Yesterday I was testing a popular automated trading program.

(In case you didn’t know an automated trading program is essentially a trading system that’s been programmed to execute the trades for you.)

After loading it up and running a few tests here’s are some of the results it generated…

92.8% winners
7.14% losers

Wow… that’s great isn’t…

Well don’t get too excited yet…

Average profit: $207.90
Average loss: $4660.16

Hmmm….

That changes the picture (quite) a bit.

I figured I must have made a mistake… so I double checked the instructions and ran it again…

I even gave it the benefit of trading good years when the markets made some solid moves…

The result?

92.0% winners
8.0% losers

Average win: $209.29
Average loss: $1594.15

Almost the same…

That brings me to the point…

A lot of people judge trading systems on how many winning and losing trades it generates… now on the surface that seems to make sense… I mean how can you really lose with 92% winning trades?

But as you can see, if winning trades was *ALL* you were looking at, you miss out on how much you were winning and losing per trade…

In fact who knows if this is why this system was developed this way, to satisfy the need to showcase a high winning ratio.

I’ve tried to hammer this point home in other articles, that wins and profits are not directly tied together… but we’ll take a closer look at it in a future article…

Continued Success!

Ray

Categories: Trading

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