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First month trading- Review my output #s please
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First month trading- Review my output #s please

  #31 (permalink)
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SoftSoap View Post
Thanks a lot for this post, I was familiar with the expectancy model but not so much with the probability of ruin matrix. Seems like expectancy model is more for traders with consistent numbers month over month, while this is more applicable to new traders such as myself who want to ensure they survive the roughest patch of day trading. One thing to add to the equation is that mathematical models only take into account the numbers, and not the person.

I have a main takeaway from your post, assuming that my initial goal is capital preservation and not profit optimization.
38% win is too low, even with this profit/loss ratio, I should be aiming for at least a 45% win and a 2-1 ratio before switching over to live. This gives me a minimum target to strive for, so I appreciate that.

A 5% chance of ruin in ~a month seems more than reasonable to me (I do about 110ish trades per month atm). Especially once you add in the human factors that the model cannot account for.

Might I suggest something more robust here? Take all of your trade setups, rank them within this matrix. I recall you said in a previous post that some setups only appears once per week. But if that setup is say a 4:1 with 60% expectancy, then maybe you risk a 2% allocation on that trade, and if it's say 2.5:1 with only 40% expectancy, then risk .5% of your account, etc. The fact that easy trades only appear 1-2 times per week is not a bad idea, a single trade can make your entire month if managed properly with scale in's.

Remember, your job is not to keep clicking the mouse to put trades in, your job is to manage risk.

Your P&L curve indicates to me too much inconsistency not from a profitability standpoint, but from poor risk management. i.e. if you're up say $10k for the month and then your next draw down is $10k, why are profits not being protected? Are you in that scenario taking too many poor quality trades, or letting risk run too wide on stops, or taking too much risk even on a good trade?

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  #32 (permalink)
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MacroNinja View Post
Might I suggest something more robust here? Take all of your trade setups, rank them within this matrix. I recall you said in a previous post that some setups only appears once per week. But if that setup is say a 4:1 with 60% expectancy, then maybe you risk a 2% allocation on that trade, and if it's say 2.5:1 with only 40% expectancy, then risk .5% of your account, etc. The fact that easy trades only appear 1-2 times per week is not a bad idea, a single trade can make your entire month if managed properly with scale in's.

Remember, your job is not to keep clicking the mouse to put trades in, your job is to manage risk.

Your P&L curve indicates to me too much inconsistency not from a profitability standpoint, but from poor risk management. i.e. if you're up say $10k for the month and then your next draw down is $10k, why are profits not being protected? Are you in that scenario taking too many poor quality trades, or letting risk run too wide on stops, or taking too much risk even on a good trade?

This is a great suggestion, I will do this with my next 100 trades and report back results early next week.

You're completely right on the inconsistency part, and it's one thing that has frustrated me a bit in the past. I think a big issue is that my win% is subpar so I'm taking too many poor quality trades.

I'm not sure if I'm letting my risk run too wide on stops, but it's a question that I will ask myself at the end of every day/week to see if that's the case.

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  #33 (permalink)
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I'll check back again next yr, but the true probability of ruin in trading futures is 95%. Let that number sink in.

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  #34 (permalink)
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farmer55 View Post
I'll check back again next yr, but the true probability of ruin in trading futures is 95%. Let that number sink in.

@ Famer55, I would wholeheartedly agree that in the retail space, the failure rate is probably 99%. However, a broad statement of saying the probability of ruin in a futures contract is inherently 95% most likely lacks the proper risk management analysis rigor needed. For example, if the account size is $1M USD, and you only hold 1 ES contract at any given time, what is the risk of ruin rolling one contract to the next? The ES could in theory go to zero and the account size could not approach zero.

A more constructive risk analysis would be to apply the risk of ruin calculations in relation to % risk taken per trade, expectancy, and figuring out if there is enough capitalization to justify the risks.

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  #35 (permalink)
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MacroNinja View Post
Might I suggest something more robust here? Take all of your trade setups, rank them within this matrix. I recall you said in a previous post that some setups only appears once per week. But if that setup is say a 4:1 with 60% expectancy, then maybe you risk a 2% allocation on that trade, and if it's say 2.5:1 with only 40% expectancy, then risk .5% of your account, etc. The fact that easy trades only appear 1-2 times per week is not a bad idea, a single trade can make your entire month if managed properly with scale in's.

Remember, your job is not to keep clicking the mouse to put trades in, your job is to manage risk.

Your P&L curve indicates to me too much inconsistency not from a profitability standpoint, but from poor risk management. i.e. if you're up say $10k for the month and then your next draw down is $10k, why are profits not being protected? Are you in that scenario taking too many poor quality trades, or letting risk run too wide on stops, or taking too much risk even on a good trade?


