Ken Fisher is a successful money manager, writer for Forbes and author. I believe it was in his book The Only Three Questions That Count that he stated that if 65% of your trades are profitable then you will be a very successful money manager. I had to read that statement a second time because I couldn’t believe that you could be so successful with only 65% winning trades but Ken Fisher knows what he is talking about.
Below is the nine-year equity curve for my Long and Short IWM model:
The Long and Short IWM model has beat the underlying market (Russell 2000) by 18% per year (as measured by CAGR) since June, 2000. I believe that such performance is exceptional. If you had to guess the percent of correct trades for this model, what would you guess? Remember what Ken Fisher said! Believe it or not, my Long and Short IWM model has had 63.4% winning trades and managed to perform very well. It looks like Ken Fisher is right!
My investing, which primarily follows my timers and models, is based on probabilities. Assuming that my models have the same percentage of winning trades in the future as they have had in the past, then by following my models I should handily beat a buy-and-hold strategy. Of course, only time will tell.
FJP
