They implicitly or explicitly admit that they have lost money.
Why do I explain this? Because this is related to the title of this article.What I want to convey is, even the top world traders have lost and the losses they have experienced have not affected their success as top traders.
Then what do you do?
I mentioned above about Mr. George testimony. Then is Mr. George testimony above a lie?
In fact, I was interested in trying out the signal Pak Andi said. We must be open to new things, but remember what I will write in the next paragraph.
Please believe that a trading strategy / signal is really good, but you still have to realize that the trading strategy / signal is man-made. Humans have limitations, so the strategies that they produce may be – as I mentioned above – one day they will fail.
For this reason, use risk management and money management that are appropriate to your capital. Limit risk, use capital wisely. If you apply these two things well, you will find that accuracy is not the only thing that determines trading success.
In the last few weeks I have tested a trading strategy live , using a real account , which is said to have high accuracy. It turns out right, the accuracy is high. But unfortunately, the implementation of risk management is not very good. Finally? Minus, brothers and sisters.
Below I show the most important part of the Detailed Statement.
With accuracy reaching 81.4 percent, it can be concluded that approximately 8 out of 10 transactions made based on this strategy resulted in profit, but two other transactions (which ended in loss) were able to DELETE all profits from the previous 8 transactions.
That is proof that accuracy is not everything. From the Detailed Statement above, we can see that out of 43 transactions carried out, only 8 lost. But the overall results are still losing .
But that doesn’t mean accuracy isn’t important. It remains important, but it will not be meaningful if it is not balanced with risk management and good capital management.
So, answering the above title question, maybe I can say it like this:
A good trading strategy or signal is not seen from its accuracy, but from the accumulated results of all transactions made. If the accumulation of the transaction results is positive, it means that the strategy / signal is suitable for you. If otherwise, it might not suit you.
But the question like the title of this article has never stopped me from receiving it. OK. I just mentioned, that as long as the signal accuracy of your trading strategy is not less than 50%, that’s good enough. Provided – once again – strengthened by appropriate risk management and money management .
Congratulations on hunting trading signals .