Scott Carl -- Amateur Trader

I can't stand it when I get beat by the averages. I lose more than they do when they go down, and I gain less than they do when they go up. That's how this whole stupid week has been. I haven't stuck to my plan at all (yes, I've been sidetracked again).

Today I made a measly .45%--mostly because of massive selling in my account yesterday. I just haven't got the knack for balancing the downsides and the upsides. It was rare that I felt that way last year, and maybe it's the market as a whole that isn't quite right. I don't know.

I re-read Trade Your Way to Financial Freedom by Van K. Tharp over the last week. I'm surprised by the amount of information I didn't digest the first time I went through it. Both Trader Mike and Chris Perruna have excellent articles about what they learned from the book.

I really didn't understand the whole concept of risk the first time I read the book. I made sure that I didn't loose more than 1% of my portfolio on any one trade, but I had no measure of expectancy or the value of the risk that I was taking (or making) on each trade.

I went back though the Zweig Relative Strength 5 and the Zacks & Zweig #1 screens to calculate (based on weekly data) what the expectancy of each of those screens were during 2007. I calculated based on a buy on Monday and a sell everything on Friday. Here's the data:

Zack's and Zweig #1 2007
Total Trades=135
Winners=79 (59%)
Losers=56 (41%)
Average Gain=4.0%
Average Loss=3.20%
Expectancy=.32

Zweig Relative Strength 5 2007
Total Trades=244
Winners=139 (57%)
Losers=105 (43%)
Average Gain=5.33%
Average Loss=4.95%
Expectancy=.18

Just looking at those numbers would convince most people that both systems wouldn't even beat the market. Neither one produced even 60% winners. The spread between winners and losers wasn't even one percent. But both beat the market handily. ZZ#1 made 44.64% and Zweig RS 5 made 46.70 without any sort of money management.

I've been really lazy about tracking my trades and I really have no idea the risk (R) I took on each trade. I hope to change that now.