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Short term TF trading


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Short term TF trading

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  #641 (permalink)
Raleigh,NC
 
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indextrader7 View Post
On individual trade level:
avg win:loss ratio is about 1.5
avg win % is typically 50%

Daily view:
avg winning:losing day about 1:1
winning days 77% of the time

Intraday, I have an average fluctuation of +/- 1%.

We're still considering what type of weekly stop (if any, or any type of optimal stop levels) will be optimal, given how I tend to perform.

Questions for you:

1. What is your max loss % for each trade?

2. Do you trade all day every day or does your plan call for only certain trading times?

3. Do you cease trading when a certain max profit level is hit each day or week?


Wolf

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  #642 (permalink)
Birmingham, AL
 
 
Posts: 1,065 since Apr 2012


Traderwolf View Post
Questions for you:

1. What is your max loss % for each trade?

2. Do you trade all day every day or does your plan call for only certain trading times?

3. Do you cease trading when a certain max profit level is hit each day or week?


Wolf

1. It has varied through time. Ranging from 0.5% to 1%. Currently it's under question. When I figure out the correct weekly stop out level, I'll adjust individual position size accordingly. (at least i think that's how it will work)

2. I typically trade a couple hours a day, usually the AM session.

3. No I have no rule with that. Although, I do know that sometimes when I am up for the day, it influences my decision to be done for the day.

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  #643 (permalink)
Thessaloniki, Greece
 
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indextrader7 View Post
I'm considering changing my daily maximum loss of 2% to a WEEKLY max loss of 2%. My logic is as follows:

I read about a hedge fund guy that manages his traders. He gives them a 3% stop out (practically lose your job if you hit it) level for the year, and it resets annually. He's structuring his traders like trades themselves. He may have a couple guys stop out at 3% and go home, but the rest will generate 5%, 10%, 20% returns for the year. Excellent risk to reward is achieved.

Then I thought about my daily 2% stop, and the fact that most of my good days I make 1%. So good days are 1% while bad days will be -2% ? Not a good risk to reward there. Then I thought about my good weeks which are typically 4% to 5%. So if I make my weekly stop 2%, and my good weeks are 4% to 5% up, this creates a nice risk to reward skew on a weekly basis.

We can look to my actual results for some more information in making this decision. Over the past 124 trading days, I my average winning day is 1.2% and my average losing day is -1.3% but I win 77% of those days.

Maybe I don't need to change anything. I have no idea. Maybe implementing this would be really valuable.

Possibly the most important thing to consider is how this change would affect my trading behavior, the psychological side of this coin. I would take very small risks early in the week, and as I booked profits I would expand my risk taking capacity proportionally. There is a huge difference in risk taking capacity for being able to risk 2% each day, versus knowing it's all you have to risk being stopped out for the week. Maybe it's mostly mental, but my biggest incentive is being taken out of the game. Being taken out for a week would be very much motivation not to let that happen.

It's so hard to know what is the right thing to do often times in trading. Honestly, I should consult someone with much more experience in trading risk management.

I believe you're looking at this the wrong way. A stop for a single trade is completely different from a stop for a strategy or a trader as a whole. The stop for any one trade will be strategically placed and adjusted to the conditions; a simple 2% stop for yourself will not.

The most important question here is: are your returns serially correlated? i.e. if one of your trades is a loser, does this influence the expected value of the next trade?

If losers tend to be followed by more losers, then a stop may be prudent.
If there is no change, or if losers tend to be followed by winners, a stop is a bad idea as you'll be taking losing trades, then missing out on trades with positive expected value.

In any case, it should be relatively easy to export your trades to excel and see what would happen if you had an x% weekly loss limit...use WEEKNUM() to detect every week, then reconstruct your equity curve ignoring any trades that happened after hitting the loss limit.

