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Daily profit measured by volatility
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Daily profit measured by volatility

  #41 (permalink)
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ah so he is using the year to date as the lookback - thanks for pointing that out because i completely missed it not that i understand any better now why.

mark brown

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  #42 (permalink)
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I don't see using the ADR as an efficient measurement on your intra-day trading. There will be days that far exceed the ADR or days that come nowhere near the ADR. I measure my trading performance against each specific day's range not the running average. The same goes for the week, month, etc., etc. You just never know what you're really going to get in the market and this provides an open minded approach to just accept what the market does without having some sort of expectation. When you "expect" the market to do something, it usually ends up being a disappointment for you. Sure, I could just look to get 1 or 2 points in Crude per day but that's trying to impose my will on the market which is a big mistake. Accept what the day provides and go with the flow. Going into the market with the intent of making a specific amount of money can be detrimental. On tight range days, you'll become extremely frustrated and on big trend days, you'll end up getting out of your trade before the move is complete because you "hit your daily target". You'll ultimately miss out on the big moves.

Below is an example of how I keep track of my performance. I do this on a daily, weekly, monthly, quarterly and annual basis. I also use an average for every 3 contracts traded as I'm scaling in and out in 1/3's.

Here's an example of my report.

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  #43 (permalink)
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Private Banker View Post
I don't see using the ADR as an efficient measurement on your intra-day trading. There will be days that far exceed the ADR or days that come nowhere near the ADR. I measure my trading performance against each specific day's range not the running average. The same goes for the week, month, etc., etc. You just never know what you're really going to get in the market and this provides an open minded approach to just accept what the market does without having some sort of expectation. When you "expect" the market to do something, it usually ends up being a disappointment for you. Sure, I could just look to get 1 or 2 points in Crude per day but that's trying to impose my will on the market which is a big mistake. Accept what the day provides and go with the flow. Going into the market with the intent of making a specific amount of money can be detrimental. On tight range days, you'll become extremely frustrated and on big trend days, you'll end up getting out of your trade before the move is complete because you "hit your daily target". You'll ultimately miss out on the big moves.

Below is an example of how I keep track of my performance. I do this on a daily, weekly, monthly, quarterly and annual basis. I also use an average for every 3 contracts traded as I'm scaling in and out in 1/3's.

Here's an example of my report.

I might be wrong, but I'm pretty sure that's what mike is trying to measure, the specific day's range. he just used the common term "adr".

at least that's what I understood or it would make even less sense.


Last edited by Silvester17; March 9th, 2013 at 09:08 PM.
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  #44 (permalink)
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Private Banker View Post
Here's an example of my report.

Is "core avg close vs. rth VWAP close" the difference between the settlement and the vwap at the end of day? How is this number important to you?

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  #45 (permalink)
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josh View Post
Is "core avg close vs. rth VWAP close" the difference between the settlement and the vwap at the end of day? How is this number important to you?

This only pertains to trend days and its my running average final exit vs. the RTH VWAP close. I use this because I scale in and out throughout the day especially on trend days. On down trending days, I want my running average to be above VWAP (positive skew) with my final exit being below the VWAP close and vice versa for up trending days. The reason for this is to prevent selling in the hole or buying into potential resistance while maintaining a positive skew. Its a lot more than that but that's the gist of it.

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  #46 (permalink)
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wldman View Post
To trade well is the only goal for me. "Well" is sometimes not a measure of profitability on a specific trade. It seems as though a reasonable goal of say $400 per day would leave a guy taking $350 a day as failing everyday. How might that impact confidence or a traders psychology?

Thanks Mike.

Dan

Everyone wants to trade well. It's a moot point.

So the next step is to quantify what "well" means. And it doesn't just mean end with a net profit.

Since volatility is a key metric for traders, to me it makes sense to tie performance to volatility.

Mike

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  #47 (permalink)
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indextrader7 View Post
Performance with regard to ADR can be a valuable metric, and as others pointed out, it's going to depend on your style of trading.

I think of that metric like @wldman said, it's an efficiency metric. It's practically like considering the daily range to be the MFE of the "trade" and you're seeing what you captured from what was "available".

For me, that metric is mostly pointless. It's because I don't hold trades that long. So I look at the swing sizes on timeframes that I DO hold trades on, and gauge performance there. Also, individual trade MFE/MAE data is good for everyone because it does account for your style.

I don't understand the argument of MFE being pointless. To me, MFE vs actual exit is extremely valuable. I talked about this in your TST journal in detail.

I'm sure there are better ways to ask my question or better ways to measure it. The purpose of the thread and poll was to get people thinking, and the goal has been accomplished.

I want people to start thinking about their performance vs what was available to them, ie volatility.

Mike

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  #48 (permalink)
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josh View Post
ADR for ES, not counting the two holidays we have had so far, is 11.37, for 46 days, with all days being ESH except the last one (yesterday) which is ESM. Median, a more robust statistic IMO, is 10.375 (as the effect of outliers like 2/25 are minimized).

Thanks, I guess the data I used from another member was faulty, or the Excel function I used had the wrong inputs. Always great to double check against someone elses data.

Mike

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  #49 (permalink)
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josh View Post
As for the topic at hand, as IT7 mentioned, this is an outcome goal, and hence subject to the limitations of outcome goals. I think it can be a VERY useful metric to analyze one's progress (is the percentage of ADR being captured increasing or decreasing, for example), but it could be dangerous to make it a goal. If you don't capture any of the first 30 ticks offered, are you going to force a trade because it's your goal to make 50% of ADR? If so, then it could be a dangerous goal to have.

Perhaps the word goal or objective should have been removed from the question, to simply ask "what is your daily profit in terms of % daily volatility".

Mike

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  #50 (permalink)
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Big Mike View Post
Everyone wants to trade well. It's a moot point.

So the next step is to quantify what "well" means. And it doesn't just mean end with a net profit.

Since volatility is a key metric for traders, to me it makes sense to tie performance to volatility.

Mike

With that in mind, most professional traders are measured objectively with the Sharpe ratio. Usually it is the monthly SR. Someone with a Sharpe of about 2.0-3.0 is considered a top trader and would easily get to trade a book of tens of millions of dollars in the hedge fund industry.

That's close to my goal.

Edit: the good thing about using the monthly Sharpe Ratio is that it allows for some variation in the market and gives traders time to make up losses if they indeed have an edge. Everyone runs into losses, it's a fact of life. Using monthly statistics accounts for that.

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