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Kevin's TST Combine Journal

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  #401 (permalink)
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A final thought on position sizing...

I realize, after going through the thread, that I have omitted position sizing details that probably would have made things clearer to the in-depth reader. I did this to keep things simple (e.g. "next trade will be 2 contracts"), and unfortunately that has confused things and muddied the waters. I apologize for that.

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kevinkdog View Post
Thanks for the comment. You have mentioned "cherry picking" a few times, and I'm not sure why the concept is relevant here. I have not used it in the Combine, or anytime else. I recall one day where I had to skip a trade, but that is because if that had been a loser, I would have been knocked out. To me, that is not cherry picking, that is trying to survive to fight another day.

To me, cherry picking would be passing on potential trades because I did not "like" the signal (I agree that is a fool's game), or cherry picking could be arbitrarily changing size of next trade (another fool's game).

What I have been doing is trading with maximum size whenever possible, to maximize the chances of hitting the profit goal. As I showed earlier, that approach maximizes my profit goal odds (at the expense of hitting the max drawdown limit), and has not worked (yet?) - my losers have had big size, and winners have had small size.

Yes cherry picking is not the right phrase.

I understand you want to stay under the DLL. But was all this part of your original research and testing? Does your strategy performance that you've analyzed and compare yourself to include this type of rule or decision making?

I guess I am just saying that in my experience, when I develop strategies --- whenever I've tried to apply rules like stop after a losing trade, or even stop after some daily loss limit that I define (an arbitrary number), the results of the backtest suffer. I would look to control risk from position sizing and not from these other methods, and just rely on a "emergency stop" for the strategy as a whole whenever it has a sizeable loss that is a fair bit outside of the historical figures.

I feel like some of your sizing decisions are not backtested to be improvements and that is where I would get into trouble myself. I would want to design the strategy so that sizing is part of the strategy itself, so that it could be properly tested including a scenario where you dig a hole out of the gate.

Have you run a monte carlo analysis on this new strategy? I imagine the answer is yes and I've just missed it

Mike

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Yes cherry picking is not the right phrase.

I understand you want to stay under the DLL. But was all this part of your original research and testing? Does your strategy performance that you've analyzed and compare yourself to include this type of rule or decision making?

I guess I am just saying that in my experience, when I develop strategies --- whenever I've tried to apply rules like stop after a losing trade, or even stop after some daily loss limit that I define (an arbitrary number), the results of the backtest suffer. I would look to control risk from position sizing and not from these other methods, and just rely on a "emergency stop" for the strategy as a whole whenever it has a sizeable loss that is a fair bit outside of the historical figures.

I feel like some of your sizing decisions are not backtested to be improvements and that is where I would get into trouble myself. I would want to design the strategy so that sizing is part of the strategy itself, so that it could be properly tested including a scenario where you dig a hole out of the gate.

Have you run a monte carlo analysis on this new strategy? I imagine the answer is yes and I've just missed it

Mike


Yes, I incorporated the Daily Loss Limit into initial development and all subsequent studies. Kind of tricky, though. It would have been much simpler without DLL. But, rules are rules, and I must follow them.

You do bring up an interesting point: should trading strategies incorporate position sizing during development, or is it better to apply position sizing after the strategy is developed?

Personally, I develop the strategy, then later apply position sizing (where I also factor in the correlations of other systems I am trading). Many traders do it this way. But, I know traders much better than me that do it the opposite way (they include positions sizing right from the start). Both methods are valid, in my mind.

I have run simple Monte Carlos on what I am trading for this Combine, and those results can be seen in some of the daily equity curves.

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Big Mike View Post
What is the reasoning for taking no trades on rest of day if first trade is a loser?

Mike

The question I would ask is why take so much risk on the first trade that you might not be able to trade for the rest of the day?

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deaddog View Post
The question I would ask is why take so much risk on the first trade that you might not be able to trade for the rest of the day?

Most days there is only one trade. Because of this, coupled with the desire to hit the profit target, means that maximum size should be used.

If I knew with strong likelihood there'd be multiple trades in a day, I would do things differently.