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  #644 (permalink)
San Francisco
 
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indextrader7 View Post
I'm considering changing my daily maximum loss of 2% to a WEEKLY max loss of 2%. My logic is as follows:

I read about a hedge fund guy that manages his traders. He gives them a 3% stop out (practically lose your job if you hit it) level for the year, and it resets annually. He's structuring his traders like trades themselves. He may have a couple guys stop out at 3% and go home, but the rest will generate 5%, 10%, 20% returns for the year. Excellent risk to reward is achieved.

Then I thought about my daily 2% stop, and the fact that most of my good days I make 1%. So good days are 1% while bad days will be -2% ? Not a good risk to reward there. Then I thought about my good weeks which are typically 4% to 5%. So if I make my weekly stop 2%, and my good weeks are 4% to 5% up, this creates a nice risk to reward skew on a weekly basis.

We can look to my actual results for some more information in making this decision. Over the past 124 trading days, I my average winning day is 1.2% and my average losing day is -1.3% but I win 77% of those days.

Maybe I don't need to change anything. I have no idea. Maybe implementing this would be really valuable.

Possibly the most important thing to consider is how this change would affect my trading behavior, the psychological side of this coin. I would take very small risks early in the week, and as I booked profits I would expand my risk taking capacity proportionally. There is a huge difference in risk taking capacity for being able to risk 2% each day, versus knowing it's all you have to risk being stopped out for the week. Maybe it's mostly mental, but my biggest incentive is being taken out of the game. Being taken out for a week would be very much motivation not to let that happen.

It's so hard to know what is the right thing to do often times in trading. Honestly, I should consult someone with much more experience in trading risk management.

Well, I'm definitely not someone with a lot of experience in managing trading risk. But hey I get a lot of benefit out of your posts, so maybe I can add a thought or two. I'll only address the idea of a weekly draw-down limit of 2%.

You said your good weeks are +4-5%. What are your average bad weeks? Are they below -1%, greater than 2%? I've noticed that some of your good days have less-than-stellar starts and then great finishes, is there a big % of your profitable weeks that start out poorly but end up well into the black? If so, would a 2% weekly loss cause you to miss too many weeks that would end up profitable if they were played through? Or, maybe it's the opposite and losses breed losses for you over the course of a week and the best thing you could do is just chill until Monday..the numbers should help you see that.

It seems to me that maybe your most effective question is about the 2% daily loss you mentioned. Perhaps a tighter stop there would be more appropriate to improve your daily expectancy, which I think is +.71% if I did that right. A tighter daily stop-loss would probably also encourage better handling of losing trades (to avoid getting shut down for the day, because that's never fun), which may help generate very effective process goals (avoid big losing trades feels like a more concrete goal than "don't string two losing days together").

I had to take a break from writing that to run to a couple of classes, so sorry if it didn't come out very coherently.

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  #645 (permalink)
Raleigh,NC
 
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indextrader7 View Post
On individual trade level:
avg win:loss ratio is about 1.5
avg win % is typically 50%

Daily view:
avg winning:losing day about 1:1
winning days 77% of the time

Intraday, I have an average fluctuation of +/- 1%.

We're still considering what type of weekly stop (if any, or any type of optimal stop levels) will be optimal, given how I tend to perform.


indextrader7 View Post
1. It has varied through time. Ranging from 0.5% to 1%. Currently it's under question. When I figure out the correct weekly stop out level, I'll adjust individual position size accordingly. (at least i think that's how it will work)

2. I typically trade a couple hours a day, usually the AM session.

3. No I have no rule with that. Although, I do know that sometimes when I am up for the day, it influences my decision to be done for the day.


I have pondered many of the same questions as you.

You have a very good system in terms of positive expectancy and intra day variability. You are winning many more days than losing and your intra day draw downs are very respectable. For that reason, I would think you would rarely hit a reasonable daily stop loss limit and hardly ever hit a weekly either, so I do not think it will make a difference whatsoever.

