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Kevin's TST Combine Journal

  #361 (permalink)
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Have you considered adding size as equity shrinks?

Your aim with trading size off the get go is to maximize profit. What about minimizing your losses?

There is a calculated stop of $425 a contract. The starting size is 4 contracts. If you take a loss on the first trade then size is reduced. Lets say to 3 contracts, then 2, then 1 and there is a deep hole to dig out of. 3 losses in a row almost takes you out of the game. Even with a win on the 4th trade you are still in trouble. In the 4 trades you have traded 10 contracts.

Trading those same 10 contracts in reverse order; start with one and got to two if you have a loss, then 3 then 4. After taking 4 losses in a row you値l be in the same position that you were if you start with 4 and work your way down to 1. The difference is that if you get a win in any of those 4 trades you are back to even or close to it.

I know that doubling down is a terrible idea for your own account but for a combine where you are out of the game after a very limiting max draw-down it might work. Minimum size can be increased as the account grows.

You haven稚 addressed the risk reward ratio of your strategies. Are you expecting the wins to be much larger than the losses? Do you have stats on a per contract as opposed to a per day basis?

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  #362 (permalink)
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deaddog View Post
Have you considered adding size as equity shrinks?

Your aim with trading size off the get go is to maximize profit. What about minimizing your losses?

There is a calculated stop of $425 a contract. The starting size is 4 contracts. If you take a loss on the first trade then size is reduced. Lets say to 3 contracts, then 2, then 1 and there is a deep hole to dig out of. 3 losses in a row almost takes you out of the game. Even with a win on the 4th trade you are still in trouble. In the 4 trades you have traded 10 contracts.

Trading those same 10 contracts in reverse order; start with one and got to two if you have a loss, then 3 then 4. After taking 4 losses in a row you’ll be in the same position that you were if you start with 4 and work your way down to 1. The difference is that if you get a win in any of those 4 trades you are back to even or close to it.

I know that doubling down is a terrible idea for your own account but for a combine where you are out of the game after a very limiting max draw-down it might work. Minimum size can be increased as the account grows.

You haven’t addressed the risk reward ratio of your strategies. Are you expecting the wins to be much larger than the losses? Do you have stats on a per contract as opposed to a per day basis?


I will try your approach and probably post it tomorrow.

I can also post the Performance reports of Strats 1-3, and summary stats for Strat 4, so you can see the win and loss sizes. All the strategies are different, which makes it hard to lump into 1 Reward:Risk number...


Last edited by kevinkdog; June 29th, 2013 at 03:24 PM.
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  #363 (permalink)
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TST Combine Draw Down



kevinkdog View Post
Sort of. First the max drawdown is calculated based on starting equity, not peak equity. So the requirement is really never to have closed equity drop below $145,500. I could theoretically run equity up to $300K, and then have a drawdown of $100K, and not violate the rule.

So, the 3 losers in a row would just be at the start, or any time I had $150K or less equity.

BUT, I'd never trade 4 contracts all the way down. I'd reduce to 1 contract to maximize my chances of staying in the game.

I missed that this is how the draw down was calculated for the combine. I have been trying to calculate what sizing I should use to ensure I don't hit the daily loss limit and this changes the calculation once again.

Thanks for pointing this out


I also like your analysis on position sizing as I'm trying to work through this for my coming combine too.


Quoting 
If equity <= 150000 Then lotsize = 1

If equity > 150000 Then lotsize = 2
If equity > 152000 Then lotsize = 3
If equity > 154000 Then lotsize = 4
If equity > 156000 Then lotsize = 5
If equity > 158000 Then lotsize = 6


Add Size - 3 to 6 model

If equity <= 150000 Then lotsize = 3

If equity > 152000 Then lotsize = 4
If equity > 154000 Then lotsize = 5
If equity > 156000 Then lotsize = 6


Trade Wise, Trade Well

John

Last edited by MarketPilot; June 29th, 2013 at 10:26 PM. Reason: Added second Quote
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  #364 (permalink)
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deaddog View Post
Have you considered adding size as equity shrinks?

Your aim with trading size off the get go is to maximize profit. What about minimizing your losses?

