NexusFi: Find Your Edge


Home Menu

 





Is this strategy good enough?


Discussion in Currencies

Updated
      Top Posters
    1. looks_one baruchs with 34 posts (1 thanks)
    2. looks_two monpere with 17 posts (6 thanks)
    3. looks_3 ThatManFromTexas with 15 posts (15 thanks)
    4. looks_4 Trader.Jon with 12 posts (1 thanks)
      Best Posters
    1. looks_one LukeGeniol with 1.5 thanks per post
    2. looks_two ThatManFromTexas with 1 thanks per post
    3. looks_3 MWinfrey with 0.6 thanks per post
    4. looks_4 monpere with 0.4 thanks per post
    1. trending_up 33,761 views
    2. thumb_up 62 thanks given
    3. group 14 followers
    1. forum 145 posts
    2. attach_file 6 attachments




 
Search this Thread

Is this strategy good enough?

  #101 (permalink)
 
MWinfrey's Avatar
 MWinfrey 
Lubbock TX
 
Experience: Intermediate
Platform: NinjaTrader
Broker: Stage 5 Trading
Trading: CL
Posts: 1,878 since Jul 2009
Thanks Given: 1,450
Thanks Received: 3,335


Trader.Jon View Post
Wouldnt you want to know about the previous 10 to that? Maybe they were 9 heads and 1 tail!?

no what bearing does the previous outcomes have on this one, none. they are discrete events.

Reply With Quote

Can you help answer these questions
from other members on NexusFi?
ZombieSqueeze
Platforms and Indicators
Build trailing stop for micro index(s)
Psychology and Money Management
Online prop firm The Funded Trader (TFT) going under?
Traders Hideout
NexusFi Journal Challenge - April 2024
Feedback and Announcements
Ninja Mobile Trader VPS (ninjamobiletrader.com)
Trading Reviews and Vendors
 
  #102 (permalink)
 
Trader.Jon's Avatar
 Trader.Jon 
Near the BEuTiFULL Horse Shoe
 
Experience: Beginner
Platform: NinjaTrader
Broker: MBTrading Dukascopy ZenFire
Trading: $EURUSD when it is trending
Posts: 473 since Jul 2009
Thanks Given: 401
Thanks Received: 184


baruchs View Post
Very good. So we can make a rule. If strategies are loosly correlated or not correlated or even better, like here (correlation =-1), have negative correlation on the outcomes, then adding even a losing strategy can improve your position!!
Lets look into another example:
you have two strategies:
1. NP=40K DD=6K
2. NP=10K DD=1k
Which is better? If you can prove it I'll be very impressed.

I really cant prove anything with information provided. Extrapolation of data supplied shows that at a level of equality NP=400K the DD for #2 = 40K and for #1 it is 60K, so as I understand it risk of ruin is faster with #1 == no money == no trades and a variety of simulations such as Monte Carlo could offer somre insight into how soon and what propability it happening first, assuming account size of 10k then you would be out of trading sooner with #1 as it is depleted and you cant carry on trading at the same level with reduced account size. HOW SOON the DD happens is a huge factor to resolving these questions. YMMV

I realize not well said, but trying to be brief.

Jon

Writing to you from the wonderful province of Ontario, Canada. Home to the world's biggest natural negative ion generator, the Niagara Falls, and to those that dare to know how to go over it in a barrel. SALUTE!
Reply With Quote
  #103 (permalink)
 
Trader.Jon's Avatar
 Trader.Jon 
Near the BEuTiFULL Horse Shoe
 
Experience: Beginner
Platform: NinjaTrader
Broker: MBTrading Dukascopy ZenFire
Trading: $EURUSD when it is trending
Posts: 473 since Jul 2009
Thanks Given: 401
Thanks Received: 184



MWinfrey View Post
no what bearing does the previous outcomes have on this one, none. they are discrete events.

YUP. I was thinking that also, should have said that as well.

Jon

Writing to you from the wonderful province of Ontario, Canada. Home to the world's biggest natural negative ion generator, the Niagara Falls, and to those that dare to know how to go over it in a barrel. SALUTE!
Reply With Quote
  #104 (permalink)
 
monpere's Avatar
 monpere 
Bala, PA, USA
 
Experience: Intermediate
Platform: NinjaTrader
Broker: Mirus, IB
Trading: SPY, Oil, Euro
Posts: 1,854 since Jul 2010
Thanks Given: 300
Thanks Received: 3,371


Quoting 
no what bearing does the previous outcomes have on this one, none. they are discrete events.


Trader.Jon View Post
YUP. I was thinking that also, should have said that as well.

Jon

It is probability theory. Although an individual coin toss or the roll of a dice is a random event, if repeated many times, the sequence of random events exhibits certain statistical patterns, which can be studied and predicted. Two representative mathematical results describing such patterns are the 'law of large numbers' and 'central limit theorem'.

Reply With Quote
Thanked by:
  #105 (permalink)
 fluxsmith 
Santa Maria
 
Experience: Advanced
Platform: NinjaTrader, ThinkOrSwim
Broker: Mirus/Zen-Fire
Trading: ES
Posts: 290 since May 2010
Thanks Given: 97
Thanks Received: 322


Trader.Jon View Post
Wouldnt you want to know about the previous 10 to that? Maybe they were 9 heads and 1 tail!?

