Base hits or home runs? Why you should trim your P&L outliers
If your best month depends on two trades, you do not have a process yet. Trimming the tails of your P&L distribution shows what your edge really is.
Line up every trade you took last month by P&L and you’ll get something close to a bell curve. Most trades sit in the middle - small wins, small losses, scratches. A few sit far out on the tails: the trade that ran all day, and the one where you moved your stop.
Those tails can tell you more about your trading than the average ever will.
Two traders, same month
Imagine two traders who both finished the month up $3,000.
The first made it in steady increments: lots of modest winners, losses kept small, no single trade bigger than $400.
The second was down $1,500 going into the last week, then caught one trend day for $4,500.
Same P&L, completely different businesses. The first trader has a process - something repeatable that can be refined and sized up. The second has a process that loses money, rescued by a home run. Next month, if the home run doesn’t come, the result looks very different.
Trim the tails and recalculate
The test is simple. Remove a small percentage of your biggest winners and your biggest losers - say the top and bottom 5% of each - and recalculate your statistics on what’s left.
Then read the result:
- Your edge holds. Expectancy stays positive without the tails. Your results come from base hits - a process you can trust and scale.
- Your edge disappears. You’re relying on home runs. That’s a fragile way to trade: one missed runner and the month goes red. Work on the middle of the distribution.
- Your edge improves. A few blow-ups are erasing a good process. The fix isn’t your strategy - it’s your stop discipline. Find what those trades have in common.
Trimming both sides matters. Removing only your best trades makes everyone look worse; removing only your worst makes everyone look better. Taking the same share from each tail shows you the shape of your everyday trading.
Don’t delete the trades
The outliers are real money and real lessons, so they belong in your journal. What you want is a view that sets them aside - a lens you can switch on and off - not a spreadsheet where you delete rows and hope you remember to put them back.
How Premo helps
In Premo Trading, outlier exclusion is a setting: choose a percentage and the top and bottom share of your winners and losers are left out of every statistic while it’s on. Nothing is deleted. Pair it with P&L filters - above, below or between any amount - to study exactly the trades you care about.
This article is educational and is not investment advice. Trading involves substantial risk of loss.