There is a calculated stop of $425 a contract. The starting size is 4 contracts. If you take a loss on the first trade then size is reduced. Lets say to 3 contracts, then 2, then 1 and there is a deep hole to dig out of. 3 losses in a row almost takes you out of the game. Even with a win on the 4th trade you are still in trouble. In the 4 trades you have traded 10 contracts.

Trading those same 10 contracts in reverse order; start with one and got to two if you have a loss, then 3 then 4. After taking 4 losses in a row you’ll be in the same position that you were if you start with 4 and work your way down to 1. The difference is that if you get a win in any of those 4 trades you are back to even or close to it.

I know that doubling down is a terrible idea for your own account but for a combine where you are out of the game after a very limiting max draw-down it might work. Minimum size can be increased as the account grows.

You haven’t addressed the risk reward ratio of your strategies. Are you expecting the wins to be much larger than the losses? Do you have stats on a per contract as opposed to a per day basis?

@deaddog -

I haven't tried this approach, mainly because I do not know what exactly you'd like to do on the upside. Do you want to add a contract at every $1000 gain in equity?

Would you like me to try something like this? Please feel free to edit it to get your desired schedule.

$145,500 - $147000 - 4 contracts
$147000 - $148500 - 3 contracts
$148500 - $150000 - 2 contracts
$150000 - $151000 - 1 contracts
$151000 - $152000 - 2 contracts
$152000 - $153000 - 3 contracts
$153000 - $154000 - 4 contracts
$154000 - $155000 - 5 contracts
$155000 - and up - 6 contracts

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  #365 (permalink)
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MarketPilot View Post
I missed that this is how the draw down was calculated for the combine. I have been trying to calculate what sizing I should use to ensure I don't hit the daily loss limit and this changes the calculation once again.

Thanks for pointing this out


I also like your analysis on position sizing as I'm trying to work through this for my coming combine too.




Yes, what TST calls a "drawdown" in NOT the traditional definition of a drawdown:

Drawdown - uses peak equity for calculation

TST Drawdown - uses initial equity for calculation


TST's drawdown should more accurately be called "Drawdown From Initial Equity."

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  #366 (permalink)
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kevinkdog View Post
@deaddog -

I haven't tried this approach, mainly because I do not know what exactly you'd like to do on the upside. Do you want to add a contract at every $1000 gain in equity?

It will depend on the R/R ratio to some extent. How much do you plan to make for your $425 of risk. It would also depend on the expectancy of the strategy and the frequency of the trades.

I would increase size when I could have 4 losing trades in a row and not put myself out of the game. Once you are over the initial capital you increase your size so that after 3 losing trades you are still in a profit position.

You go to 2 contracts at initial account size plus 6 times your risk per contract.
You go to 3 contracts at initial account size plus 9 times your risk per contract.

Once I increase size I would also change my position size calculation.
If I知 trading 2 contracts I would stay at 2 after the first loss the increase to 3 then 4.
If I知 trading 3 contract then I would stay a 3 after the first 2 losses then increase.

The reason I keep asking about R/R is that I知 assuming that the strategies employed will produce bigger wins than losses.

In theory with a 1 to 1 R/R you depend on the system having more wins than losses and requires either a large number of trades or more dollars be risked per trade. A R/R greater than 1 to 1 means you can take fewer trades or risk less per trade.

Kevin, I commented on this thread after seeing your performance on the fist few days. I知 new to futures.io (formerly BMT) and didn稚 realize your credentials. I am appreciative that you are even taking the time to respond. Thanks for humoring me.

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  #367 (permalink)
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kevinkdog View Post
Yes, what TST calls a "drawdown" in NOT the traditional definition of a drawdown:

Drawdown - uses peak equity for calculation

TST Drawdown - uses initial equity for calculation


TST's drawdown should more accurately be called "Drawdown From Initial Equity."

I think really it is the Ruin amount, the way I've understood it anyway.



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  #368 (permalink)
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Big Mike View Post
I think really it is the Ruin amount, the way I've understood it anyway.