And if you assume a fair coin, then any record of the previous flips should have absolutely nothing to do with it.

Visit my NexusFi Trade Journal Reply With Quote
  #106 (permalink)
 
worldwary's Avatar
 worldwary 
Williamsburg, VA
 
Experience: Intermediate
Platform: ThinkorSwim
Trading: Stocks
Posts: 522 since Mar 2010
Thanks Given: 259
Thanks Received: 791


baruchs View Post
Very good. So we can make a rule. If strategies are loosly correlated or not correlated or even better, like here (correlation =-1), have negative correlation on the outcomes, then adding even a losing strategy can improve your position!!
Lets look into another example:
you have two strategies:
1. NP=40K DD=6K
2. NP=10K DD=1k
Which is better? If you can prove it I'll be very impressed.

If you trade both, and if you assume that future performance will match historical performance (a problematic assumption possibly, but let's set that aside for the moment), then you'd expect net profits of 50K and a max drawdown of 7K (assuming both strategies hit max drawdown at the same time). Min drawdown could be zero (assuming that strat 1 hits max 6K drawdown at the same time that strat 2 is on a 6K winning streak). Actual expected drawdown can't be computed without additional input I believe (need to know correlation for instance).

Visit my NexusFi Trade Journal Reply With Quote
  #107 (permalink)
 
monpere's Avatar
 monpere 
Bala, PA, USA
 
Experience: Intermediate
Platform: NinjaTrader
Broker: Mirus, IB
Trading: SPY, Oil, Euro
Posts: 1,854 since Jul 2010
Thanks Given: 300
Thanks Received: 3,371


worldwary View Post
Automatic win under the scenario you've outlined; will win $1K on either heads or tails

Ok, trick question! The trick is that you flipped the role of heads, you win on heads with 1 guy and loose on heads with the other guy on the same coin toss. I thought you were always betting 1 way, just plain win or loose, heads you always win, tails you always loose.

Ok, give an actual trading example to demonstrate your point.

Reply With Quote
  #108 (permalink)
 
monpere's Avatar
 monpere 
Bala, PA, USA
 
Experience: Intermediate
Platform: NinjaTrader
Broker: Mirus, IB
Trading: SPY, Oil, Euro
Posts: 1,854 since Jul 2010
Thanks Given: 300
Thanks Received: 3,371


worldwary View Post
If you trade both, and if you assume that future performance will match historical performance (a problematic assumption possibly, but let's set that aside for the moment), then you'd expect net profits of 50K and a max drawdown of 7K (assuming both strategies hit max drawdown at the same time). Min drawdown could be zero (assuming that strat 1 hits max 6K drawdown at the same time that strat 2 is on a 6K winning streak). Actual expected drawdown can't be computed without additional input I believe (need to know correlation for instance).

So, then it becomes a timing equation. I can see that theoretically, but in reality, are you going to put up your account equity against this theory?

Reply With Quote
  #109 (permalink)
 
worldwary's Avatar
 worldwary 
Williamsburg, VA
 
Experience: Intermediate
Platform: ThinkorSwim
Trading: Stocks
Posts: 522 since Mar 2010
Thanks Given: 259
Thanks Received: 791


monpere View Post
So, then it becomes a timing equation. I can see that theoretically, but in reality, are you going to put up your account equity against this theory?

In my experience, the first week I start live trading the system with a "max $1K drawdown" I'll wind up with a $2K drawdown, so trusing my account equity to any theory remains a problem for me.

But I'm interested in seeing where this thread is going so I can learn more.

Visit my NexusFi Trade Journal Reply With Quote
  #110 (permalink)
 
ThatManFromTexas's Avatar
 ThatManFromTexas 
Houston,Tx
 
Experience: Advanced
Platform: NinjaTrader
Broker: Mirus Futures/Zen-Fire
Trading: TF
Posts: 2,265 since Feb 2010
Thanks Given: 1,206
Thanks Received: 4,348


You can make odds work in your favor. In Las Vegas, if you go to the "Craps" table and bet the "No Pass" line every time , assuming you have sufficient capital to cover you during the draw downs, you will make money over time.

The "house" is profitable because the odds are in their favor; players will lose eventually. The house has a large enough bank to ride out the streaks where players win more than they lose , a streak that historically is always short lived. By betting against the player throwing the dice, you are aligning yourself with the house position.

BTW... You won't make any friends doing this ... but you will make money.

I'm just a simple man trading a simple plan.

My daddy always said, "Every day above ground is a good day!"
Reply With Quote
Thanked by:




Last Updated on March 7, 2011


© 2024 NexusFi™, s.a., All Rights Reserved.
Av Ricardo J. Alfaro, Century Tower, Panama City, Panama, Ph: +507 833-9432 (Panama and Intl), +1 888-312-3001 (USA and Canada)
All information is for educational use only and is not investment advice. There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
About Us - Contact Us - Site Rules, Acceptable Use, and Terms and Conditions - Privacy Policy - Downloads - Top
no new posts