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kevinkdog View Post
Repeat request: if anyone has a position sizing technique that they think would work better for my strategies for this Combine, please post it and I'll test it out. I'd love to know I have chosen a sub-optimal approach, because that means I'll learn something new. That is always good!

Hi Kevin,

Here is my thinking on this topic as I have been trying to figure out what to do for my combine. My thinking breaks sizing into two categories.
  1. Initial sizing
  2. Maximum Sizing.
For me, Initial sizing would be based on the Daily Loss limit. My plan is to allow for three consecutive losing trades to have the best chance to catch a move for the day. I know this severely limits my contract size and definitely restricts me from being able to trade the maximum allowed contracts in the combine. But I'm ok with this.

My mind set would not allow the first losing trade to "knock me out" for the remainder of the day. On the other side, if your system is good at catching an initial winning trade more often than not, then I can see how maximum size from the start would yield the largest profits. I see this calculation being based on: Average Stop size, Number of Trade Signals per day, and Winning trade percentage.

Once profits are booked for the day, I can see how the Combine rules enable you to increase the size by effectively risking those banked profits. I'm struggling with how to determine the increase in contract size (if at all). If I jump to Maximum sizing after one winning trade, I risk that if the second trade is a loser I could end up with the same net result as two standard size losing trades. If this happens, then one more losing trade would knock me out for the day. So my thinking is that one would step up the size as additional profits are banked.

I struggle with the step up in size contracts too because as soon as I catch a losing trade, I could have double or triple the loss which will kill daily profits. For me, I wont be able to answer these questions until I can get automated back testing figured out.

Currently, I'm leaning towards fixed size and trying to scale into a position over increasing size.

Trade Wise, Trade Well

John
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Hi Kevin,

Here is my thinking on this topic as I have been trying to figure out what to do for my combine. My thinking breaks sizing into two categories.
  1. Initial sizing
  2. Maximum Sizing.
For me, Initial sizing would be based on the Daily Loss limit. My plan is to allow for three consecutive losing trades to have the best chance to catch a move for the day. I know this severely limits my contract size and definitely restricts me from being able to trade the maximum allowed contracts in the combine. But I'm ok with this.

My mind set would not allow the first losing trade to "knock me out" for the remainder of the day. On the other side, if your system is good at catching an initial winning trade more often than not, then I can see how maximum size from the start would yield the largest profits. I see this calculation being based on: Average Stop size, Number of Trade Signals per day, and Winning trade percentage.

Once profits are booked for the day, I can see how the Combine rules enable you to increase the size by effectively risking those banked profits. I'm struggling with how to determine the increase in contract size (if at all). If I jump to Maximum sizing after one winning trade, I risk that if the second trade is a loser I could end up with the same net result as two standard size losing trades. If this happens, then one more losing trade would knock me out for the day. So my thinking is that one would step up the size as additional profits are banked.

I struggle with the step up in size contracts too because as soon as I catch a losing trade, I could have double or triple the loss which will kill daily profits. For me, I wont be able to answer these questions until I can get automated back testing figured out.

Currently, I'm leaning towards fixed size and trying to scale into a position over increasing size.

Thanks for sharing. I think adding to winning trades is a good approach, in general. Many times it makes a good system even better, and I use the idea in a few of my live strategies.

I think you are on the right path - figuring out how to best trade to the Combine rules, and realizing it might be different than other "live" trading. I'm guessing most who try a Combine never go to the level of depth you are. Of course, most fail Combines, so maybe it is cause and effect...

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  #408 (permalink)
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Why not request a custom combine with just a profit target then you dont have to worry about stupid combine rules ?

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kevinkdog View Post
Most days there is only one trade. Because of this, coupled with the desire to hit the profit target, means that maximum size should be used.

I did not read all the new posts before before my last post.

If there are few trades per day I understand why you would swing for the fence on the first trade and have the risk of a loss keeping you from trading that day. Especially as you might not have another signal. I know I either missed this detail or simply did not remember this fact about your system.

My only other thought is have you considered a system that would trade more times per day? Or revising this system for more trades?

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garyboy275 View Post
Why not request a custom combine with just a profit target then you dont have to worry about stupid combine rules ?

They are real big on maximum loss. I would doubt you could get much changed related to daily loss. Or if they allowed it in the combine, you would have a harder time getting to the funding stage.