Mike

Yep, I agree. It is the "ruin amount." TST calls it drawdown though.

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  #369 (permalink)
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deaddog View Post
It will depend on the R/R ratio to some extent. How much do you plan to make for your $425 of risk. It would also depend on the expectancy of the strategy and the frequency of the trades.

I would increase size when I could have 4 losing trades in a row and not put myself out of the game. Once you are over the initial capital you increase your size so that after 3 losing trades you are still in a profit position.

You go to 2 contracts at initial account size plus 6 times your risk per contract.
You go to 3 contracts at initial account size plus 9 times your risk per contract.

Once I increase size I would also change my position size calculation.
If I知 trading 2 contracts I would stay at 2 after the first loss the increase to 3 then 4.
If I知 trading 3 contract then I would stay a 3 after the first 2 losses then increase.

The reason I keep asking about R/R is that I知 assuming that the strategies employed will produce bigger wins than losses.

In theory with a 1 to 1 R/R you depend on the system having more wins than losses and requires either a large number of trades or more dollars be risked per trade. A R/R greater than 1 to 1 means you can take fewer trades or risk less per trade.

Kevin, I commented on this thread after seeing your performance on the fist few days. I知 new to futures.io (formerly BMT) and didn稚 realize your credentials. I am appreciative that you are even taking the time to respond. Thanks for humoring me.


Hi @deaddog -

You are asking a lot of great questions, and it is helping me both understand my Combine position sizing better, and helping me explain things better. You've been a big help.

I hope readers realize that, at least for the trading strategies I am using in this Combine: 1) I have to do things I would never do with real money and 2) that in order to win the game (Combine), you have to respect the rules and make decisions based on the rules.

Some of the things I have to do with a Combine, that I don't do with real money:

1. Small per contract per trade loss ($425 before slippage and commissions)

2. Daily loss limit

3. Trade 1 strategy almost entirely because it has a high win percentage (in order to meet the Combine win % goal)

4. Trade another strategy in order to ensure I have 20 trading days in a 2 month Combine

5. Position sizing based on a very small initial equity drawdown (ruin point).


The list could go on, but you get the idea.

I guess the point is that you have to trade to the rules of the "game" whether the game is a Combine, trading your own money, trading in a contest, trading friends and family accounts, etc. All of those "games" will have different rules, and the key is to trade so that you don't fail any of them.

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  #370 (permalink)
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deaddog View Post
It will depend on the R/R ratio to some extent. How much do you plan to make for your $425 of risk. It would also depend on the expectancy of the strategy and the frequency of the trades.

I would increase size when I could have 4 losing trades in a row and not put myself out of the game. Once you are over the initial capital you increase your size so that after 3 losing trades you are still in a profit position.

You go to 2 contracts at initial account size plus 6 times your risk per contract.
You go to 3 contracts at initial account size plus 9 times your risk per contract.

Once I increase size I would also change my position size calculation.
If I知 trading 2 contracts I would stay at 2 after the first loss the increase to 3 then 4.
If I知 trading 3 contract then I would stay a 3 after the first 2 losses then increase.

The reason I keep asking about R/R is that I知 assuming that the strategies employed will produce bigger wins than losses.

In theory with a 1 to 1 R/R you depend on the system having more wins than losses and requires either a large number of trades or more dollars be risked per trade. A R/R greater than 1 to 1 means you can take fewer trades or risk less per trade.

Kevin, I commented on this thread after seeing your performance on the fist few days. I知 new to futures.io (formerly BMT) and didn稚 realize your credentials. I am appreciative that you are even taking the time to respond. Thanks for humoring me.


I tried to implement your idea the best I could. Here are results:




Your scheme does a really good job at avoiding ruin, but not so good a job at passing the combine.

So, I made one modification - I kept your downside scheme, but made the upside scheme such that once I had positive equity (>150K), I "floored it" and put on 6 contracts.

Here are those results. Not a whole lot different than what I am using (Cut Size 6 to 1). "Deaddog Modified" has better chance of not failing, but worse chance of passing.:



Last edited by kevinkdog; June 30th, 2013 at 06:25 PM. Reason: wrong picture posted
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