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The back test / forward test already exists in the successful track records of the prop and floor traders, hence there is no need to back test an existing method that works. If you told a new retail person with no mentoring and abilities to just go ahead and start trading on a method they just made up, would that be wise?
Trading an unproven method with no testing is stupid - if you argue that isn't the case then I got nothing else to say.
I never said you are definitely giving money back when scaling, you are defending a remark I never made. I said IF anybody's past performance shows scaling doesn't give you any love you should go all out. I don't even know what your stats are nor do I care.
I also never said you can automate all styles, and that I in fact think discretionary on a short time frame like yours is necessary
Do you and Itchy both read with blinders on?
To each their own - if you don't like to use statistics to evaluate past performance and see if you can fix any patterns then that is your deal. There most certainly are patterns, especially in personal behavior which you can find and fix but if it's not your cup of tea then lets agree to disagree.
I do not see/know/have heard any other way how to find the best scale in/out method for your own system than trading it again in history and simulating the different methods. Even if the strategy is based into very same ideas than others. Different people different results.
@DionysusToast
But let me add some more to what I do....
- In a very slow market I will be all in/all out. Range trading
- With a more normal market, which on my market means runs that can last 30 mins to an hour and then reverse, I scale out because the target is unknown and depends purely on how other traders behave in terms of jumping on the move (as well as those that get stuck fading it).
- In a very fast market, I will scale in. Mostly because I know I can go offside quickly and that the market can put in a larger run, so I will de-risk the trade by starting small
That's not how prop shops work. There's a very small percentage of prop shops that want bums on seats to execute a specific strategy. I know a prop trader that was considering such a position in a Canadian shop as it was close to where he was located. The biggest problem he had with the job was that they'd dictate very strictly how he could trade. It was not an attractive proposition for him. On the one hand he wanted back in prop, on the other hand he wanted to execute his own style.
They effectively wanted drone-traders which is the opposite of what most prop shops are doing. That is taking people with promise, showing them how the market works and helping them to develop as traders. If you don't believe this, call a prop shop, ask them how many traders they have and how many are executing exactly the same method. They won't - they'll all be growing in different directions because prop shops want to develop independent traders that evolve with the markets, not finger pushing drones. It's a bit like teaching a man to fish as opposed to giving him a fish.
I met 5 traders for a coffee in Singapore one day - all at the same prop shop. All doing very different things. Some on spreads, some on outrights and one girl trading the queue position in what can only be described as marginally less exciting than watching paint that had already dried.
Once in a trade, it's a matter of monitoring until you are convinced the market is following through. If it doesn't follow through, if you get in a trade and then work your way out because you feel momentum is simply not there - then you will be out, maybe at a profit. You may be a scale-out trader but decide after 4 or 5 ticks that the market is stuck and then unwind the position. So you got 'all out'. This does no mean there are no rules but it does mean that trying to turn the numbers into trade management statistics is problematic because the stats are not situation specific. Stats for April 2015 and stats for December 2015 would not be comparable for day traders because of the different conditions.
Practice is what makes you better at trading. Practice, journaling and reviewing your trades are not backtesting but they are proven ways of improving as a discretionary trader to the point you can get to live. It's not stupid it's just skill development, not mechanical method implementation.
This is where we agree then. There is no right or wrong. It cannot be mathematically proven that scaling is better or worse in all cases. It is just one of many aspects of trading that we have to think about every day.
Yes, of course.
I didn't say you cannot have statistics and I am a firm believer in having a trade journal. Where I disagree really comes from cause and effect. I have bad days where the day is bad because I thought the day would play out one way and I stuck to my guns on that despite the market clearly doing something else. My journal records such things "being a dick" is a common sentence in my journal. When I look at my journal, it reads more like a diary than a spreadsheet. I am interested in how well I followed my plan, what techniques I applied, how well they worked, how the day played out. So I build a picture of the type of activity, what techniques I applied, how well I applied them and how they worked.
Of course I can get stats, what worked well in what conditions and my rating for how well I followed my plan. What I don't do is data mine the results because that could find 'causes' that don't exist - patterns that appear that are nothing more than randomness or just a reflection of that period of time (such as a period of exceptional volatility).
Data mining just the technique applied and the results is not valid in my opinion because that is only a small part of the equation in any period. Market conditions, news risk, market maker participation are just as important and have just as much effect as specific trade strategies applied during that period. So you end up crunching partial data. So you can either try to quantify 5000 data points or embrace the "skills" aspect of trading.
I see it as a way to ensure I build on my experience because in the heat of the moment, you can get so caught up that you don't really spend time to reflect on what you did.
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OK - so this is one of the trades I regularly take.
Market opens up, we end up rotating in a 6 point range. We have a decent size range built and "value" is a way of defining the range. In other words, you look for a long entry around the VAL and a short around the VAH.
So you go long somewhere around the VAL, you target the VAH but you have a hurdle in the way - the POC. So you take some off ahead of that first hurdle, target the VAH if it gets through the POC and work your way an exit if it fails to get through POC.
So what you did was got into a long - saw 'hurdles' ahead. You could "all out" at the first hurdle but instead you pay attention at each hurdle and react accordingly. That surely must be a better approach than "this price or bust".
Certainly, it didn't seem like the worst analogy ever.
If you have any questions about the products or services provided, please send me a Private Message or use the futures.io " Ask Me Anything" thread
Please show me at least one system that works long term that uses all in / all out that is based on back testing.
Provide a brief description of what it does. You can obfuscate it to some degree if you wish to keep some of the variables secret. Explain it vaguely as pseudo code if it's too lengthy. I just want one example of a system that uses this type of trading.
I don't need exacts or a broker statements. I don't want this debate to get lost in being able to prove, it isn't about proving, it's about simply seeing a system that works.
Show me a journal, book, video of someone who uses this type of trading for over a year and is profitable. ANYTHING.
thank you.
R.I.P. Joseph Bach (Itchymoku), 1987-2018.
Please visit this thread for more information.
I don't need to dig up any more because my point is proven.
Unlike you, coming out of this debate I have even more respect for @DionysusToast than I did before because he can debate his side with facts and experience. You on the other hand, can't debate out of a wet paper bag.
YOU of all people want evidence based replies? This is coming from the guy who believes in fibonacci and probably how the alignment of Saturn with our moon will affect our markets, you aren't even in the same league.
Since you can't read, I'll help you one more time - I never said anything apart from all in/out works - it most certainly can work. If you have an edge, it doesn't matter if you do AIAO, AISO, SIAO, SISO, you will make money, how much of it you make depends on how you apply those 4 methods in the right situations and part of figuring that out is looking at how you did in the past, whether it be your live results or a back test.
In terms of who would be doing a favor and leaving anything aside, I'd say with gems like this:
I apologize about the lengthy rebuttals statement and about what people have to prove on this forum. I didn't want this debate to get out of sorts and am sorry it turned out that way. I understand there are people who are profitable with all in all out but it's probably on the range of 1.618% or less, those that were lucky. The thanking my own posts thread was just a joke and not of relevance here.
And by the way PeakGrowth Happy holidays, I still love ya my brotha
R.I.P. Joseph Bach (Itchymoku), 1987-2018.
Please visit this thread for more information.