I look at daily and weekly stop loss limits as limits to be hit to stop trading so I can live to trade another day if something really goes wrong(i.e. if the monkey gets loose, I revenge trade, I am confused by market, etc). Since my individual trade loss limit is set at 1.2% , my daily limit is set at 5%.. so I could not have more than 5 losses in a row or I would have to stop trading for the day. My weekly is set at 15% and I have to stop trading for at least 1 week to assess what is wrong with myself or my plan. These sound wide, but with a 1.2% limit loss per trade, these are not that large.

Since the expectancy numbers on your system seem to be so good, I think you can benefit more($$ that is) by trading more hours in the day and not cut off winning days. When you are " in the zone", why cut it short? Since you do not have any control over when the market will give you a setup your plan desires, why not be available for most of the day so as to capitalize with in-plan trades? There is something to be said for free time and maybe that is reason enough for you to only trade 2 hours/day. Nothing wrong with that either.

Hey.....thanks again for sharing a great journal.. I appreciate it.

Wolf

BTW, when I have hit my daily or weekly loss limits( I have hit weekly once), I have found I am trading outside of plan trades or revenge trading and the monkey has stolen my mouse and clicking away. In both cases, I am able to put the monkey back into the cage and resume profitable trading the next day or week.

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  #646 (permalink)
Como Italy
 
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imPairsonator View Post

In any case, it should be relatively easy to export your trades to excel and see what would happen if you had an x% weekly loss limit...use WEEKNUM() to detect every week, then reconstruct your equity curve ignoring any trades that happened after hitting the loss limit.

I think that analysis would be crucial. And if it turns out that this would improve your results, it would be worth looking at those weeks in detail to try to find out what was going on.

Given the discretionary nature of your trading, I doubt that a weekly loss limit would make sense unless there were psychological issues at work in your losses, or the market had changed in some way that your analysis was no longer working. Perhaps set level at which you would set aside time to review the week, your emotional state, and the market conditions, in order to see if there was something else going on, rather than just a run of losing trades?

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  #647 (permalink)
Birmingham, AL
 
 
Posts: 1,065 since Apr 2012

Really appreciate the input/feedback guys. Really do.

Looks like yall are right. There are many weeks where I drop below a 2% drawdown, but pull through for a positive week. As long as my mind is right, it looks like I should hang in there and keep plugging away.

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  #648 (permalink)
Altamonte Springs,FL
 
 
Posts: 72 since Jan 2012
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Im expecting a move back down from the 855.7-854.0 Supply level.Once it reaches the 840.5-838.5 Demand level down below im looking for a bounce back up.

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  #649 (permalink)
Gainesville, Florida, United S
 
 
Posts: 66 since Dec 2010
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If the figures on your results are actually accurate, you should never stop trading based on some arbitrary win/loss results over some given time frame. Based on your numbers alone, you are not actually trading -- but printing money with each trade you take -- regardless of your win/loss results for a given trade or time period.

Trading results don't understand time periods such as days, weeks, months, etc. These only exist in our minds. A trade today is not different than one tomorrow or next week to the overall results. Same goes for a trade taken when you are way ahead or way behind over a given period.

Now if these "things which don't really exist in statistics" adversely affect your ability to trade consistent to your numbers -- then you have a problem which will not be easy to solve. Attempting to factor ones emotions or superstitions into statistics is a rather comical pursuit at best, I would think.

If you have a true edge and an adequete bankroll to withstand fluctuations -- you will win over the long run. If not you will lose.


Peace,
Paige

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  #650 (permalink)
Birmingham, AL
 
 
Posts: 1,065 since Apr 2012


Classic example of what keeping losers small can do for a trading program today.

Man, sure was frustrating for most of the day today. I was continually wrong, in hindsight I was fighting the bias (so mine was clearly wrong). The thing was that the pre session move was up, and I continually looked for a continuation of that move.

I can see trades 1-5 making sense, but 6-8 ? no way. Hard headed and not mentally flexible enough today cost me. You can see this here on the 250 tick:



The good news is that I kept grinding though and found opportunity after the 9am news. Loaded up on a double size position and made the day profitable.

Horrendous.



Tremendous.


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