Breakeven Stops: At Entry or 1-2 Tic Profit? | Psychology and Money Management


futures.io - futures trading strategies, market news, trading charts and platforms


Psychology and Money Management


This forum is where successful traders spend most of their time and where struggling traders never visit. The psychology and money management forum is where you learn to become a profitable day trader




 

Breakeven Stops: At Entry or 1-2 Tic Profit?

  #11 (permalink)

Chicago
 
Trading Experience: Beginner
Favorite Futures: MES
 
snax's Avatar
 
Posts: 682 since Feb 2019
Thanks: 2,404 given, 1,971 received


centaurer View Post
But this formula (Win% x Avg Win) - (Loss% * Avg Loss) is highly flawed for the statistical properties of trades. This makes sense on an IID process that there is only one win/loss %. Then with an IID process the more samples you take the more informative the average win and average loss becomes.

This all breaks down with market data because the distributions change over time. The distribution of a trade for ES on Monday is not the same distribution as a trade on ES from early February bouncing out of the lows.

It is viewing the trader as the generating process as opposed to the market.

I've thought about this as well, its part of why i started trading in small cycles of trades so I could track if and how this result "(avg_win * win%) - (avg_loss * loss%)" changes as I modify my technique in an ever changing market. And that's just for one contract with its own unique behavior.

Its an interesting problem and one which I've been coming to the conclusion that I'll have to come up with my own formula eventually unless there is already good stuff out there.

@centaurer you have hit upon a topic which has bothered me, the fact that there is so much cargo-culting of information that is of questionable value. But that's a huge topic. And I think exploiting this condition could be a rich area for developing an edge perhaps.

Note: I didn't mean to imply that anyone in this thread is cargo-culting bad information, I meant in the broader sense that you see throughout trading in general.


Last edited by snax; May 11th, 2019 at 11:51 AM. Reason: added clarification.
Visit my futures io Trade Journal Reply With Quote
The following user says Thank You to snax for this post: