bjesse a Big Wave Trading subscriber did an independent study of Josh Hayes’ trading performance. bjesse did not receive compensation for this review, but it highlights cutting your losses and riding your winners. Did you have this type of success? If you haven’t, why haven’t you subscribed to Big Wave Trading yet?
Looking at the performance of Josh Hayes’ trades in a scatterplot, it is clear that losses are kept small relative to gains. But exactly how are they distributed? Here I examine Josh’s trades from 1/1/2010 through 1/19/2011. There are a total of 697 trades. 61% are gains. The average gain is 33% and the average loss -6%.
The histogram shows a decidedly skewed distribution with a fat positive tail. It is non-normal; not a Bell curve. This is most dramatically seen in the log plot. This gives Josh his edge. Negative returns are confined to 4 bins; positive returns extend for more than 15 bins (nearly 5 are below the mean and over 14 above). 84% of losses are less than -10%. Nearly half of all gains are over 20%; one fifth are over 50%, and 7% are more than 100%.
Successful trend traders have positively skewed performance distributions; see Michael Covel’s excellent book “Trend Following,” 2009. Josh decidedly falls into that camp. At the risk of making it sound easy, this data once again shows that Josh’s success has three keys:
1) pick a high percentage of winners (61%),
2) keep losses small (3/4 are less than -8%), and
3) let winners run (half are over 20%, one fifth are over 50%).
Caveat: this data examines Josh’s performance based on reported percentage gain/loss per trade. It is not based on actual dollars invested. The results shown here would represent actual dollar performance only if an equal amount were invested in each trade.
There is no holy grail to investing and over the LONG run success doesn’t come from those who buy penny stocks. You will often see outrageous trade profiles where someone has “figured out the market.” It is absolutely hog wash, real results are proven here by one of our members bjesse. We aren’t here to give you stock market tips, tips are for waiters. Big Wave Trading gives you the tools to become a great trader.