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Kevin's TST Combine Journal

  #321 (permalink)
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Big Mike View Post
And this is exactly why traders that seek algorithmic trading as a way to solve their own shortcomings on psychology or lack of understanding in the market will still fail.

They think they can program their way out of their deficiencies, but your post #315 shows a good example of how discretion is still the #1 rule in the game. And that means you have to actually be good at it.

Trade first, program later. That's my recommendation for all. Once you are a consistently profitable trader, then you can start to program strategies.

BTW Kevin, none of this is aimed at you which is why I didn't quote your post. I am just speaking in generalities.

Mike


Yes, I've heard people say that algo trading is a way to take emotion out of the trading equation. Not true. Any psychological or emotional hangups one brings to the table with discretionary trading will NOT go away with algo trading. The still present hangups will just manifest themselves differently.

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  #322 (permalink)
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Big Mike View Post
They think they can program their way out of their deficiencies, but your post #315 shows a good example of how discretion is still the #1 rule in the game.


Hi Mike -
Can you explain this comment in more detail? Are you referring to maybe turning on and off an algo system via discretion, or that how discretionary systems could be a ton better than this algo system, or something else entirely?

Thanks

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  #323 (permalink)
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kevinkdog View Post
Hi Mike -
Can you explain this comment in more detail? Are you referring to maybe turning on and off an algo system via discretion, or that how discretionary systems could be a ton better than this algo system, or something else entirely?

Thanks

Kevin, I meant the discretion in when to turn a system on or off, when it starts or ends, whether to stop it after a run up and wait for a pullback, whether to continue it after a drawdown, etc etc.

All discretionary decisions and ones that traders will deal with, usually in the wrong way, in my experience. I think this thread is great and that it shows how traders should be dealing with all those issues, more or less collectively called consistency, and how to measure it.

In other words, you are doing a good job

Mike

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  #324 (permalink)
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Big Mike View Post
Kevin, I meant the discretion in when to turn a system on or off, when it starts or ends, whether to stop it after a run up and wait for a pullback, whether to continue it after a drawdown, etc etc.

All discretionary decisions and ones that traders will deal with, usually in the wrong way, in my experience. I think this thread is great and that it shows how traders should be dealing with all those issues, more or less collectively called consistency, and how to measure it.

In other words, you are doing a good job

Mike


You bring up a great point: When is a good time to start trading a system (mechanical or discretionary):

A. At or near a new equity curve high

B. After a pullback in the equity curve


Both cases can be influenced by recent performance, too: a pull back after so-so upward performance is certainly different than a pullback after tremendous performance.


So, in my case for the Combine #2, I knew performance would eventually pull back - I just did not know when that would occur. Maybe it would be the next trade (which is what happened), but maybe the outstanding performance would have continued for the next month.


It is a personal decision, when to start. For me, I'd be more upset standing on sidelines, watching my system outperform. So, I started trading immediately. Others may be more risk adverse, and wait for the pullback. No right answer, no wrong answer.

But a key is not to second guess yourself. In my case, in hindsight I made the wrong decision, but it does not bother me. I take full responsibility for the decision, acknowledge it, and move on. I make wrong decisions all the time, so if I always second guessed myself, I'd be in serious trouble!

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  #325 (permalink)
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Flip Side

The flip side to the argument about when to start trading a system is that "it should not matter." That is, be mentally, emotionally and financially prepared for the worst case, based on history. If you know the system once had a $5,000 per contract drawdown, assume you will start out live trading with the same thing.

Can you handle that worst case? Most people can't. I know for the Combine, I certainly can't, because of the max drawdown rule. With real money, though, I could handle it.

I bet many people give up way too early on decent or good trading approaches, purely based on a bad (but easily statistically possible) run right at the beginning...

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  #326 (permalink)
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kevinkdog View Post
The flip side to the argument about when to start trading a system is that "it should not matter."

This is what I subscribe to personally.

Mike

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  #327 (permalink)
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Survival Mode

The Drawbacks of Survival Mode...

This morning my Strategy #4 gave a short signal. Problem was I could not take it in my Combine account (I took it in my personal account), because of the risk involved. For that strategy, I trade pairs of contracts, and if I lost on the trade, it would have brought me perilously close to the max drawdown point (end of Combine). So, I did not take the trade.

Of course, the trade never saw more than a tick or 2 of heat, and worked out pretty well (1/2 position still open, with $1,100 in total profits).

So, I feel bad I did not take it, but then again I don't, because my objective right now isn't passing the Combine, or making winning trades - it is surviving to fight another day.

I need to get some breathing room above the max drawdown ($145,500) so I can then shift into 1) trading more size and 2) switch into profit mode. To get there, I'd like to be able to endure 3 max losing trades in a row before I fail the Combine.

Right now I am at $146,618 in equity, $1,118 above max drawdown.

Before I go further with calculations, does anyone know ( @Pedro40 probably knows) if they turn you off at the max drawdown for open trades, or just on a closed trade basis? For example, let's say I have $145,501 in equity ($1 above "kill" point). Can I take a trade that loses $500 during the trade (which would take me under the max drawdown equity limit), but then closes with a profit? That answer might change how I work in "survival mode."

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  #328 (permalink)
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kevinkdog View Post
Can I take a trade that loses $500 during the trade (which would take me under the max drawdown equity limit), but then closes with a profit? That answer might change how I work in "survival mode."

My strong suggestion would be to ask them directly; either an email to support, or, better, ask for a clarification from someone on the decision-making side, like John Hoagland. I think they would be willing to clarify it, and I think getting it officially would be important for you. (This is no knock against Pedro or anyone else; it's just that having it from the people who are actually going to enforce it is important.)

Good luck... you're managing this turn of events well.

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  #329 (permalink)
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kevinkdog View Post
So, I feel bad I did not take it, but then again I don't, because my objective right now isn't passing the Combine, or making winning trades - it is surviving to fight another day.

Hmm.

I would feel bad.

I am just an outsider looking in, so take that with a grain of salt naturally. But, it seems to me the strategy was overleveraged from the start which is causing these issues.

Being forced to skip a trade because of risk management, account sizing, etc, is a flaw in the original strategy, in my opinion. And trying to cherry pick which trades are worth taking, trying to manipulate the size of the trade on the fly, etc -- well, none of it was part of the original backtest, based on my understanding. So you are greatly altering the results.

If I can be so bold, and hopefully not piss you off because I like you, this thread, and want you to come do more futures.io (formerly BMT) webinars --- I think the issue here is a bit of ego. You have a sense of needing to prove yourself publicly and don't want to fail a combine. This is affecting your decisions.

Normally, I am all for public accountability. Most people in that situation are struggling traders that need the accountability to stop making really stupid decisions (to be frank). But in this case, I think you are a good trader already, and are feeling some pressure to publicly demonstrate that, which is leading to some bad choices.

I hope it somehow helps.

Mike

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  #330 (permalink)
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kevinkdog View Post

Before I go further with calculations, does anyone know ( @Pedro40 probably knows) if they turn you off at the max drawdown for open trades, or just on a closed trade basis? For example, let's say I have $145,501 in equity ($1 above "kill" point). Can I take a trade that loses $500 during the trade (which would take me under the max drawdown equity limit), but then closes with a profit? That answer might change how I work in "survival mode."

When I asked several weeks ago their response was that that only the daily loss limit will shut down your trading. The max drawdown is on an "end of day" basis so you can go below it intraday but once the day ends you must be above your max DD. Obviously you should check with them as they do make modifications to their risk parameters on an ongoing basis.

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