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Smoothing the equity curve
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Smoothing the equity curve

  #1 (permalink)
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Smoothing the equity curve

As a trader – who is not in millions and /or doesn’t need his/her trading income- it is usually nicer to have some form of monthly basic income- from a psychologic point of view. However, this is offcourse not always possible, especially when trade frequency is low. To try to make an effort in this area I found the following factors helping to smooth the equity curve per given time period:

• Increase trades n per given timeperiod
• Profittaking at several profit targets. This is especially true for methods in the larger R:R part ( scale out)
• Entering at increasing/decreasing ‘confirmation’ stages(scale in)

*I have not taken into account trading multiple uncorrelated strategies


What are your experiences in this area, or have you found other methods to smooth your equity curve?

One of my worst enemies are my own false assumptions

Last edited by Zwaen; May 8th, 2014 at 06:03 AM. Reason: added clarification
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  #3 (permalink)
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Zwaen View Post
As a trader – who is not in millions and /or doesn’t need his/her trading income- it is usually nicer to have some form of monthly basic income- from a psychologic point of view. However, this is offcourse not always possible, especially when trade frequency is low. To try to make an effort in this area I found the following factors helping to smooth the equity curve per given time period:

• Increase trades n per given timeperiod
• Profittaking at several profit targets. This is especially true for methods in the larger R:R part ( scale out)
• Entering at increasing/decreasing ‘confirmation’ stages(scale in)

*I have not taken into account trading multiple uncorrelated strategies


What are your experiences in this area, or have you found other methods to smooth your equity curve?

The vola of the equity curve is directly connected to your trading system..
Well placed stops can prevent larger drawdowns - profit taking zones may be of advantage

BUT
any system has its good moments and some bad moments - having a monthly guaranteed stable income
with trading is not possible. Bringing the system to a smoother curve can also mean that some bigger gains
are excluded.
Best way is to avoid revenge trading: stay at the sidelines when chop is in sight..
As markets are back in balance get in again.

GFIs1

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Diversification. Trading many strategies in different markets. Done correctly, that really smooths the equity curve.

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kevinkdog View Post
Diversification. Trading many strategies in different markets. Done correctly, that really smooths the equity curve.

Every bank advisor has this special recipe for his client: "Diversification"!
As a trader - especially not working within a team - has to go back to the
roots and learn the traded market IN and OUT!
So reduce to one market and learn the patterns that occur there.
This makes your equity curve NOT smoother
BUT instantly STEEPER

GFIs1

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GFIs1 View Post
Every bank advisor has this special recipe for his client: "Diversification"!

The kind of diversification I am talking about is completely different than what a "bank advisor" would recommend.

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
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I agree with @kevinkdog diversification is one of best ways to smooth out curve. I am currently trading GC, TF CL, NQ and YM. I think many day traders do not consider trading a portfolio of markets and think that is more for for long term hold trading. But i have found it reduces drawdown and keeps my curve much smoother. However, I would find it hard to trade so many markets at once if I was not automated.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
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GFIs1 View Post
Every bank advisor has this special recipe for his client: "Diversification"!
As a trader - especially not working within a team - has to go back to the
roots and learn the traded market IN and OUT!
So reduce to one market and learn the patterns that occur there.
This makes your equity curve NOT smoother
BUT instantly STEEPER

GFIs1

@GFIs1 I agree trading many markets at once may not be best for a new trader. But someone who has a proven live system and understands that system well can greatly benefit from trading many markets and should consider it. It can smooth out curve quite a bit done correctly.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."

Last edited by liquidcci; May 8th, 2014 at 03:38 PM.
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Zwaen View Post
*I have not taken into account trading multiple uncorrelated strategies

Start there. I personally believe it's the best bet and deserves the most attention.

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I don't think you can think so far ahead as a month, start by looking at the day and the month will take care of itself. Of course you can keep a monthly target in mind but don't put any pressure on yourself to push unnecessarily towards it. Regarding diversification, keeping you eggs in many baskets is clearly good, but only in the right context. Equally one could say don't try spinning too many plates as you'll just end up with a lot of broken china. If you're confident multi tasking and happy that you can manage multi asset trading go for it. But just my opinion I'd say try to keep it as simple as possible at first and limit exposures to single products and learn the personalities of individual markets.

Good luck mate.

Sands

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