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Kevin's TST Combine Journal

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  #441 (permalink)
Legendary Market Wizard
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kevinkdog View Post
I will be doing a webinar at TopStepTrader on Friday August 16th at Noon CT. It is through topsteptrader.com website.

The topic: ..."Coming Back from the Brink of Failure: The Keys to Successfully Pulling Your Account Out of the Red"

Unfortunately, my Combine #2 was my first hand experience with that!


Please feel free to post questions here, and I'll try to answer them in the presentation.

Looking forward on a webinar on how to throw a Hail Mary pass.

Seriously you will have to be careful not to encourage aspiring traders to take too much risk.

Your recovery seemed to consist of risking the daily allowable dollar amount on a single trade. Had the trade gone against you, the max drawdown would have been exceeded by about the daily amount.

When I first posted to this thread I didnít know your reputation as a world champion trader. I wrote:

Quoting 
You have asked for comments so I look at this as if I were considering having you trade my account.

The first thing I notice is that your losing trades are bigger than your winning trades. To me that is lack of risk control.

The second thing I notice is whether you have the discipline to follow your plan.

Iím afraid I havenít changed my opinion based on your performance in the 2 combines you have taken.

I see lack of risk control in taking a calculated risk with a large position size off the start, basically gambling that your first trade will be a winner. By doing this you put yourself in the hole and spent the rest of the combine trading smaller size trying to break even.

Would you hire a trader whose plan was to risk a lot on the first trade then if that trade failed to reduce size and attempt to get back to break even then take a huge risk again?

I didnít see the discipline in following your plan. The plan seemed to change as you progressed thru the combine. Your goals changed from winning the combine, to trying to get to breakeven, to throwing a Hail Mary pass, to taking small losses to stay above water to get a roll over.


Quoting 
I agree it will be hard reaching the profit target trading small size. Even as it gets towards the end, I won't gamble - what is the point? That won't prove my strategies are good - it will just prove I can violate my plan.

You rationalize your performance on the strict combine rules. I see the rules being set up to control risk. You seem to be saying that the only way you can achieve the goals set by the combine is to be allowed to risk more. Again if I was hiring someone to manage an account for me that is the last thing I want to hear.

Just my point of view. From one who doesnít trade futures or day trade.

DD

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  #442 (permalink)
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kevinkdog View Post
Thanks for the comment.

create a system, look at the equity curve, and then spend a lot of time trying to improve the weak spots (drawdown periods, flat periods, etc), you are starting to descend a slippery slope. By that I mean it is fairly easy to make backtests better, but it comes at a cost - more rules, more parameters, more filters, etc.

What makes you think those additional rules will work in real time? They may, or they may not. But your mind will think there will be an improvement, since your backtest is much improved. This can trick you into thinking you have something "better" when in all likelihood you really have something that probably is worse.

It is also a slippery slope because once you do it the first time, now another part of the equity curve will look poor. Do you try to fix that, too? How many times do you repeat this process? Done enough times, you'll have a great looking backtest, but when you go to real time, the system will probably fall apart.

My general experience is that you can make adjustments like this 1 or 2 times to a strategy, as long as you leave plenty of data out of sample. Beyond that, it is probably better to just drop the strategy.

Just be very careful.

That's the closest quote I could find to what I wanted to convey. Why would you stop trading now ? The odds are the best they have ever been. Your strategies are turning in your favor after a drawdown, you have enough days left in your combine so time isn't a factor and you have other factors such as time in trade and avg win % in your favor over starting a new combine all together.

So, you are essentially quitting after going down and now when you got back even you are deciding to quit. Why not let your strategies run it out--either you fail or run out of time. There is still enough time that you can pass the combine. Keep the faith.

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  #443 (permalink)
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garyboy275 View Post
That's the closest quote I could find to what I wanted to convey. Why would you stop trading now ? The odds are the best they have ever been. Your strategies are turning in your favor after a drawdown, you have enough days left in your combine so time isn't a factor and you have other factors such as time in trade and avg win % in your favor over starting a new combine all together.

So, you are essentially quitting after going down and now when you got back even you are deciding to quit. Why not let your strategies run it out--either you fail or run out of time. There is still enough time that you can pass the combine. Keep the faith.


Great question Gary. Thanks for asking it.


Here is my thinking...

When I got to breakeven, I looked at how many days I had left possible to trade in the Combine. It was 17, if I traded everyday. But, in August I will be away for 3 days. That leaves 14 days for possible trades. Based on the past, I figure I would trade 75% of those days, or 11 days.

So, I really have 11 trading days to earn the full profit. I had previously estimated it would take about 28 days to reach the profit (with the strategies I am trading). So, trading 11 days will probably (almost certainly) not get me there.

Given all that, I decided to stop at breakeven. Maybe it is the wrong decision. Heaven knows I make enough of those already.

So, IF I qualify for a rollover, and IF I decide to trade a 3rd Combine, with the new rules I would only have 20 trading days max. That means the strategies I used for Combine 1 & 2 would almost certainly not be good enough to pass. I would have to develop new strategy for Combine #3.

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  #444 (permalink)
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I just received official word that I indeed qualified for a Combine rollover, so now I can address this question...