But you can always ask....

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MarketPilot View Post
I did not read all the new posts before before my last post.

If there are few trades per day I understand why you would swing for the fence on the first trade and have the risk of a loss keeping you from trading that day. Especially as you might not have another signal. I know I either missed this detail or simply did not remember this fact about your system.

My only other thought is have you considered a system that would trade more times per day? Or revising this system for more trades?

Either option could work. For more trades per day, the biggest problem is that your losses would likely have to be smaller, which makes it a lot more difficult to develop a long term positive trading system.

As an example, I currently trade a couple of Euro strategies with my own money, and they have per contract stops around $1000-$2000. For the Combine, I created strategies with $500 stop loss. Creating a $500 sl system was a ton harder than creating a $1K sl system.

For revising the system, I hate to do that, since usually it leads to better backtested results, but not better live results. That revision process can easily become curve fitting.

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One way or another, I think the end is near...



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Kevin; It must an offshoot of Murphy's Laws that whenever you post trades you will end up in a period of drawdown. It has happened several times to me in the past. 2 months of easy trading and as soon as I attempt to show my skill, bam; 10 losses in a row.

Goals 2 and 3 can still be met.


kevinkdog View Post
My goals for this Combine:

1. Pass the Combine, or at least avoid a spectacular failure!

2. Continue test drive "incubation" of strategies 1-3, to see if I should allocate real money to them

3. Hopefully pass along some words of advice to newer traders




Please feel free to post questions, comments, criticisms, etc.

Looking forward to your post mortum:

DD

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Hi Kevin,

I completely agree with @deaddog , and I am also looking forward to your postmortem. (And, of course, it ain't over yet!)

This has been an informative and thought-provoking thread. I hope you finish well, and I hope you are will keep going with it.

I recall that you started with the idea that you would enter a much smaller Combine, and also that you didn't have that much time to create and test the systems that you would use. Granted that the current results are a very small sample, but what are your current thoughts on these systems? What would be different if you started fresh?

Good luck on the rest of the Combine.

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Hi Kevin,

I completely agree with @deaddog , and I am also looking forward to your postmortem. (And, of course, it ain't over yet!)

This has been an informative and thought-provoking thread. I hope you finish well, and I hope you are will keep going with it.

I recall that you started with the idea that you would enter a much smaller Combine, and also that you didn't have that much time to create and test the systems that you would use. Granted that the current results are a very small sample, but what are your current thoughts on these systems? What would be different if you started fresh?

Good luck on the rest of the Combine.


My conclusions so far:

1. My initial strategies may be good for trading my own account, where I don't have some of the Combine rules.

2. Position sizing has played a big role in the overall results - more so than even the strategies themselves.

3. I haven't thought at all about what, if anything, I'd do differently. No point for me, unless there is a Combine #3 in my future.

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Granted a temporary stay of execution from the governor's office. Still on Death Row, though...



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kevinkdog View Post
Granted a temporary stay of execution from the governor's office. Still on Death Row, though...

Nicely done. What was the position sizing for these? And what will it be for tomorrow?

Mike

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Nicely done. What was the position sizing for these? And what will it be for tomorrow?

Mike


For the first trade, I started about $150 above the max drawdown. Meaning, a closed trade loss greater than $150 meant certain failure. Since my stop for even 1 contract is $425, I had nothing to lose...so I traded 10 contracts, and made around $1600 on the trade.

Second trade was only 2 contracts. It made $700.

Third trade was a goof, 1 contract.


Tomorrow will be between 2-4 contracts, except my win high percentage overnight system, which may be up to 10. I say that because I am heading out in a bit, and will likely enter any overnight trade late. So, I might be able to take on more contracts, with same risk.


Realistically, passing the Combine seems out of the question. Hitting breakeven is still in play, however.

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As to why 10 contracts, and not 15, since I was "going for broke..."

The daily loss limit is calculated intratrade (I think), but max drawdown is on closed trades. So, going to 15 instead of 10 would give me less wiggle room during the trade. With 10, I could have taken 24 ticks of heat, but with 15 contracts, I could only take 16 ticks of heat.

As it turned out, I did not come close to either.


