Is there a formula that can beat your investments, featured in Toyo Keizai Online column
Good morning, this is Matsushita.
In the past, in math class at school,
do you remember learning formulas?
The formulas you learn in elementary school include calculations of area,
and so on.
Area of a quadrilateral = height × width
Area of a triangle = base × height ÷ 2
You probably recalled them a bit, right?
A formula is a theorem that can be expressed by a mathematical expression,
so they say.
In other words, a rule that can be expressed with an equation.
In investing as well, there exist formulas that lead to profits.
For example, if your win rate is 50% or higher, and the average profit/average loss
(the payoff ratio = PR) is 1, you can win.
This combination of win rate and PR is closest to a swing trading image,
so it may be seen as a win in swing trading = win rate ≥ 50% × PR 1.
Is that the kind of formula?
In trend following,
win rate is about 30–40%,
for short-term breakouts,
it becomes about 60–70%.
However, with only this win rate,
it does not become a winning formula.
Another element, the average profit/average loss (PR), is required.
If you want to turn your investment into a winning formula,
you need win rate and average profit/average loss (PR).
However, you may not know such things,
or you may not know your own win rate and average profit/average loss (PR).
Therefore you do not have a “winning formula.”
In investment materials, you might hear,
“the equation of victory.”
When I started investing,
I read a book and learned the concepts of win rate and average profit/average loss
and began calculating them in my own trades.
Then I started to win.
I obtained a winning formula, a victory equation.
My winning formula at that time was
win rate 37% × average profit/average loss 2.6
(I think it was this number).
Seeing this number, I thought, “This should win,”
and it gave me even more confidence.
From reading previous articles,
you may wonder if you want to do such complex and troublesome things,
or you may wonder how to determine this number in your own trading and
how to transform it into a winning formula,
and it will determine future losses or gains.
Every day in investment is a day you branch between those losses and profits,
and your actions choose whether you incur losses or gains.
If you want to obtain a winning formula, a victory equation,
please study win rate and average profit/average loss (PR).
The numbers needed for these formulas
are explained in the free online school
“Seven Actions to Make Money.”
It is also explained in the school materials.
If you only study at this school,
it will remain free forever.
Even so, if you choose not to study,
I can only think you are giving up investment profits.
Please try studying at the free online school.
Stock Investment Free Online School
“Seven Actions to Make Money” is here.
“Seven Actions to Make Money” is here.
