Stock Trading Math Wizardly

I know I'm beating a dead horse here but please bear with me. The one constant that I read why most people lose money stock trading is they hold losers too long and take profit too soon on winners. And I know that is true for me.

Higher math goes well over my head but I have a firm understanding of basic math, percentages, and decimals. I like patterns and numbers but not equations. I like Fibonacci number sequence for a lot of reasons. Its simple: 3+2=5; 5+3=8; 8+5=13 and so on and it is a pattern. and if you divide 5 by 8 the result is PHI; the golden ratio. The key percents are 60%, 50%, 38%, 23%, 14%, and 9%. 3,5, and 8 also seem to be key time frames too.

But I ran the numbers using a 10% stop loss and 23% trailing order with a 50/50 won/loss ratio and after a year the gain was 650%. I know that number is not realistic in one way because it depends on finding enough favorable trades and strict discipline but it is something to shoot for and I believe achievable with experience and a plan.

Since this strategy is swing trading understanding and using technical indicators are one key. I'll be using what I term a setup using bollinger bands in a narrow range, MACD divergence, and SMA crossover as a trigger to look farther. I don't know if this will deliver a 50/50 won/loss but I ought to be able to tweak it do better.

Part of this strategy is assuming most stocks have highs and lows a couple times a year. Apple's lows and highs last year ranged from near $90 to $140 (50%) which I believe occurred twice. I assume over time one would accumulate a file on such companies.

Below is my math and I'd like your opinions on the 50/50 plan (anyone here have a method that is 50/50 and care to share any of it) and are the 10% and 23% stops realistic. It seems a little hard to believe a 650% return on a stock picking system that gets it wrong half the time.

Again here that chart starting with a $1,000: I started by assuming losing 6 of 10 trades so it starts out clunky the first month. I believe losing 6 of 10 would still show a similar profit assuming a 30% gain on the winners but I felt that was stretching it too far so I changed over in the first month to 50/50.

Example 10 trades @ $500 each; 6 losers and 4 winners with losers sold at 10% loss and winners sold at 23% gain what is the total profit of the 10 trades counting commissions. 10 trades equal 20 fee transactions and equal $200. 6 losing trades at 10% equal $300. 4 winning trades at 23% gains equal $460 for a net loss of $40. Half and half wins/losses net a profit of $125. That’s a 25% gain or 12.5% if a $1,000 is needed to execute 10 monthly trades at $500 each.

2nd month each trade is $550 and using the same scenario of 50/50. Fees remain at $200, losses are now $275 for a total of $475 against gains of $630 and a net profit of $155 with the same percent gain. At the end of 2 months your account is up $280.

3rd month: each trade is now worth $625 with fees still at $200 and losses now at $312 for a total of $512. The 5 winners yields $719 with a gross profit of $207.

To recap at the end of month 1 you have a gain of $125 and a total of $1125. Month 2 sees a gain of $155 and a total of $1280. Month 3 profit $207 and we now have in our account $1487. I have each month increased the value of each trade by 12.5% rounded.

4th month: Trades are now worth $700 each. Fees equal $200 and losses of $350 total $550. 5 winners total $800 and the net profit is $250 and a grand account total of $1640.

5th month: Trades now worth $790 each with losses and fees totaling $600 against 5 winning trades of $910 and a $310 profit with an account at $1950.

6th month: Trades are now $900 each counting fees and losses totaling $650 against $1035 in gains with a difference of $365 and an account worth $2315 for a 6 month gain of 123%.

7th month: Trades= $1012. Fees= $200 Losses = $506. Total = $706 .Winning trades = $1164. Profit = $460. Balance = $2775

8th month: Trades = $1140. Fees = $200 Losses = $570. Total = $770. Winning trades = $1310. Profit = $540. Balance = $3315.

9th month: Trades = $1280. Fees = $200 Losses = $640. Total = $840. Winning trades = $1472. Profit = $630. Balance = $3945

10th month: Trades = $1440. Fees = $200 Losses = $720. Total = $920. Winning trades = $1655. Profit = $735. Balance = $4680

11th month: Trades = $1620. Fees = $200 Losses = $810. Total = $1010. Winning trades = $1860. Profit = $850. Balance = $5530

12th month: Trades = $1820. Fees = $200 Losses = $910. Total = $1110. Winning trades = $2090. Profit = $980. Balance = $6510.

Is that not 650%?

So what are your thoughts?

Katie

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Stock Trading Math Wizardly