Are strategies unreliable if all the profits come from the best trade?
If you remove the best trade and returns immediately turn negative, that’s certainly worth examining. But declaring the strategy useless outright may also misunderstand how it makes money.
Here’s a purely hypothetical example: using fixed-dollar risk units, or R, to measure results, twenty trades make a total of 5R. The best trade earns 8R, while the other nineteen lose a total of 3R. This sample shows that profits are highly concentrated. It doesn’t prove that future trades will inevitably lose, nor that another big winner is guaranteed to come along.
Some trend-following strategies are designed to rely on a few big moves to cover many failed attempts. If you start closing every winning position early just to make each month look good, you may end up cutting out the very part the strategy depends on. On the other hand, if that big win came from adding to a position against the rules, you can’t use it as evidence that the normal rules work.
In my reviews, I keep the full results and separately show the contribution of the biggest winners, checking whether they followed the same rules and risk budget. I also look at whether similar opportunities have appeared across different market conditions and whether the losses during the waiting periods are bearable.
CME’s Trading Math course emphasizes average wins and average losses. When looking at those averages, asking “Which trades are pulling the average up?” gives you a more complete picture.
When researching BTC, ETH, and SOL strategies, don’t treat a few big wins as a stain—but don’t mistake one lucky trade for long-term skill, either.
The second image is an illustrative photo of a strategy review, not my personal live trading.
$BTC $ETH $SOL
Tap my profile picture to view my live trades.
If you remove the best trade and returns immediately turn negative, that’s certainly worth examining. But declaring the strategy useless outright may also misunderstand how it makes money.
Here’s a purely hypothetical example: using fixed-dollar risk units, or R, to measure results, twenty trades make a total of 5R. The best trade earns 8R, while the other nineteen lose a total of 3R. This sample shows that profits are highly concentrated. It doesn’t prove that future trades will inevitably lose, nor that another big winner is guaranteed to come along.
Some trend-following strategies are designed to rely on a few big moves to cover many failed attempts. If you start closing every winning position early just to make each month look good, you may end up cutting out the very part the strategy depends on. On the other hand, if that big win came from adding to a position against the rules, you can’t use it as evidence that the normal rules work.
In my reviews, I keep the full results and separately show the contribution of the biggest winners, checking whether they followed the same rules and risk budget. I also look at whether similar opportunities have appeared across different market conditions and whether the losses during the waiting periods are bearable.
CME’s Trading Math course emphasizes average wins and average losses. When looking at those averages, asking “Which trades are pulling the average up?” gives you a more complete picture.
When researching BTC, ETH, and SOL strategies, don’t treat a few big wins as a stain—but don’t mistake one lucky trade for long-term skill, either.
The second image is an illustrative photo of a strategy review, not my personal live trading.
$BTC $ETH $SOL
Tap my profile picture to view my live trades.