I grabbed my most frequent setups in the last 8 weeks of trading. 6 setups accounted for ~75% of my trading, and here are the numbers. Total trades in those 8 weeks were 114.

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Looks like my top 3 setups are good, and the bottom 3 are not that great. This is great analysis as it tells me that I should continue with my favorite setups as they are also the least likely to bring me ruin.

Some of those setups have very little trades though so I'll keep them on for now and will do the analysis when I have about 8 more weeks of data to see whether or not I should drop them altogether.

Thanks again @MacroNinja

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  #36 (permalink)
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Two week update

Here's an update from when I initially posted this thread. I've gotten a lot of good feedback from this thread and I appreciate everybody's input. With your advice, I stopped experimenting on a lot of things and started to hone in on what I felt I actually understood.

I also started playing the first 2 hours of a day (when I'm most active) at 1x speed, so I can experience more of a 'live' market as opposed to one that is at my disposal.

Since starting this thread I've traded about 2 months worth of data, and here are the numbers for 2 months worth of data. I've also added the initial numbers as a comparison. Please note that these are not weekly or monthly averages, but total numbers.

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I'm happy as I've pretty much improved on every output, and I'm feeling more comfortable about my performance as it feels that I've stopped gambling and started trading.

My initial plan involved sim trading about 2.5 years of data before moving to live trade, but I'm going to cut almost all of that due to feedback. I'll do a little bit of day trading from 2016 just to get a feel for the market and then I'll jump to live trading in the next month or two.

Thanks so much to everyone who has contributed in this thread but specially to @amoeba, @bbgg91, @DionysusToast, @JonnyBoy, @MacroNinja

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  #37 (permalink)
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Best of luck! Those looks like much sharper numbers.

Now just to be a bit of a challenger...=)

If you were sitting on one of my desks, I might challenge you to dig a little deeper and see what happens to those numbers again if you completely eliminated trades 4, 5, 6 (OR scaled down the risk to .25% on trades 4 and 5. 6 gets removed either way) and then juiced up your risk to 1.25% on trade #1 while keeping the risk at 1% for trade #2 and trade #3.

Don't forget, not trading a system is also an active P&L decision. Either way, it sounds like you're off to a great start to the year with the tweaks that you've made with a pretty impressive boost to the ROI and risk metrics. Great job!

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  #38 (permalink)
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MacroNinja View Post
Best of luck! Those looks like much sharper numbers.

Now just to be a bit of a challenger...=)

If you were sitting on one of my desks, I might challenge you to dig a little deeper and see what happens to those numbers again if you completely eliminated trades 4, 5, 6 (OR scaled down the risk to .25% on trades 4 and 5. 6 gets removed either way) and then juiced up your risk to 1.25% on trade #1 while keeping the risk at 1% for trade #2 and trade #3.

Don't forget, not trading a system is also an active P&L decision. Either way, it sounds like you're off to a great start to the year with the tweaks that you've made with a pretty impressive boost to the ROI and risk metrics. Great job!

Thanks! I'll lower the maximum risk on setups 4-6 from 1% to 0.5%. I trade with a small account (~15K) so risking 0.25% would probably be worse than just getting rid of the setup altogether. I'll up the maximum risk on setup #1 to 1.25%.

I'll keep monitoring these setups though and if they continue to show they aren't very helpful, I'll just get rid of them completely.

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  #39 (permalink)
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43% winners still seems low to me. People do talk of 50% winning systems and making money but to be honest if I lost on 50% of my trades it would do my head in. That is me though and others can be different. As I said before, you are never going to get all your trades anyway so if your system is only running at 50%, which side of the 50% will you be on? If you randomly take out 20% of your trades, how does it effect your results? Personally for me I only ever capture 70-80% of the trade that I can get but for what I do my success is in the high 80's so it is ok.

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  #40 (permalink)
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bbgg91 View Post
43% winners still seems low to me. People do talk of 50% winning systems and making money but to be honest if I lost on 50% of my trades it would do my head in. That is me though and others can be different. As I said before, you are never going to get all your trades anyway so if your system is only running at 50%, which side of the 50% will you be on? If you randomly take out 20% of your trades, how does it effect your results? Personally for me I only ever capture 70-80% of the trade that I can get but for what I do my success is in the high 80's so it is ok.

Your win rate is in the high 80 percent mark trading live?

So let's say in a single trading week you round trip 25 trades, 20 out of the 25 are winners? Correct? What is your profit to loss ratio?

43% winners is a perfectly good number if your profit to loss ratio was 4:1. It is all about the context.

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