2. Am I going to do another Combine, since I may qualify for a free one via rollover?


Maybe. A few things have to fall into place first:


A. Confirmation from TST that I do qualify for a new Combine - RECEIVED 7/29

B. Development of a new strategy or strategies to complement/replace existing ones because of the following:

1. Combine rules have changed (profit target different, 20 day limit for trading days)

2. In next stages after passing a Combine (Live Trader Prep, Junior Trader), one cannot trade during overnight. My desire is to trade the same approach regardless of stage, so I will no longer trade strategy #1 (which trades overnight) in the Combine.

3. Put more focus on staying away from Max Drawdown. By my choice, that criteria was my nemesis in Combine #2, mainly because of the way I position sized. I position sized to meet the profit goals. That hurt me from the start.

4. Modify position sizing rules, both intraday and over the course of the Combine. "Start small, increase size with wins" is probably best for the Combine rules, but it depends on the strategies I trade, too.


IF and WHEN all this occurs, I will likely begin Combine #3. I will update this thread as I progress.

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  #445 (permalink)
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Who do you have this need for trading a new strategy? I assume you have at least half a dozen proven ones, why not just pick one that best fits the rules and trade that one??

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  #446 (permalink)
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Pedro40 View Post
Who do you have this need for trading a new strategy? I assume you have at least half a dozen proven ones, why not just pick one that best fits the rules and trade that one??

Great question, I appreciate you asking, @Pedro40.

Most of the strategies I trade live are swing strategies, lasting a few days to weeks. Also, most have larger stops than would be appropriate for the Combine. Finally, on many of my strategies, the win % is below 50%. All these factors would eliminate them from Combine consideration.

I have one "live" strat for Gold and Crude Oil that I will look at using. My fear with that one is that it requires quick order entry and exit, and the Combine order entry and exit would come after taking care of my live account. That might really be a showstopper - I have to look deeper at it.

So, it may be a brand new strategy, or it may be an existing strategy with some mods. At this point, I am not sure.


Hopefully I've answered your question. If not, just let me know.

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  #447 (permalink)
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Kevin:
Why are most of your real trading systems swing systems and not day systems? Also why are most of the win/loss percentages below 50%? Is it that difficult to have win/loss % above 50%? Also your systems must have larger wins than losses to make up for the under 50%.

Thanks

and Thanks for taking the Combine and keeping a Trading Journal!

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  #448 (permalink)
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Pinot13 View Post
Kevin:
Why are most of your real trading systems swing systems and not day systems? Also why are most of the win/loss percentages below 50%? Is it that difficult to have win/loss % above 50%? Also your systems must have larger wins than losses to make up for the under 50%.

Thanks

and Thanks for taking the Combine and keeping a Trading Journal!


Thanks for the question, @Pinot.

For winning percentages, I have never really cared about it. It is only important for psychology, because a string of losers, even small ones, can be emotionally draining. But if the math works out (small frequent losers are overshadowed by much larger but less frequent wins), it is nothing to care about. For the Combine, though, it does matter (>50% win percentage required).

For day vs swing systems, I like day systems better. BUT, I have found it much more difficult to find day systems that hold up over a number of years. Maybe it is the way I test and evaluate, but swing type systems always seem to be where I end up. I'm sure part of that is the trading costs (commissions and especially slippage), which can just eat you alive if you trade a lot.

That being said, of the 8 or so strategies I currently trade, 2 of them are day strategies, and the rest swing.

I hope this answers your question.

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From the beginning of Combine #1 (which I did not pass, but qualified for a rollover) and Combine #2 (which I did not pass, but also qualified for a rollover), in the back of my mind I always thought I might trade Strategies #1,2 and 3 for my own account. They may not be good enough to pass the Combine requirements, but they may meet my own requirements.

Here is an update of how they are doing. Right now, unless some unforeseen circumstances occur, I might go live with strategies 1 and 2 in late August, once I get a few more trades. I'm not sure about Strat #3 at this point, and it trades very infrequently anyhow (about 3 trades per month).


The biggest fear I have right now is starting live trading at a time when both strategies are at an equity peak... is it more likely that the trend continues, and equity keeps going up, or is a drop in equity more likely, before continuing up. Or, does it even matter? I lean towards trading it when I am ready, regardless of current equity peaks or not.







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  #450 (permalink)
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kevinkdog View Post
The biggest fear I have right now is starting live trading at a time when both strategies are at an equity peak... is it more likely that the trend continues, and equity keeps going up, or is a drop in equity more likely, before continuing up. Or, does it even matter? I lean towards trading it when I am ready, regardless of current equity peaks or not.

Let me try to restate your decision point. Suppose you're ready, i.e. you have a strategy (or a pair of strategies) with a positive expectancy (and some other characteristics which make it good enough for trading) that spent sufficient time in inbucation. The question is 'should I start now, or should I skip the next N trades', where N is a fairly small number (I guess you wouldn't want to wait long enough to let N grow statistically significant). I think skipping the first N trades would only make sense if you had a good reason to think that the expected profit of those N trades is negative. I can't see how you could arrive at such a conclusion when your strategy has positive expectancy and the N future trades are just a small subset of its total trades.

The fundamental things apply
As time goes by
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