Time Duration Trading Secrets & Statistical Validity
October 23, 2009 by David
Filed under Commodities Futures, Stock Index Markets, Stocks & Options, Technical Analysis, Trading Systems
Secrets of time durations of profitable & losing day-trades
Most successful daytrades last approximately 7-minutes. That typial trade duration assumes the trader is using a reasonable profit objective and exiting the trade as his profit objectivegets hit.
Most losing day trades last about 45-minutes. That’s because the trader relies on hope once he sees the trade looking like a failure. So he hangs on to the losing trade hoping it will turn, finally the loss becomes too big forcing him to exit the trade after being in the trade for a much longer time than originally anticipated, mostly due to relying on hope.
How many trades are needed for good statistical validity?
Lots of stocks and commodities traders ask how reliable their track-record may be as far as statistical validity goes. They may see some statistics on seasonal trades showing a market was mostly uptrending from April to June during 12 of the last 14 years, for example. The same traders may have experience with their own trading system showing 8 of 9 winners following say a 5-unit moving average crossing over a 9-unit moving average.
None of those scenarios are valid from a statistical validity standpoint. That’s because according to mathematical experts and statisticians a minimum of 30 occurrences are needed for good statistical validity. Please keep this in mind when evaluating a trading system or trader metholodology. Anything less than 30 samples will not be statistically accurate.
