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building my trading strategy
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building my trading strategy

  #1 (permalink)
Elite Member
Augusta, GA
 
Futures Experience: Advanced
Platform: NT
Favorite Futures: ES, TF
 
Posts: 91 since Feb 2011
Thanks: 33 given, 20 received

building my trading strategy

Hi all wanted to get some feedback. I am trying devise a new workable trading plan in trading futures and am struggling with trying to focus on higher percentage setups and lower risk/reward although ideally 1/1 or greater or going with the lower percentage model and great risk/reward 3/1 (MT Predictor model.) I have had success until recently with a plan that yielded about 55% winners to losers and about even risk/reward. However, the last several months have shredded that so i am back to the drawing board. I do like the concept of MT Predictor but have a hard time with the long losing streaks and hefty drawdowns. I would like to get a feel for what you guys do as far as winning % and risk/reward. Anyone out there actually getting 80 % accuracy as some vendors promote with decent R?R. If so how are you doing it if you dont mind, Or are you closer to my profile or MT predictors? I have a hard time reconciling losing a high percentage of the time even though the math can work but wanted to find out the different models that are working. Also if there is methodology and or vendor approach that is allowing you to succeed in your model that would be greatly appreciated as well. Love this forum and appreciate any input anyone can give.

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  #3 (permalink)
Elite Member
Honolulu, Hawaii
 
Futures Experience: Intermediate
Platform: NinjaTrader
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bluemele's Avatar
 
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That is a great great great question!

Personally I think that you have to figure out if you are the type of person who likes to be 'right' with a high win% or likes to be profitable and can handle the larger drawdowns, or a person how needs to be in the market all the time or not etc...

Do you see it more clear as counter-trend or as trading with the trend...

Do you like Position trading, swing trading, or intraday trading or scalping?

Out of the systems that you have seen, which appeal to you more?

I think once you define that, then you can decide where to dig further and gain your experience. To me, mechanical systems take loads of experience.

So, can you define what kind of trader you are, and then I think people can point you in the better direction. Instead of you fitting around the methodology, why don't you start with the methodology fitting you first?

Per your other questions I believe you can take any system and make it win after enough time watching...

If I were to start over from scratch, day 1...

Read "High Probability Trading" (Thanks @forestang), this will give you some insight into where most traders go wrong/right and a very SIMPLE READ.

Choose an instrument and methodology that fits you. For instance, for me, I like something that moves! CL, TF, GBPJPY, etc. all interest me more than say ES. A nice middle ground might be 6E.

Make sure your methodology and your future goals line up. For instance, I live in Hawaii, so swing or position trading is probably easier for my sleep cycle...

(remember this is for my own good on this post..)

Study Price Action like there is NO TOMORROW. Learn chart patterns, trendlines, breakouts, exhaustions, Support & Resistance, Inside Bars, Outside Bars, Reversals, 1,2,3 setups, ATR and anything else that floats your boat like volume, profiles, ACD or whatever.. To me, seeing where the market will 'most likely' go is getting much easier.

Learn Multi-Time Frame and the importance of how to use it etc..

Learn about the different types of money management, scaling in/out of positions, martingale/averaging down, etc..

Promise yourself to constantly learn and evolve, but stick with your system. If you need support, find it through the forum by journaling and other more exp. traders will push you into the right direction.

This post is kind of jumbled and I apologize for that... But to me, learn price-action and try learning to trade with no indicators would be where I would go and you may already know all this or have a different leaning, but just my 2 cents..

P.S. I looked at MT Predictor and to me, just another jumbled mess of software to spend money on.

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  #4 (permalink)
Market Wizard
New Orleans, La (Mardi Gras City)
 
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bluemele View Post
Read "High Probability Trading" (Thanks @forestang), this will give you some insight into where most traders go wrong/right and a very SIMPLE READ.

It may help to give a link to the resource.

It is hard to tell if this is a reference to a thread at futures.io (formerly BMT)?
The book: "High Probability Trading" (Marcel Link)
The book: "High Probability Trading" (Robert Miner)
Or something else?

Thanks

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  #5 (permalink)
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DavidHP View Post
It may help to give a link to the resource.

It is hard to tell if this is a reference to a thread at futures.io (formerly BMT)?
The book: "High Probability Trading" (Marcel Link)
The book: "High Probability Trading" (Robert Miner)
Or something else?

