How long should the 'long run' be in judging your trading?

[stueytrader]

Hi,

We may be familiar with the advice to ignore short term profit/loss, in judging how good your trading is.

But, a simple question, how long do you think the 'long run' should be before you make a judgement about your success or failure as a trader?

Be interested to know views.

Thanks,
Stu.

[marksmeets302]

I'd say a full cycle of a year. I started out in april (2007 I believe) and didn't know what hit me when winter came. Turned out things always get better in march again.

[stueytrader]

I'd say a full cycle of a year. I started out in april (2007 I believe) and didn't know what hit me when winter came. Turned out things always get better in march again.

Can see the logic behind using a 'full year' yes - guess you can say you've experienced all of the different conditions/periods of trading by that point.

[stueytrader]

On a related, but slightly different point, however is it not possible that one year may even be different from another too (so arguably even that not long enough to judge). As an extreme example, the first year of trading for an individual vs their 2nd year of trading?

[spreadbetting]

At the end of the day the only thing that counts for most traders is the bottom line of how much you're winning. There's no exam to tell you how good you are, you have to pretty much truthfully self assess yourself as to whether you're improving or standing still.

How 'good' you are at it is pretty much immaterial as you should always be striving to improve regardless how long you've been at it, there's always something new to learn. For me it's more about having a consistent edge/s I can continually use. I'm sure there are plenty of traders much better than me making less and much worse traders making more.

[stueytrader]

At the end of the day the only thing that counts for most traders is the bottom line of how much you're winning. There's no exam to tell you how good you are, you have to pretty much truthfully self assess yourself as to whether you're improving or standing still.

How 'good' you are at it is pretty much immaterial as you should always be striving to improve regardless how long you've been at it, there's always something new to learn. For me it's more about having a consistent edge/s I can continually use. I'm sure there are plenty of traders much better than me making less and much worse traders making more.

I do get what you're saying, but what I meant is how long before you know you haven't just been lucky (or unlucky). You can't know you have a 'consistent edge' without judging the sample can you (size, reliability etc)?

[marksmeets302]

You can test for differences between the distribution of your returns and a normal distribution. Given enough samples, the test will say that you have an edge with x% certainty. (x will never be zero, no matter how many samples you gather it can always be the result of luck).

Your question is, how many samples do I need? The answer is: it depends on how your samples (returns) are distributed. A better question would be: I have a distribution of returns, am I 99.9% certain of an edge?

I'm really hoping gazuty or others will chime in here because I still don't feel very confident when it comes to statistics.

[GunDog]

I'd say a full cycle of a year. I started out in april (2007 I believe) and didn't know what hit me when winter came. Turned out things always get better in march again.

When you talk about winter, are you saying that there say, less beach volley ball?

Or is there a significant drop of in some or all markets?

[jimibt]

I'd say a full cycle of a year. I started out in april (2007 I believe) and didn't know what hit me when winter came. Turned out things always get better in march again.

When you talk about winter, are you saying that there say, less beach volley ball?

Or is there a significant drop of in some or all markets?

the horses get affected by all sorts of weather issues (frost, water-logged course etc), plus there are fewer meetings. as for the beach volleyball - works for me any time of year

[Dallas]

When you talk about winter, are you saying that there say, less beach volley ball?

Or is there a significant drop of in some or all markets?

There is a big difference between the summer and winter markets not just the amount of sports and markets available but also the quality thats on offer, Horse racing can often see days of just a few poor quality AW meets so the overall opportunities within any sport/market is much less than there is in summer months.

[Euler]

A year is a good time to experience the market for good and bad but I'd also agree that looking at the deviation in returns will tell you if you are on the right track. The longer you go on the more the returns you get will settle into a % ROI on stake, so that stable ROI will tell you are OK to scale up.

[stueytrader]

Thanks for the replies, some interesting and useful points to consider.

I still consider myself a relative newbie (in trading though I've been involved betting for more than 20 years) even though I've been trading for much more than a year on a more serious basis. Still feel I'm learning, even though I thought I would have most things clear within a couple of months at the start (lol, yeh right).

Part of my reason for the question is that I've done pretty damn well last few months, and I feel I need to re-assure myself that it's not just a lucky blip so to speak.

Thanks for the thoughts, so far.

[marksmeets302]

I think the following should do the trick: Open excel or libreoffice and put your profits and losses in column A. On B1 put 0. This is the amount of money you want to prove you can (on average) at least make. Now go to data->statistics->t-test. For 'variable 1 range' enter column A. Set 'variable 2 range' to a single cell: B1. On 'results to' enter C1 and hit OK. Around C1 you will see amongst others see 'alpha', 't-stat' and 'P(T<=t) one-tail'. If alpha is 0.05, and t-stat is lower than P(T<=t), it means with 95% certainty that you will in the long run make more than 0. If not, either you don't have an edge or you need more data to prove that you do.

You can play around with alpha and B1 to answer questions like 'am I 99% sure my average PnL will be more than 10 pounds'?

(if there are any statistics gurus that want to comment, please do - this is not my area of expertise but I'd love to learn more)

[stueytrader]

Thanks Mark, may give that a try from the 'statistical' side of this question.