There is no reason to stop posting because of one persons (or even a few people's) response being negative to your findings. The majority of people are very supportive of your time and efforts and very appreciative of what you have shared.
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Apologies @Anagami, my comment was not aimed at you. I found your research very interesting. My comment was aimed not at you, but at those who believe that your research says that it is impossible for any scalper to reach 60% win ratio, and any one who claims so is a liar.
I just wanted to point out that, as you suggest, I believe some may see your research, and misunderstand what it was about, and what you were trying to say, and are using it as the law to support their belief. That is the thing about data, based on other people's assumption, and interpretation, data can often be interpreted by others in ways that can be misleading, or not intended by the originator.
Last edited by monpere; October 23rd, 2012 at 11:01 AM.
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@Big Mike, appreciate you comment and private message. Obviously we have different approaches to trading, and like you, I believe and have always said, there are multiple ways to skin a cat, multiple ways to make money in the market. We should respect everyone's perspective and view points, and be especially sensitive as to not denigrate, belittle, or ridicule anyone's view whether we agree with them or not.
Last edited by monpere; October 23rd, 2012 at 10:55 AM.
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So far the thread has been a "lively" discussion on the impact of targets and expenses on scalp/swing traders and how a trader's decision to scalp/swing can impact trader profitability.
Another aspect which is often overlooked is the impact of instrument selection. For example, most successful manufacturers understand the cost structures of running their business and the relative profitability of each product they manufacture. Production of unprofitable products is usually ceased.
In trading terms, each instrument traded is the equivalent to a product and the costs of trading these products can be materially different and affect bottom line profitability. For this reason instrument profitability needs to be monitored closely. Continued poor performance trading one or more instruments could lead a trader to abandon trading it altogether.
ES, FDAX, NQ, TF
The following spreadsheet compares the above equity instruments across 2 scenarios:
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1. SCENARIO 1
The first scenario compares the above instruments on an expense optimized basis assuming a 1:1 RR and 60% win rate for the first target and 2:1 RR and a 35% win rate on the second target. (See rows 19 & 20). It also assumes 1 trade is taken per day and 2 contracts per target so 4 contracts per day.
The assumptions are the same for all instruments.
We know the targets of 30 and 60 ticks are optimized because our expenses as a percentage of revenue in row 49 is less than 6% (shaded in green). We know that anything above 6% put the odds less than an American style roulette wheel and the trader needs to achieve extraordinary performance to cover the additional expenses.
The key point to note is row 51 which shows the annual margin post expenses. The outlier is NQ which shows a profit of only $18.3k. Compare this to ES and FDAX which shows profit of $50.2k. The Russell TF is also less than the ES and FDAX but not as much.
Basically due to the unfavorable point value of the NQ the trader will make far less money trading the same number of contracts as the ES or FDAX.
2. SCENARIO 2
Scenario 2 on the right quantifies the number of NQ contracts needed to trade to exceed the net margin achieved by ES/FDAX traders. Note in Row 9 the number 6 is highlighted in pink. So the NQ trader has to trade 3 x the number of contracts i.e. 6 contracts to achieve $54,900 compared to an ES trader. Note this has a large impact on commissions and minimal impact on slippage. The NQ trader will pay an additional $6,000 a year to the broker in commissions (see Row 46 in pink).
If you trade the NQ and notice margin leakage compared to other instruments, it is probably due to the reasons identified above. This is not to suggest the NQ should not be traded but points out likely reasons for performance deficiencies compared to other equity instruments. It also provides the trader with data to consider trading other correlated instruments with less expense drag.
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@Anagami, what you have provided in your thread is unique, credible and well presented research that provides traders with useable win rate benchmarks in my opinion.
Based on keeping meticulous records over the last 14 years detailing individual trade RR and win rates your numbers mirrors these closely. Trust me, your research is much more useful than academics espousing various theories that rarely work in the real world.
Also my back testing supports these results as well although do not claim to be an expert in this area. It would be useful to hear from expert backtesters on whether their optimized strategies mirror your findings.
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This post has been selected as an answer to the original posters question
I believe that there's a lot of kind of traders, and everyone knows what is suitable for themselves.
New traders are, many times, influenced by more experienced traders, and try to follow their styles, it is normal and very useful, but at the end, if they want, and can go ahead in the trading world, they will make your own style, sometimes based on what they heard and learned, but the ''main style'' will be their own.
The best way of using the acronyms Ph.D in the world of traders..
Patient, Humble and Disciplined
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This post has been selected as an answer to the original posters question
I would suggest to you that the answer depends on the capability of the different traders. Day Trader was also thrown in the mix, and yet, we all know that because one is considered a Day Trader, he cannot be pigeonholed into a particular style of trading. The best of the position traders make very good money and often take some early profits, while holding some contracts, a portion of the trade, for the big expected move. Then there are intermediate traders who often use a 2/1 or 3/1 ratio of risk to reward and some of the systems are very accurate. I have traded with some of the best of both groups and have found that what I am doing is the best of both worlds. "Everyone likes the idea of very low risk, but hates the constant stopping out of a trade. Scalpers often trade for 2-3 or 4-8 ticks with a similar risk and they must be very accurate to be richly rewarded for all the stress and effort. More often than not, the first two groups have the advantage. The accurate Position trader may have several fine trading days before getting stressed out seeing their trade on the wrong side of the market. We know the market is always right. So, was the Technical Analysis wrong or did news or something else change the direction of the market to cause the large stop out? Even so, the risk to reward of 3/1 or much more can usually offset the loss or losing day.
I have seen just about every kind of trader, and, after trading with them, found that I am most comfortable with a combination of the three. My trading posts reveal just what I am describing. The intermediate trading style often has a reward of 12 to 30+ ticks and can be traded off a MA as seen on my charts such as the Green (rolling) MA. It has served me well and I did learn this style from at least three professional traders who had nearly perfected it. Yes, mine is better, as I used the best of all they had to offer and improved on it after many hours of studying charts. My risk is usually very low and, even after taking a loss, it can be made up very quickly. By moving my stop when the trade is in the money, I avoid most loses. Some of the trades may end up with only 1-5 ticks reward and get stopped out, but there is always another trade, especially if you have several instruments to trade.
So, obviously, I am not trying to indicate that one of these methods (scalpers or position traders) are better and more profitable than the other, but that if you can be a price action trader, you may find yourself beating either as I have. I have called live trades and never called a loser. I have called the high and low tick and captured every one. Those on the chat room could not believe my calls. But, you should know, that doing that causes undue stress and I have no need to do it again. But I do have some of the chat room discussions recorded for proof to my trading friends. You will find that this question will not necessarily be answered perfectly by any pole or discussion, but it is interesting to see the results and the posts. I did not answer the pole, as my answer is a combination as you have seen.
Whether this helps anyone is yet to be seen, but I do hope you all find what works best for you to be a successful trader.
Last edited by ESFXtrader; October 28th, 2012 at 01:29 AM.
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I totally agree with Mike.. Watch the webinar with Mr Topstep, he said its crazy to go for less then +20ticks on the CL. He should know with his experience... Of course there are people out there who have a excellent winratio, but I think they are very few...
I have a very good friend (Swede as well who good for $100.000.000USD. His tips to me... start with stocks, they do not move that fast... Secondly to not scalp, just higher time frames on Futures.
"insanity is doing the same thing over and over again and expecting different results." - Albert Einstein
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