After speaking at the Traders Expo in NYC a few months ago, I sat in on a few other presentations and talked with several traders from many different paths. I always look forward to these opportunities as they provide me with a fresh perspective into the thoughts and objectives of other traders.
I could not help but notice that the issue of Win-Loss % found its way into the discussion. This was also addressed in many of the presentations I attended. What I soon realized was, no matter who was talking about it and no matter what the percentage happened to be, there was no way I could figure if their trading plan was successful. I heard 68%, 75%, 88% and still, no matter what the Win % may have been, it did not tell the whole story.
Example: When comparing two trading records, and one trader has a Win-Loss Record of 8-2, it could be considered a very impressive achievement. We might have a different perspective if the 8 winning trades accumulated 6.00 PTS and the two losers dropped 8.00 PTS realizing a true total loss of 2.00 PTS.
It can also be misleading on other side when looking at a 40% Win-Loss performance. A 4-6 record could be seen as unsuccessful but what if the 4 winners tallied an accumulated gain of 3.50 and the sum of the 6 losers equaled .50? The 4-6 record would be successful with a profit of 3.00 PTS. The point here is, of course we want to win more trades than we lose but the RISK MANAGEMENT is what makes the difference between the success and failure of a P&L.
As Option Strategists, we need to maintain this kind objective in any timeframe. When an anticipated direction goes against us we need to be prepared and react to the new observations properly. This is what we do and why our winning trades make greater profits than our losing trades (if there happen to be any).
Here are the latest results for every closing trade Published, Traded and Risk Managed in the Pristine Option Suite since its inception in November 2008:
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