Again, I am doing some things in this Combine because of the Combine rules. I don't recommend going for broke in the real world!

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Nice comeback Kevin



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Size today?

And plans for tomorrow?

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Hi Kevin- seems we are both chasing the same answer- i have found when trading a certain pattern ,taking every move ,on a 50 k account 1 contract will keep you above water all the time ,while 3 balanced on a 150k accounts will make you survive till the end , also the way it is setup thus far i am curious to see results taking only 2 tick profit per trade but feel it will hamper results for trade duration , I feel you on on your way ,with as balanced a system as i have seen you trade thus far , well done,but please try the 3 basis,

:when you cheat -you only cheat yourself
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Size today?

And plans for tomorrow?

Mike


4 contracts in 1 trade today. 4-6 tomorrow likely. At this point, I am aiming to get positive, and then probably put this Combine out of its misery...

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4 contracts in 1 trade today. 4-6 tomorrow likely. At this point, I am aiming to get positive, and then probably put this Combine out of its misery...

Thoughts on a third combine?

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Hi Kevin- seems we are both chasing the same answer- i have found when trading a certain pattern ,taking every move ,on a 50 k account 1 contract will keep you above water all the time ,while 3 balanced on a 150k accounts will make you survive till the end , also the way it is setup thus far i am curious to see results taking only 2 tick profit per trade but feel it will hamper results for trade duration , I feel you on on your way ,with as balanced a system as i have seen you trade thus far , well done,but please try the 3 basis,

Not sure I understand. If you mean "trade 3 contracts all the time" I could easily do that, but I'd have zero chance of passing the Combine. I probably would not fail the Combine either, though.

Below is the chart for 1 contract performance for strategies 1, 2, and 3. Not enough to pass a Combine, but pretty good nonetheless...




I should point out that this chart shows ideal performance for Combine #1 performance in April-May, performance between Combine 1 and 2 (mid May to mid June, tracked only by me), and Combine 2 (mid June to present). It does NOT show actual Combine performance. This is the performance I'd expect, though, if I traded automated and live with 1 contract.

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Thoughts on a third combine?

Mike

Undecided, probably because I still have to qualify for a rollover first, before that becomes an option...

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i find pattern trading ,say on a 20 day ,3500 target ,you need 2 serious running days to cover all the flat or 300 dollar loss days,other than that 175 per day average is quite do able for 1 lot trading,its the target time that captures my interest , say you take a 2 lot trade at every setup for 2 ticks ,most times your trade can be over quite fast,and only a 50 dollar profit ,where as the loss would always be greater than the gain unless edge trading ,which at that point you might as well play runners,

but if you captured 20 -- 2 tick trades ,your gain of 500 gross puts you well above the curve ,but you trade duration time would suffer as you winners have to time out better than your losing trades-

so here is my dilema - flip pattern runners for 20 days straight or 2 tick every turn and take the fast nickle-

1 thing i am trying to do at this point is to use the mindset of a 18 yearold kid with a minimum wage job ,and take what is given me , but i can tell you ,its been 4 tough days mentally setting up my mind for it,

looking forward to your segment on friday as its always a good listen ,keep up the great effort

oh and i am keeping a max loss personally at 400 for any given day,as sometimes 1 timing is just not right on certain days-

here is a funny thing , i have found that tuesdays are my worst performance days and I know why -after all this time - tuesday is when our trash collection is done and every dang tuesday morning i have to clean up the mess they leave in the street when loading the truck,i just cracked this this week and laughed so hard that something so simple can trip up 1's day -they wont get me again

:when you cheat -you only cheat yourself
refer to post # 470 & 527 & 930
option traders refer to post 996 thru 1005
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Day 19 is in the books - it was a nice little winner with 10 contracts. That put me positive, FINALLY!

So, Day 20 (Thurs night / Friday) is going to be a simple 1 contract in and out trade. $17.50 total loser.

In the end, I ended up just slightly positive. I will submit my results to see if I qualify for a rollover (I should, unless I missed something).

I feel the only thing I did well in this Combine was keeping my discipline, and trading per the plan, even when it would have been easier to just "roll the dice" and go for broke.


At this point, I've done 2 Combines, and failed to pass, or fail, either.


