Best Days Compared to Total Profits in Trading (2024 Updated)

Best Days Compared to Total Profits in Trading? (2025 Updated)

How important are the best days compared to total profits?

In trading, you want to avoid negatively skewed trading strategies. These are strategies that have fat left tails and might wipe out all your profits from many trades. You need to understand the distribution of your expected profits and losses. Below is my profit distribution:

When I summarized my trading from 2002 to May 2012, I looked at how much of my daytrading profits were generated from the best trading days. Before I did the analysis, I expected the “grinding” (ie. the small profits every day) to be my greatest asset in trading.

Best Days vs Total Profits in Trading

It turns out that the 1% best days equals 11% of my total profits over that ten year period. Whether this number is big or low I don’t know (compared to other traders), but it was actually smaller than I expected it to be. However, 19 of my best 25 days were in 2008, 4 in 2007, one in 2006 and one in 2005.

Here is a bar graph of all my trading days:

What can I learn about this?

  1. When the markets conditions are favorable I have to be there trading. No holidays are allowed. I didn’t take holidays in 2006, 2008, 2009, and 2010. In 2012, when conditions have been less favorable, I have traded lightly and done other stuff, among other things invested in real estate.
  2. When the market conditions are favorable, you have to trade size. Looking back, from 2006 until 2010 I should have traded a lot bigger size. I have to go for the jugular when the edge is there!
  3. BUT! Never underestimate the small profits/grinding. They do add up!
  4. Perhaps contradictory to point 1, but you never know when a good day suddenly shows up. 1. august 2012 was such a day for me. I made more money that day than all my trading for 2012 until that day.
  5. I trade too small. My statistics are pretty good, but I have to take a greater risk. Hopefully, my new secondary income in real estate will make me a bit more aggressive.

FAQ:

– How is negatively skewed trading described, and why is it a concern?

Negatively skewed trading strategies have fat left tails, meaning they can potentially erase profits from multiple trades. This is a concern because it poses a risk to a trader’s overall profitability.

– What does the profit distribution represent in trading?

The profit distribution illustrates how profits are distributed across various trading days, helping traders analyze their trading performance.

– How does the trading approach change based on market conditions?

The approach involves trading more actively and with larger size when market conditions are favorable, as illustrated by the trading experience from 2006 to 2010.

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