So the answer to last weeks question is……no!
In theory, knowing that on average approximately 2 out of 3 trades are losing trades means betting on this could generate a profit. I looked at a couple of different ways to do this and found one possible way, options trading. I went away and trialled this strategy on a paper trading account and quickly found it was in fact very difficult to pull off.
The problem with using options is that it relies on timing. I calculated that the average losing trade took around 3.5 months to play out and as is the nature of an average, some happened sooner and some later. I worked out approximately 60% of trades lost within 9 months. This means 40% were winning trades or the loss took longer than 9 months to play out. The problem with placing options trades 9 months ahead means that if the trade did close out within that time the buy out costs cause the advantage to be lost.
Oh well, it was worth a try hey! It was an interesting experiment and it has got me very familiar with options strategies so that is no bad thing. I think it does however confirm that there is no free lunch in trading and I should remind myself not to get greedy.
Anyhow …. a quick update on what i’ve been up to the past few weeks and why things have been a bit slow on the blog. I’ve started a new job and have moved across to the private sector after nearly 10 years in the public sector. I’m intrigued what differences are in store and am excited about a new adventure.
With regards to the blog I have this week updated the trading log, something that was well overdue.
A short post this week but as always if you have any questions or anything to add please get in touch using the comments section, the contact page at www.tradecompoundgrow.com/contact or email me at firstname.lastname@example.org.