Looking forward, the following questions remain:

1. Am I ready to start trading strategies 1, 2 and 3 with my own money?

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


I will address these questions in the days ahead...


Tomorrow (Friday), I will be on TopStepTrader Radio at 10 AM CST (note different time than normal) to discuss my Combine and answer some questions.




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  #433 (permalink)
 deaddog 
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kevinkdog View Post
I feel the only thing I did well in this Combine was keeping my discipline, and trading per the plan, even when it would have been easier to just "roll the dice" and go for broke.


kevinkdog View Post
For the first trade, I started about $150 above the max drawdown. Meaning, a closed trade loss greater than $150 meant certain failure. Since my stop for even 1 contract is $425, I had nothing to lose...so I traded 10 contracts, and made around $1600 on the trade.

Isn't that rolling the dice and going for broke?

Also isn't taking a quick loss with one contract to stay in the game a change from your original strategy?

I'm asking this because early in the combine I suggested that one may have to adjust their strategy to keep playing and you replied:

Quoting 
The Combine is 20 trading days MINIMUM. So no need to gamble. 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.

I hope Iím not being too critical.

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Isn't that rolling the dice and going for broke?

Also isn't taking a quick loss with one contract to stay in the game a change from your original strategy?


I don't see it that way (both of these special situations were in fact part of the plan - the latter technique was also used on the last Combine too), but I understand your thinking.

I'll try to disclose the complete plan better, should I try another Combine.

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1. Am I ready to start trading strategies 1, 2 and 3 with my own money?

Here is the latest performance chart (based on Tradestation performance report) for Strategies 1, 2 and 3. Just to remind casual readers, part of doing the Combine was to validate if I could and should trade Strats 1, 2 and 3 with my own money, regardless of Combine performance.

So far, after 4+ months and 52 trading days, the overall performance (based on 1 contract traded always) looks pretty good. It is doing better than the "average" line, which concerns me a bit - over the long term, performance should be close to the average line, which implies that the strategies will underperform in the future.

I also have to do some correlation analysis with 3 other Euro systems I currently trade live - I don't want to be too heavy in the Euro.

Based on all this, I will probably wait until I get 60 trading days (another month or so), and assuming everything checks out, then turn them "on."


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  #436 (permalink)
 deaddog 
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I assume the graph shows actual performance. What would it look like with the postion size being constant, 2contracts per trade?

Can you break it down by strategy?

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I assume the graph shows actual performance. What would it look like with the postion size being constant, 2contracts per trade?

Can you break it down by strategy?

The graph above is "perfect" performance, not actual. Also, it does not include strategy #4.

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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.

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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!

I think it is fortunate. Otherwise people could accuse you of talking something about what you have no idea...

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I think it is fortunate. Otherwise people could accuse you of talking something about what you have no idea...


Yes, I have plenty of experience with the "dark" side of trading...

Too many people out there make trading sound like the land of milk and honey - it is definitely not!

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 deaddog 
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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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 garyboy275 
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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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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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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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Pedro40
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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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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)
Pinot13
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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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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)
 Trovatore 
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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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 sixtyseven 
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Hi Kevin,

Would you mind posting up the strategy statistics - i.e trades per year, win %, R:R, ave win, ave loss (or expectancy), std dev of trades, and % of equity risked for each strategy. It would add perspective to the equity curves and be useful info for those of us developing our own systems. Everyone has their own tolerances - but it's good to have a legitimate benchmark of what is realistic versus various claims. I assume the equity curve for both 1& 2 are based on "1 contract always" so we are looking at all oranges?

Not trading these Live because it's near an equity peak is like saying - "I'm going to stop trading because it's had a string of 5 wins, so there is a bigger chance of a loss on the next trade". For all you know it could creep along the Top 10% line for the next 6-12 months. Alternatively, if you wait for a drop in equity - you'll then start running scared - "Is this strategy now broken". How confident will you be entering when it's dropped down to the bottom 10% line? Essentially it seems like that is what you are waiting for?

The graph shows a damn fine looking equity curve (and I assume the backtest is better or at least as pretty). That's going to be a lot of data all sloping up. The strategies seem to compliment each other well (they both didn't have flat spots at the same time). You've traded them on TST - so you must know the testing mirrors the entries quite well. Assuming the ROI is good I'm not really too sure what you are waiting on.

