I took hundreds of trades in the last eight or so hours, but the funny thing is, the thing I was trying to find didn’t even happen.
Instead, I found something completely different.
You know how trading gurus say a higher time frame is better for trading?
Like, if you take trades on smaller time frames, you will get a horrible win rate, but if you take trades on higher time frames, you will get a really good, magical win rate.
Well, I wanted to test this to see if it actually happens, take hundreds of trades on each of these time frames, and see if the win rate actually goes up according to tested data.
But then I failed at it.
I tested many things, then didn’t find the proof, but instead found something else, a different proof that 100% will increase our win rate and will definitely make a beginner trader better at trading.
First, I made this simple indicator on TradingView, which basically took trades on the time frame I selected and then showed its win rate.
Here, on the 5-minute time frame, it took 100 trades, and only 33% won, and this was with the MACD indicator, which is really popular.
Since the win rate completely sucked here, I increased the time frame to 4 hours to see if it went up, and it actually did.
However, this was not good proof.
If we showed this to Einstein, he would throw us out of the universe.
So I added more strategies.
I took hundreds of trades with the MACD and RSI indicators.
But the funny thing is, when I increased the time frame, one strategy increased its win rate, but the other strategy didn’t increase its win rate.
So Einstein slapped me hard and said, “What is this nonsense?
This is not how you test something.”
So then I took trades with five different strategies, and one of them was even random trades.
But this time, when I increased the time frame one by one, there was no clear, consistent increase in the win rate.
Some strategies increased the win rate, but then went lower, even though the time frame kept going higher.
This was all a bit confusing, and Einstein was getting really mad at me about it.
So after taking a few more slaps from Einstein, I made this indicator that not only took trades with different indicators, but also showed their win rates on multiple time frames.
To make sure Einstein is really happy, I also added a median value, which basically automatically takes the true middle percentage of all these win rates and shows them at the bottom.
This way, we can clearly see if the win rate percentage is going up or not.
Einstein smiled at first, but then he said, “What the hell is this garbage?
Why is the one-week time frame not taking trades or only taking fewer trades?
It is giving a really high win rate, though, but the number of trades the strategies are finding on this time frame is basically none.”
So to keep Einstein happy, I removed the one-week time frame.
I made sure that all time frames took around 200 trades maximum so we can compare their win rates easily.
And to make sure Einstein gets really happy and gives me a kiss, I also added a graph of the median win rate and a trend line to see if the win rate is actually going up or not.
But then Einstein slapped me instead and said that you are only testing on one thing.
“That’s not enough, you have to test on many different forex pairs and stocks to find the real truth.”
So, I opened the EUR/JPY chart and showed Einstein to his face an upward-moving trend line that clearly showed that the win rate gets higher as the time frame gets higher.
Einstein slapped me again and said,
Why is there a lower win rate on the two-hour time frame when the win rate was going up and up before that?
He said it is not enough proof.
So I said, “Don’t worry, I will open another chart.”
And I showed him different graphs where the trend line was going higher and higher, but Einstein was not impressed because suddenly, on some time frames, the win rate was dropping.
He was not happy about the lack of consistency.
We sat there for many hours going through as many different forex pairs as possible, and on many of them, we saw a clear uptrending graph.
I was quite happy with this.
But Einstein kept finding flaws in my testing, like there are not enough trades on the one-day time frame sometimes.
He said, “Don’t worry, we will test more for hours and hours because time is relative.”
I said his wife is a relative of his!
He was not happy about that.
Then Stephen Hawking came into the room and found a really big black hole in the testing method.
I thought even though the win rate is not consistently going up, it is still overall going up, which is quite enough.
But Stephen Hawking said that in all of my tests, I was only taking trades in the upward direction.
And if you think that is not going to cause a problem, get ready to be surprised, because as soon as I started taking both long and short trades, the win rate became more random.
The trend line was no longer going up strongly like before.
The win rates were going up and down, up and down.
On some pairs, it was still an uptrend, but now there were big drops in the win rate in the middle for some reason.
Basically, the data had now become even more inconsistent.
And this was the point where I decided that I have basically wasted like eight or more hours testing all this with Einstein.
I can’t present this data to anyone because it is not that reliable, even though the trend line is going in the upward direction many times.
But Einstein’s wife came into the room and told me to switch to the stock market, and then Einstein was amazed at what he saw, and Stephen Hawking was too, probably.
In the stock market, there was a very clear and consistent increase in win rate the higher the time frame went.
I tried hundreds of trades with many different popular stocks and stock market indices, and pretty much every time, the trend line was strongly moving in the upward direction pretty consistently.
But then Einstein slapped me hard and said to mention the win rate went up only during the long setups.
Suddenly, Stephen Hawking slapped Einstein with his chair and said that the win rate was going up with both long and short trades as well.
Angry Einstein threw him into the black hole and said that even though the win rate is going up in both long and short trades, the long setups show a much clearer picture.
The data shows really strong proof of the win rate increasing as the timeframe gets higher in the stock market during long setups.
Einstein and I sat there for hours and tested different popular stocks like Apple and saw a really consistent increase in the win rate as the time frame got higher.
We tested on the S&P 500, we tested on Nasdaq, we tested on the Nifty 50 index, we tested on the Dow Jones index, and there was a consistent enough increase in the win rate.
We basically proved that in the stock market, the win rate goes higher and higher as the time frame gets higher and higher, especially while taking long trades.
A beginner trader can take full advantage of this data because this basically means we don’t have to pick a direction in the stock market most of the time.
If a beginner trader in the stock market only focuses on taking long setups on medium to higher time frames, then they will have a much higher probability of becoming successful, simply because the default win rate on those time frames is higher in the long direction.
I wish I could tell you this is where the story ends, like this is where I proved that a higher time frame actually increases the win rate, but it doesn’t.
With the help of Einstein, let me try to simplify what is really happening.
If you remember, in the forex market, the win rate was improving many times as the time frame got higher.
That was mainly because that forex chart was moving in an uptrend on the higher time frames.
When I switched to a forex chart that was not really moving in an uptrend, the win rate didn’t really go up consistently as the time frame got higher.
But when Einstein and I switched to the stock market, many stocks and indices gave a higher win rate on higher time frames because they naturally move in an uptrend in the long run.
So in reality, after wasting eight or more hours, what we really proved is not that the win rate gets higher as the time frame gets higher.
Instead, what we actually proved was that in the stock market, on popular stocks and indices, the win rate does get higher as the time frame gets higher.
Remember that there is a big difference in what I just said, even though it sounds the same.
In other markets that don’t naturally have an uptrend, like the forex market, we have not found clear proof yet about the win rate increasing as the time frame gets higher.
But on popular things like the S&P 500, Apple stock, Nifty 50, or whatever regular people invest in globally, those things have clearer data of the win rate increasing as the time frame gets higher.
So whenever you are trading a stock market index, remember to take more long trades instead of short trades, because long trades will naturally give you a higher win rate and make you a successful trader.
Hopefully, this data tested from hundreds and thousands of trades will help some beginner traders decide how to easily improve their win rate and actually become profitable faster.