Thoughts, Trading

You Don’t Get a Profitable System by Flipping a Losing One

I came across this blog post (link here) yesterday, which reminded me of the same point made by Andrea Unger during one of his talks: you can’t just flip all the trading decisions of a losing system to make it a profitable one.

The blog post noted that if a system has no edge, commissions will make that a negative expectancy system. So even if you flip the zero edge system, you still end up with a system with no edge, and the same result ensues.

I think a lot of traders fail because they lack, or are unable to follow, proper money management and trade management (risk management). Proper trade management is an edge. Losing money consistently has less to do with making the ‘wrong’ entry calls, but has a lot more to do with poor trade management thereafter. Even if a losing trader is able to consciously buy when he thinks of shorting, and sell when he thinks of buying, so long as he holds on to his losers and cuts his winners short, he will continue to lose over time.



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