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Switching markets/strategies vs waiting for edge to return


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Switching markets/strategies vs waiting for edge to return

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  #1 (permalink)
Saint Joseph
 
 
Posts: 11 since Nov 2018
Thanks: 7 given, 1 received

Please excuse this sounding like a rant, as I am slightly tilting.

Often people say that changing strategies and markets is the wrong thing for a trader to do. However, I have seen strategies and edges of my own come and go, mostly due to changes in volatility. If I didn't adapt, and change what I was doing, I just wouldn't make any money or progress. Some traders give advice like "you have to recognize when the edge isn't there, and take the day off" or "If beginner traders could just stick to ONE strategy and learn it well, they would have a much higher chance for success" Well, the thing is the edge could 'not be there' for multiple months at a time.

I began trading in late 2018 and there have been wild swings in market volatility since then. had I traded the same style and stuck to just one strategy as is said to be the disciplined thing to do, there would have been periods of time where I would have sat on my hands for 3 months straight, maybe traded the next few months, and then right back to not trading for another 2 months.

I went from day trading stocks, to scalping stocks, to swing trading stocks, to scalping crude futures, to mini crude futures, to micro ES futures + swing trading stocks

Just FYI I'm not the guy that switches strategies after a few losing days, I think it's important to make that distinction.

When I first started scalping crude futures I did excellent right away, the pit session ATR was below 1.5 and it was the perfect environment for my style of scalping. I thought I finally found "my market". Now it's just gone, I have no edge there anymore and that's just reality. I tried widening stops and trading QM but nope. It could be a year before that regime returns, but until the ATR drops below 1.5 I'm going to stay away. I just imagine how sad it would be if I was still waiting for that edge to come back because I heard some guy say that was the correct thing to do.

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  #2 (permalink)
Mumbai, India
 
 
Posts: 371 since Jan 2019
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When one does back testing one of the important outputs one gets is max number of losing days straight over period of time tested.

Here is one of the simple back-test output run by me recently. See the CSV file


What I want you to see in it specifically is "number of continues occurrences of losing (or winning)"



What usually one derives from this is if at any point strategy gives more than this many continuous days of losing or winning, there is fundamental shift in markets and how it is effecting your expectancy. Its time to redo the tests, and maybe modify.

At least that's how I take it as, your approach is completely up to you. Some others might give better opinion too as these are just newbie 2c.

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  #3 (permalink)
Saint Joseph
 
 
Posts: 11 since Nov 2018
Thanks: 7 given, 1 received



LastDino View Post
When one does back testing one of the important outputs one gets is max number of losing days straight over period of time tested.

Here is one of the simple back-test output run by me recently. See the CSV file


What I want you to see in it specifically is "number of continues occurrences of losing (or winning)"



What usually one derives from this is if at any point strategy gives more than this many continuous days of losing or winning, there is fundamental shift in markets and how it is effecting your expectancy. Its time to redo the tests, and maybe modify.

At least that's how I take it as, your approach is completely up to you. Some others might give better opinion too as these are just newbie 2c.

That's good stuff, props to you for backtesting your strategy. Now you can get a statistical heads up when the market regime is turning. Personally I use volatility measures combined with discretion and experience to determine when to back off a particular style but your approach is just as valid.

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May 27, 2020


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