Thanks

Sorry, yes, the book from Marcel Link. (wouldn't recommend for more advanced traders, but for me it was good to reflect and pick up a few things from)

The book: "High Probability Trading" (Marcel Link)

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  #6 (permalink)
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High probabilty trading

Tks Blue and David. i have been more comfortable with being right consistently meaning more than 50%. I never have achieved 80% for any real strech nor even 70% for that matter. My strategy really which is indicator based to predict pivot points and trade off their retracements have not worked very well lately. Bad enough that i want to rethink my phiilosophy. I was curious if there are any true high probabilty traders here with reasonable risk/reward parameters and how they have achieved their success. If this is as undoable as i am finding i might look to invert the relationship per the MT Predictor model. Tks for the book recomendations. I will look them up and the advice on price action. If anyone here doesnt mind sharing their stats i would appreciate it.

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  #7 (permalink)
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bluemele's Avatar
 
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In my OPINION, market dynamics change all the time.

Knowing what is the bane of your technique is key. Some will be micro/macro and some will render the strategy worthless.

In my opinion if you have a decent strategy and it is failing then go back through and figure out what market conditions are causing it to fail.

Once you can define that, then go back through historical data and figure out how often this is and if you should be concerned from a prolonged drawdown. If you find it is too often, then you can either throw it away or redefine it utilizing other techniques to make it more effective for those periods of changes within the market OR turn it off until the market starts cooperating.

You will never find a technique that is perfect in all market conditions all the time. If you did, you would be the richest person alive.

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  #8 (permalink)
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New Strategy

tks Blue, i guess i am looking for what other traders are doing here if they are willing to share. What win %, target, stop loss, R/R parameters and such and even how they are achieving it if they are successful.

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  #9 (permalink)
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More Right then Wrong

Trading style can be summarized as simply "To Each his Own"

I measure trading success first on profit (duh!) and second on the number of winning days vs. loosing days. I reduce optimization of my trading system (and consequently profits) to achieve a higher number of winning days. By doing this it is easy to identify market conditions that are conducive to winning days and conditions that produce loosing days (based on back testing) - it also reduces the duration of draw down (which is psychology important)

,....so when I am live trading, I have a history of when the market produces success and failures and can make the decision to trade or not.

I am also very conservative. I give myself an absolute daily loss and an absolute daily gain (that I refer to as Maintain Gain) - the longer you stay in the market the higher the probability of realizing looses and since I take only 4 ticks of profit and 19 ticks of loss - it is important to exit when I am ahead (my ratio of wins to losses is very high).

Finally, I try to codify my thought process to remove as much discretion as possible - I prefer totally hands off automated trading.

I was trying my hand at scalping using a discretionary approach - I was successful with funny money - lost like heck with the real stuff - so I stepped back and codified as much of my thought process as I could understand - huge difference (also added a Stability Indicator (not Volatility)).

My current (tested) system is showing a minimum 60% annualized (all fees) return for the past 7 quarters (I trade the ES). It is totally automated - I have discovered that over 80% of the time that I override the system I LOOSE!. - so if you develop a system then adhere to it and develop quantifiable metrics so that you can intelligently change it - you cannot measure discretion.

In Summary - The system you decide to use for entry is not as important as managing the trade once in play,...

1) Strive for more daily Wins then Losses even if you make less
2) Maintain your gains and get out when you achieve your daily target
3) Limit your losses and get out when the market turns against you
4) Try to automate as much as possible to remove discretion.

This works for me,...hope this helps,...Good Luck!

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  #10 (permalink)
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Lesson Learned


Hello again Booker777

After 4 years and many unsuccessful trading systems, I am moving to pure scalping models (I still use the automated system I described above - but it can be nerve racking to watch it).

The reason is that I like to see immediate success and immediate losses - I hate to wait for an outcome - so scalping is my preferred goal.

I take 1-3 ticks of gain and 5 to 7 ticks of loss - I shoot for $100/per day per contract (on good days this is doubled) - 1 contract per $10k.

To put this in perspective - based on 200 trading days per year this is a 200% return, $50/day per contract is a 100% return and $25/day per contract is a 50% return (which is a lot better that most fund managers can achieve).

If your target is $50/day per contract, you can easily make this in 2.5 2 tick trades (the .5 covers cost)

After I make my target I switch to funny money trading and virtually trade the balance of the day - it helps me stay sharp) My wins to losses usually exceed 87% (but a loss can wipe 6 - 10 wins)

Another reason I like scalping is there seems to be more setups - I trade congested, trending and volatile markets - but I don't trade erratic markets.

In summary, consider scalping strategies - it is easier on my psyche - you may find it easier on yours as well.

,...G

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