Removing Trades to Add Profit

In the thought exercise from the other day about removing trades from your strategy to improve it, a couple of you responded with questions.

How can removing trades from your strategy make much of a difference?

The benefits of this approach are immense, but it's not obvious at first glance.

First, let's take the short-term improvements.

You're taking fewer poor trades in your system.

You don't have to perfectly select the losing trades to avoid - that would be impossible.

But that's not what's required!

You only have to identify the poorest set of trades to skip.

That set will contain profitable trades that you'll skip.

But, importantly, in aggregate, the set you're skipping is negative EV - well worth skipping, even if it contains some profitable trades.

This is an immediate improvement to your strategy.

But even that isn't the most valuable thing with this approach!

The most valuable part of this is:

A path to confidence in your strategy.

And confidence is the only way you're going to scale a strategy to significant size.