Summary for Trades opened : July 2013

So Far I have put up charts for all the trades I have made for this system that had a July start date. I like to look at my trades in blocks, almost as a portfolio result, because I believe that trading isn't about any individual trade, rather, it is a process of accumulating trades and their distribution of results. I will discuss this, and some of the following maths, in another Method post in the near future but for now let's look at this group of trades in a couple of useful ways.

The first way is to calculate the expectancy in terms of risk. There were seven trades in total in July. Each trade had a fixed amount of risk (referred to as R) and the returns shown as multiples of R were (0.50), 2.78, (0.21), 2.92, 0.09, 0.34 & 2.10

The simpler form of calculating expectancy is (Win% x Avge Win) – (Lose% x Avge Loss) so on the above numbers we had

• 5 winners totaling 8.23R
• 2 losers totaling 0.71R

So the expectancy is

( (5/7) x (8.23/5) ) – ( (2/7) x (0.71/2) )

=> (0.714 x 1.646) – (0.286 x 0.355)

=> 1.175 – 0.102

So Expectancy for July was = 1.07

The other useful way of looking at returns is to round each return to the nearest R and chart the distribution  

What I am looking for here is called Skewness - a measure of symmetry, or more precisely, the lack of symmetry. A distribution, or data set, is symmetric if it looks the same to the left and right of the center point. It is skewed if it bulges out to one side of center.

All my efforts in trading are aimed at creating an uneven distribution of returns with very few losses of more than 1R and many profits that push as far to the right of the bell curve as possible.

By either measure the July block of trades were stunningly good. I generally expect to hit an expectancy of between 0.5 and 1.0 and a win% of 42% - 52% over the long term but these trades were taken during a sweet spot on the ASX. It's important not to get too carried away by a small collection of trades as we will see in forthcoming posts. This number of trades isn't even statistically significant but one has to start somewhere.