Base hitting your way to outliers
I would argue that, as of 2024, good discretionary trading is defined by sticking to rules, including rules on running profits. But it does not need to be like this.
Asymmetric reward to risk is the ultimate objective, for the simple reason that high win rates cannot be assured into the long run.
But most traders I know (present company included) go out of their way to hunt for outliers -- basing their exit strategy around the acquisition of occasional outlier trades.
But sometimes it is worth pausing and reflecting... and learning from history.
The great Marty Schwartz comes to mind. He hasn't done anything on YouTube, bar the below -- hence this video is to be regarded as an absolute treasure, a goldmine of sorts.
How did Marty Schwartz trade his initial $40,000 grub stake up to $20 million in a few short years? Was it by intentionally hunting down outliers through the use of trailing stops etc? No, it was not.
I have dug out his book Pit Bull from one of my book cabinets and scanned a snippet below:
What do we infer? We infer that he was a base hitter who never went for home runs. But, occasionally, home runs came to him. This method of home run acquisition puts faith in a bell curve of natural price action, with low frequency extremes taking the form of significant gap ups and high volume wide range bars. The outcome is something along the lines of a 50% win rate, with the vast majority of his trades profiling at a reward to risk ratio of 1:1. In other words, most of the time Marty Schwartz was a breakeven trader. But when occasional abnormal price action hit, Marty was "forced" to book abnormal profits. But, most importantly, he never seemed to go in the active pursuit of said outliers, like most traders do today.
P.S. Do watch the video. Marty Schwartz is a truly inspirational gentleman.