caprica's money and trade management system - futures io
futures io futures trading



caprica's money and trade management system


Discussion in Psychology and Money Management

Updated by traitor786
      Top Posters
    1. looks_one caprica with 10 posts (13 thanks)
    2. looks_two sefstrat with 6 posts (5 thanks)
    3. looks_3 Mindset with 4 posts (0 thanks)
    4. looks_4 systrader with 2 posts (0 thanks)
    1. trending_up 7,573 views
    2. thumb_up 19 thanks given
    3. group 18 followers
    1. forum 27 replies
    2. attach_file 1 attachments




Welcome to futures io: the largest futures trading community on the planet, with well over 100,000 members
  • Genuine reviews from real traders, not fake reviews from stealth vendors
  • Quality education from leading professional traders
  • We are a friendly, helpful, and positive community
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts
  • We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

(If you already have an account, login at the top of the page)

 
Search this Thread
 

caprica's money and trade management system

(login for full post details)
  #21 (permalink)
Austin, TX
 
Experience: Advanced
Platform: NT/Matlab
Broker: Interactive Brokers
Trading: FX majors
 
sefstrat's Avatar
 
Posts: 285 since Jun 2009
Thanks: 20 given, 760 received


Mindset View Post
My "problem" with scaling out is the huge drop off in expectancy at the 'cost' of an improved win percentage. I have never quite come to terms with the mix on this - would be interested in your views.

It depends on your strategy, it has to be designed for high win%. Generally that means you need to be more selective about your entries and you need to use loose initial stops with tight breakeven conditions and trailing stops.

If you take a normal strategy and just tighten the stops you are going to lose a lot of money. If you pick bad entries with the conditions I described above (loose stops, tight breakeven and trail) you will lose alot of money even though you may have very high win%.

It is a delicate balance.. but if you can achieve consistent high win% in real trading with such a strategy, then you can have much greater than linear profit curve due to effects of position sizing.

I gave an overview of my MM system which works in this way on the 'More contracts == less risk' thread

Reply With Quote
The following user says Thank You to sefstrat for this post:

Can you help answer these questions
from other members on futures io?
Where is the link to download GomiRecorder?
NinjaTrader
Webinar: Linda Bradford Raschke Dealing with August burnout and Trader Camaraderie
The Elite Circle
T​​​​​​radestation datafeed (real time and historical) to NT8
NinjaTrader
Horizontal Line Indicator
Platforms and Indicators
Looking freelancer for MT4 Indicator
Platforms and Indicators
 
Best Threads (Most Thanked)
in the last 7 days on futures io
Excited and scared at the same time
13 thanks
What Is the Source of Your Edge??
12 thanks
CME to launch Nasdaq-100 Volatility Index (VolQ) futures
12 thanks
https://ivytrusts.com/ SCAM ALERT
11 thanks
financial transaction tax
10 thanks
 
(login for full post details)
  #22 (permalink)
Singapore
 
Experience: Intermediate
Platform: NT
Broker: ib
Trading: MES
 
Mindset's Avatar
 
Posts: 359 since Sep 2009
Thanks: 88 given, 287 received

Sefstrat

Thanks and I took a look at your more contracts == less risk. The concept is appealing
I see that you are looking for high probability entries for a mfe of 8 ticks (or points?)
Edit - apologies I mixed up your post and Hondo69.

Reply With Quote
 
(login for full post details)
  #23 (permalink)
USA
 
 
Posts: 163 since Jul 2009
Thanks: 67 given, 51 received



Mindset View Post

My "problem" with scaling out is the huge drop off in expectancy at the 'cost' of an improved win percentage. I have never quite come to terms with the mix on this - would be interested in your views.

I'm with you on this one. I'm not a mathematician, but I do believe Dr. Tharp says (Trade Your Way To Financial Freedom) its a no-no, and the Turtles would scale in, but they would close "all positions" on an exit signal. Just my 2 cents...

Reply With Quote
The following user says Thank You to Jugador for this post:
 
(login for full post details)
  #24 (permalink)
Austin, TX
 
Experience: Advanced
Platform: NT/Matlab
Broker: Interactive Brokers
Trading: FX majors
 
sefstrat's Avatar
 
Posts: 285 since Jun 2009
Thanks: 20 given, 760 received


Mindset View Post
Sefstrat

Thanks and I took a look at your more contracts == less risk. The concept is appealing
I see that you are looking for high probability entries for a mfe of 8 ticks (or points?)
Edit - apologies I mixed up your post and Hondo69.

No, sorry I mentioned this in the thread but I probably should have emphasized it more:

my MM system consists of 3 order classes (cost covering, scalp, swing), the screenshot I posted was taken while running tests/optimization on just the cost covering and scalp orders without the swing orders (or runners) which account for the bulk of the profit.

I only posted the screenshot like that to show that it is possible to get very high 90's win% scalping if you are careful about how you take entries and use good MM. That said, it is a viable strategy and it does work in live trading with just the cost/scalp orders but it would not very efficient in terms of commission.

If you look at the shot of the entries you can see it would not be a very good strategy if it closed all the positions after selling near the peaks.. The reason for having the scalp and cost covering orders is because the swing order has much looser stops and is allowed to dip into the red somewhat even after it has been in profit.. whereas the other orders have very tight breakeven and trail stop with small targets to assure they get hit.. they are essentially a safety net that collects some amount of ticks asap to mitigate the risk of the swing orders getting stopped out.

