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Webinar: FuturesTrader71 (FT71) on Risk, Sizing, Scaling and Trade Management
This didn't go against any rules he set up. Trades 5, 8, & 14 had a best scale out (BSO) of 5-ticks and got stopped out on the second contract. On trade #5 he didn't have a 1-tick stoploss; there was slippage of one tick when he took the 5-tick stop on the second contract. On the other two trades, the net was zero because one reached the initial 5-tick target and the 2nd reached the 5-tick stop instead of the 10-tick target. Trade #11 experienced a 1-tick slippage on the stop as well. He also experienced positive and negative slippage on full winners.
I didn't perform the actual tests but that's what my critical examination and due diligence indicates to me
Luck is what happens when preparation meets opportunity. ~ Seneca
I would like to see the 1000 trade sample run comparing the all in/scale-out to the all in/all out, but with the exact same trades. I guess to do that, you'd have to do the coin toss by hand, and then calculate the outcome of the trades for both methods from the price chart, rather then actually by taking the trades.
With these sorts of studies there's a few things to keep in mind:
1 - The 5 tick target/5 tick stop seems like it should be a 50/50 trade right?
It isn't.
The market always has 2 prices. A bid and an offer.
If you enter with a buy market order, you will get the offer price, the bid price will obviously be 1 tick below. If the market ticks down 4 prices, you will already be at your stop. If the market ticks up 5 prices, you will be at your target, still - being at your target does not guarantee you a fill. So, you really need price to move up 6 ticks to get a 5 tick profit.
So - a 5 tick target/5 tick stop means you lose if price goes against you 4 ticks and you gain if price moves your way 6 ticks.
If you enter on a limit order, you have a slightly different issue in that you need the market to move against you first and then move your way afterwards. That's a different proposition.
2 - Any method that uses random entry and a trailing stop is not actually trading randomness. Such a system will work under certain circumstances. If your market is trending, the system will be profitable. If the market is rangebound, it will lose. So - whilst on the surface, it appears you are trading at random, that is not really the case. What you are doing is making a bet that the market will trend more than it will chop. The trailing stop portion is the part of the system that requires specific market condition to work. Most people miss this because they think the 'edge' can only exist in the entry part of a strategy, when in fact that does not have to be the case.
On a totally unrelated topic, at about 1hr36min into the webinar it sounds like @BigMike has the same text notification ringtone from Dexter that I have. If so, I'd love to be able to figure out the odds of that happening.
Luck is what happens when preparation meets opportunity. ~ Seneca
Hehe, yes I am a big fan of Dexter. I think I got the ringtone from Zedge on Android. It is my text ringtone, and my other favorite show is Game of Thrones, so that is my call ringtone
The point I was trying to make (poorly it seems), is in this series of 14 trades, 1 trade (#5) was mainly responsible for the result. And, since the sample size was so small the results were of little, if any, practical value.
You commented about the series of posts of traders becoming frustrated, etc. and quitting in disgust. After years of seeing people come and go, one reasons stands out as the cause. They all start trading without understanding the task at hand by using the same type of education; after-the-fact and faulty statistical analysis by self promoted trainers. Successful trainers train, successful traders trade.
One of the most amazing things, never discussed, that contributes to the high failure rate is the large amount of effort put forth in training people how to "embrace losing". Brokers, trainers and even peers all do it. Brokers because they want to limit their liability. Trainers because they know their method doesn't work,(they used it and it didn't work for them-that's why they became trainers). And, peers because they have been brainwashed by the other two.
When the Chicago Bulls were interviewing Derek Rose, before drafting him, they asked what he didn't like most about playing basketball. He immediately responded, "I hate losing!", they knew at that moment they had a potential MVP. It's no wonder so many traders fail, when so many are teaching them to be "great losers". It is only possible to train "how to be a winner" when you have an actual winning strategy. Without one, you have to teach "how to be a good loser", or you'll soon be out of business.
(I know there is a good chance I'll be attacked for these comments. I'll only consider the attacks by long term profitable traders-with verifiable proof- to be of any consideration, what so ever. Comments by others will be treated in kind.)
I find that a very interesting statement. Not in a negative way.
You HAVE to not bother about the individual looser - obviously. NO strategy is perfect, so if you get nervous with one or a small nmber of loosers then - this is a problem.
At the same time you have to seriously work on the bigger picture and hate loosing money there. And duefully always evaluate trades against the larger picture (i.e. are 5 losses a statistical outlier that WILL come when you trade even with a 80% profit rate often enough) or is the edge more permanently fading?
Staticics are very hard things to deal with. Trading often enough even an 80% profitable setup will give you 10 losses in a row quite regtularly, if you trade 5 markets with a strat making 10 setups per day per market. That is 11000 setups per year (5 markets, 10 setups on 220 days each). The sheer number of trades makes a very unlikely event (10 losses in a row) something that will occur with a certain regularity. But when do you analytically start to review the edge? And how long do you assume that losses in a row are normal part of the game?
Interesting enough many tools (Nina etc.) do not have support for that at all. Make an expectancy, then compare trades in timeframe / nr of executions against expectancy projection.
But if you take the Derrick Rose example, embracing losers or being a good loser would be equivalent to Derrick missing a lay up. If he flips out, loses control, throws out all his strengths of how to play good ball and just starts fouling everyone and hoarding the ball, missing shot after shot after shot, then he is going to have a problem.
He doesn't do this. He is a good loser when you equate a loss to a particular shot within the game. He keeps his cool and doesn't focus on the missed shot. No. He moves on to the next shot, because that is what matters.
Traders need to be a good loser in the terms they need to learn that missing a lay up is part of the game. It is not a big deal, so don't make it one. By being a good loser on these individual plays, or trades, then the game as a whole (trading session, day, week) can come out on top as a winner because you've remained in control and allowed your experience as a player prevail.
