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Kevin's TST Combine Journal

  #381 (permalink)
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Big Mike View Post
Hey, it is no joke.

Here is the fact: in order to be a good trader, you have to be great at losing!

Even if you do fail this combine the thread is still full of extremely valuable information. And thanks to the research and number crunching you've done, you already knew your chances were less than a "sure thing" to pass the combine.

So I don't want you to get discouraged. First, you are helping many others by showing them "the other side" of algorithmic trading. And I don't mean the losing side at all --- what I mean is the research and analysis side that is outside and completely disparate from any kind of code to buy and sell. This is the side that so often is completely disregarded by most algo traders, and frankly the side that makes all the difference in my opinion.

So keep going, don't get discouraged, and good luck!

Mike


I'm glad you said that, because you've brought up some good points. I'm actually not discouraged - the raw system still shows a lot of promise (see below) - but I am disappointed in the Combine results.

I've been talking to a few Combine winners offline, and there is a lot of good info in winning Combines. Winning can be a more inspirational story than losing!



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  #382 (permalink)
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Position Sizing

Here is an interesting chart, one that I have not shown before.

2 equity curves. Same exact trades in both (except for one trade)...


1. Light Blue - Constant position size of 2 contracts. Note how it is positive.

2. Dark Blue - My Combine performance, with highly variable position sizing. Note how it is negative.


Does anyone else find it interesting that my poor Combine performance so far isn't due to my entries and exits, but is due to Position Sizing.

I remember Ralph Vince (creator of optimal f) said that most (90%?) of system performance is due to position sizing.

Food for thought...



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  #383 (permalink)
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kevinkdog View Post
Does anyone else find it interesting that my poor Combine performance so far isn't due to my entries and exits, but is due to Position Sizing.

Not surprised at all. The problem I see with the 2 contract position size is that the probability of winning the combine is probably very low.

Starting with a big position only works if you were fortunate to have a winner on the first trade, then you would have the cushion you need and be off to the races. Your gamble or calculated risk only pays off if the first trade is a winner. If not you have a deep hole to dig yourself out of and have to cut position size in order to stay in the game.

Possibly you should limit your position size to only increasing when you are won’t be negative if you lose. IE: you can risk $1000 only if you have a $1000 cushion.

Isn't there a fable about slow and steady winning the race?

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  #384 (permalink)
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To add to what @deaddog said, it is all too easy to forget that losing 50% means you have to make 100% just to get back to square one...

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  #385 (permalink)
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deaddog View Post
Not surprised at all. The problem I see with the 2 contract position size is that the probability of winning the combine is probably very low.

Starting with a big position only works if you were fortunate to have a winner on the first trade, then you would have the cushion you need and be off to the races. Your gamble or calculated risk only pays off if the first trade is a winner. If not you have a deep hole to dig yourself out of and have to cut position size in order to stay in the game.

Possibly you should limit your position size to only increasing when you are won’t be negative if you lose. IE: you can risk $1000 only if you have a $1000 cushion.

Isn't there a fable about slow and steady winning the race?


Based on your post, I ran the same Monte Carlo analysis on 2 more models:

1) 2 contracts always

2) "No Negative" Cushion Method - Increase size only if a losing trade will not cause you to go negative

The one in blue highlight is the one I am using right now.

Results below:


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  #386 (permalink)
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Kevin it would be interesting to add to these scenarios the calculation how long it would take to reach profit target, so we can get some visual interpretation of system profitability.

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  #387 (permalink)
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xelaar View Post
Kevin it would be interesting to add to these scenarios the calculation how long it would take to reach profit target, so we can get some visual interpretation of system profitability.

This might take a bit to code, but I think I will try it. I'll post it if I can do it.

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  #388 (permalink)
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kevinkdog View Post
This might take a bit to code, but I think I will try it. I'll post it if I can do it.

Actually, after looking at the code for this, I cannot do it without rewriting most of the code. Ugh.

I can estimate constant sizing, though. Trading 1 contract you make about $80 per trading day.

So, if you trade 2 contracts all the time, it would take you 100 trading days.

If you trade 6, it would take 33 days.

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  #389 (permalink)
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kevinkdog View Post
Actually, after looking at the code for this, I cannot do it without rewriting most of the code. Ugh.

I can estimate constant sizing, though. Trading 1 contract you make about $80 per trading day.

So, if you trade 2 contracts all the time, it would take you 100 trading days.

If you trade 6, it would take 33 days.

Do you get a max draw down for each scenario?

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  #390 (permalink)
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deaddog View Post
Do you get a max draw down for each scenario?

What scenarios would you like to see drawdown for?

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