Of course, as caprica pointed out.. the initial risk is higher since you have to consider the chance of cost covering and scalp orders getting stopped out too should they not hit their target/breakeven. That is why I put emphasis on only taking high probability entries and using loose initial stops that are unlikely to be hit. That way once you have made some profit on them, you have a 'no-risk' buffer for the remaining orders and you can just let them run with a loose trail stop or a breakeven and target or whatever.

In this way you can capture big market moves with large position sizes and minimal risk, assuming you have good entry conditions that you know will generate enough ticks for the cost/scalp orders every time (ie ones that you have extensively tested). Once you have made a small profit on them, you move the breakeven point on the other orders and then you essentially have a 'risk free' shot to let them run for a much bigger target. If things go against you and it hits the breakeven point, you may lose a bit do to slippage or you may break even or make a few ticks.. but either way you will not have lost much if anything so you can just wait and try again until you catch a big move.

This is the essence of what Joe Ross calls the 'Traders Trick entry'. I enhanced his system by adding the scalping orders which allow me to make money in most cases even if all the other orders hit breakeven with minimal slippage, Ross only uses cost covering orders.

Reply With Quote
The following 3 users say Thank You to sefstrat for this post:
 
(login for full post details)
  #25 (permalink)
Singapore
 
Experience: Intermediate
Platform: NT
Broker: ib
Trading: MES
 
Mindset's Avatar
 
Posts: 359 since Sep 2009
Thanks: 88 given, 287 received


Quoting 
That is why I put emphasis on only taking high probability entries and using loose initial stops that are unlikely to be hit.

... but it would not (be) very efficient in terms of commission.

Isn't this a contradiction - a high probability entry wouldn't need a loose stop?? Or are you saying you have different stops from the outset for the scalp/cost cover trades vs the swing trades.

The key question is if you cover costs - eg 3 ticks - what is the initial risk you take with that size. If you took say 9 ticks then you require a 67% win rate just to break even? And then lets talk slippage and commission. Evens lets say 75%. Now if you have 90% win then that is a good thing and it allows you to take the lower % win rate on the swing trades which is where you will make your money.
I ask not to criticise but to make sure you have covered everything before you trade live - as you indicate you have no trading experience.

Reply With Quote
 
(login for full post details)
  #26 (permalink)
Austin, TX
 
Experience: Advanced
Platform: NT/Matlab
Broker: Interactive Brokers
Trading: FX majors
 
sefstrat's Avatar
 
Posts: 285 since Jun 2009
Thanks: 20 given, 760 received


Mindset View Post
Isn't this a contradiction - a high probability entry wouldn't need a loose stop?? Or are you saying you have different stops from the outset for the scalp/cost cover trades vs the swing trades.

The key question is if you cover costs - eg 3 ticks - what is the initial risk you take with that size. If you took say 9 ticks then you require a 67% win rate just to break even? And then lets talk slippage and commission. Evens lets say 75%. Now if you have 90% win then that is a good thing and it allows you to take the lower % win rate on the swing trades which is where you will make your money.
I ask not to criticise but to make sure you have covered everything before you trade live - as you indicate you have no trading experience.

Not necessarily, you can have an entry with low probability of extended movement in one direction and very high probability of extended movement in the other direction, yet there may be some final divergence thrust or stop hunt which is unpredictable. That I would consider a high probability entry situation, it has to do with knowing where the true bias in expectation lies, irrespective of any 'noise' which may occur in the mean time. By having initial stops that are wider than most other traders I do not fall victim to the psychological traps of the operators, who prey on noise traders.

I am going to make another post on the 'more contracts == less risk' thread explaining this in a bit more detail

Also BTW I have been trading this system live for about 6 months now, win% is not as high as what you see in backtesting but it is above 90% on most instruments. (I trade the same strategy on multiple currencies simultaneously, which is another reason I am so concerned about controlling risk and limiting market exposure.)

Reply With Quote
The following user says Thank You to sefstrat for this post:
 
(login for full post details)
  #27 (permalink)
Singapore
 
Experience: Intermediate
Platform: NT
Broker: ib
Trading: MES
 
Mindset's Avatar
 
Posts: 359 since Sep 2009
Thanks: 88 given, 287 received

You might want to upgrade your trading experience then!!

Look forward to your update on more contracts == less risk.

Reply With Quote
 
(login for full post details)
  #28 (permalink)
montreal
 
 
Posts: 75 since Jan 2012
Thanks: 0 given, 8 received


caprica View Post
Attached is a good starting point for a excel spreadsheet portfolio tracker to measure risk, expectancy, and calculate position sizing.

Thanks, really appreciate the spread sheet, it was actually the second thread that popped up and so far is looks like is will be more worth then hours spent on other sites.

Still have alot of issues before i can apply it but my goal is to get some numbers in there ASAP

Reply With Quote


futures io Trading Community Psychology and Money Management > caprica's money and trade management system


January 8, 2012


Upcoming Webinars and Events
 

Dealing with burnout w/Linda Bradford Raschke

Elite only
     



Copyright © 2020 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, +507 833-9432, info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts