The holy grail! Is 100% success rate doable in trading? This is the question every beginner trader would ask him or herself when starting. Before we continue I want you to ask yourself another question: If over 95% of the traders lose (statistically) is it possible to have 100% success rate?
The real meaning of % rate
Over the years people and by people I mean experienced traders who failed or succeeded in trading BUT figured out what others want, took advantage and stared selling dreams.
The most common scam during the years was (was because I think they became smarter and don’t do it as often as they used to) when you receive an email with subject line: No loss trading or 100% win trading or something like that. Traders fell for it.
It is very simple, there is strict correlation between success rate and risk:reward ratio. What does that mean? If your risk:reward is good – 1:3 for example, that would mean: risk $1 for potential profit of $3. In other words the price must go in your direction 3 times further for a profit, compared to a loss. Buy EURUSD at 1:5000. Stop loss 10 pips (1.4990) and target 30 pips (1.5030). This trade has a R:R of 1:3. Now it is a lot easier for your stop loss to be reached – only 10 pips away from entry price, rather than your target which is 30 pips away, right?
Despite the odds of win vs loss, numbers are in our side. In the case of 3 losing trades, 1 winning trade will be cover the losses. This is the beauty of risk:reward. You can imagine that you are probably going to have more losers than winners – say 40% winners vs 60% losers which is going to bring you profits in the long term!
Now if we look at the opposite situation where we win less than we lose the numbers will look like this: risk $3 for a potential profit of $1. In this case every losing trade will wipe out 3 winning trades. Here you can have a higher success rate (win ratio) 60 or 70 or maybe even more. This is generally the law of success rate. Of course it all depends on your strategy or method etc.. If you find a method that brings 50% success rate with 1:3 R:R ratio you are golden! This is extremely good – stick to it.
Think about 100% success rate again. How and why would that be possible? In fact it will probably be extremely risky.
Forex EA (expert adviser) – 100% success rate
This is one of my favorite ones. Leave alone the fact that it is very very hard to create a profitable robot in the long term (100% automated which doesn’t require you to manage it at all) but 100% ? It is funny though because there are still people who fall for it. It is close to impossible to spend $99 and get a nearly decent robot. Nearly! I’m not talking about 100% or 90% success rate, i’m talking about just 1-2-5% a month. This is a lot more than any bank would give you per year!
Banks and hedge funds spend millions of dollars on such projects – millions ! You can’t expect much for $100, trust me. Robots are great to assist you, to give you alerts, to manage your trades etc. I use robots and scripts on daily basis. Makes my life as a trader a lot easier – a lot! BUT trusting my money 100% to a machine, to trade in a market that is rapidly changing, where there are tens of variable which we as humans can rarely consider it all…
Don’t fall for this kind of scams. If the numbers are unrealistic, delete and move on.
“Never close a trade” kind of trading system
This one is beyond anything logical a person can imagine. Imagine you are on a boat and you are a very good swimmer. You put 50 kilos in a backpack and jump into the water. You have set yourself a limit. If you go 1 meter below the surface, you drop the backpack and emerge to the surface. When you jump you may hold for some seconds or a few minutes above the surface but eventually you will start drawning.
What trading without closing a trade means is, you never drop the backpack. There is no limit that you have set and sooner or later you will drawn. There is no other possibility. Hopes and prayers won’t help you. It will only help your broker. This kind of trading is worse than gambling. Better of go to the casino and play the roulette or blackjack.
Martingale
A very attractive method of trading is using martingale. Traders usually come to this approach after they have gained some experience and start having a general idea of how the market works. Martingale means to increase the volume of the trade when a losing one occurs. Say t hat you start with 1 lot, you lose, then the next trade would be with 2 lots etc. The idea is to recovered from the loss. In theory that makes a lot of sense as sooner or later you will hit a winner. The problem emerges when you run out of capital.
The other problem is that statistically you will run out of capital eventually. There is always that move which just won’t retrace and will keep going and going and going.
There is probably a way to succeed with martingale but for me it is not worth it. The two factors not to blow up your account and stay in the game until you hit a winner are: enough capital and usage of very small lot size. In other words you should invest 50k or 100k for example and start with a lot size small enough to allow you to be able to double your lot size 10-15 times depending on your strategy and statistical analysis.
If you conduct a research where you find out that you had a maximum of 6 consecutive loses you must have a capital for at least 10. To do that your starting lot size will be extremely small and you will make very very tiny profit on each trade. And here it is… why block 50k or 100k to make super small profit and put it all on the line with 1 losing streak? Anything could happen to affect the market to move hundreds if not thousand of pips (CHF cap for example). One such event kills your account. And these things do happen from time to time.
Believe me, i was there, I was thinking about it in very different ways it is just not worth it. Super small profits vs wipe out the account. If you have 100k to invest in trading there are way way better methods that will bring you much more profits and still have a great risk management that won’t allow you to blow up your account with 1 trade.
Conclusion – 100% win rate
As much as I want to say “Yes it is doable and yes it will make money in the long term” i can’t say it. You have all the rights to look for this strategy/system or method but it will be like chasing a ghost.
Trading is a business. In business there are costs (losses). This is how the world works. You can’t only win. Even if you are running some kind of service where there is no production – lawyers or financial adviser for example. You still have costs. You have a phone, you should pay for internet, rent an office, pay for gas etc.. Even if you charge $1000 per hour you will still have these small expenses. This example translated to forex language would mean that you have awesome risk:reward 🙂 but really think about it. Why chasing ghosts when we can work with a strategy that allow us to win more on every dollar we risk?
Life is balance. You shouldn’t eat chocolate alone. You will probably get fat and sick. You shouldn’t just lay down on the beach drinking cocktails – it will depress you and you will lose motivation to live. Extremes are not good. Another example – if you love your spouse too much, there is a chance you become obsessive, jealous and you “choke” your relationship.
Anything you can think of, right now – put it to an extreme and you will see that it is not good.
I would like to hear your opinion on the subject? Have you ever tried martingale? Do you believe the 100% success rate system exists but none of us have found it yet?
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Yours,
Vladimir