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sixtyseven View Post

...

The strategies seem to compliment each other well (they both didn't have flat spots at the same time).

Ö

The x-axes of the graphs show number of trades, not time.

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 sixtyseven 
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The x-axes of the graphs show number of trades, not time.

True.
As the charts cover the same period, and have similar total trades (both in walk forward and incubation) I assumed the trades occurred with the same relative frequency and thought the dates would line up pretty well. This might not actually be the case.

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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.

Yes, you have restated the psychological "dilemma" well.

I brought up the scenario because I see many traders do this - jump in and start trading a new strategy at an equity peak, only to experience a real money drawdown right off the bat. These people are then usually disappointed, and then tend to quit the strategy.

The alternative, waiting for a pullback in the equity curve before starting live trading, might be a possible route for people who are scared of entering near a high. Of course, it is possible that the equity curve never pauses, and then the trader is left upset and angry - here he had a winning strategy, yet made no money with it!

Personally, I usually start whenever I am ready, regardless of where the equity curve currently is. But that is because I've tried both of the alternatives above over the years, and never consistently had more success with one or the other.

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sixtyseven View Post
Hi Kevin,

Would you mind posting up the strategy statistics - i.e trades per year, win %, R:R, ave win, ave loss (or expectancy), std dev of trades, and % of equity risked for each strategy. It would add perspective to the equity curves and be useful info for those of us developing our own systems. Everyone has their own tolerances - but it's good to have a legitimate benchmark of what is realistic versus various claims. I assume the equity curve for both 1& 2 are based on "1 contract always" so we are looking at all oranges?

Not trading these Live because it's near an equity peak is like saying - "I'm going to stop trading because it's had a string of 5 wins, so there is a bigger chance of a loss on the next trade". For all you know it could creep along the Top 10% line for the next 6-12 months. Alternatively, if you wait for a drop in equity - you'll then start running scared - "Is this strategy now broken". How confident will you be entering when it's dropped down to the bottom 10% line? Essentially it seems like that is what you are waiting for?

The graph shows a damn fine looking equity curve (and I assume the backtest is better or at least as pretty). That's going to be a lot of data all sloping up. The strategies seem to compliment each other well (they both didn't have flat spots at the same time). You've traded them on TST - so you must know the testing mirrors the entries quite well. Assuming the ROI is good I'm not really too sure what you are waiting on.


I can provide that data. Would you like to see each strategy separately, and the strategies combined into daily results? The latter might be more meaningful, but it depends on what you want to look at.

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 kevinkdog   is a Vendor
 
 
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Here are walkforward backtest and incubation results for strategies 1 & 2, based on DAILY results.

The info below contains most of the data I need to answer the question: "should I start trading this with real money?"








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 sixtyseven 
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kevinkdog View Post
I can provide that data. Would you like to see each strategy separately, and the strategies combined into daily results? The latter might be more meaningful, but it depends on what you want to look at.

Thanks for being so open with the details Kevin. Fantastic.

I'd like to see the separate strategy results. Strategy 2 looked twice as good in terms of equity increase - so it's interesting to compare the metrics. Thanks for posting the combined results above though. Good info.
To really push my luck I'd also like to see the separate strategy backtest equity curve. On the same chart as the walk-forward ideally.


kevinkdog View Post
The info below contains most of the data I need to answer the question: "should I start trading this with real money?".


kevinkdog View Post
I might go live with strategies 1 and 2 in late August, once I get a few more trades


kevinkdog View Post
Personally, I usually start whenever I am ready

What do you need to be ready? A handful of trades out of 600+ is insignificant.
Nothing on the face of it stands out to hold you back. Most traders would be chomping at the bit to get this going.
The only thing I can think of is that you took it "live" 2 times in the TST and as it didn't shine you are a little gunshy.

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sixtyseven View Post
Thanks for being so open with the details Kevin. Fantastic.

I'd like to see the separate strategy results. Strategy 2 looked twice as good in terms of equity increase - so it's interesting to compare the metrics. Thanks for posting the combined results above though. Good info.
To really push my luck I'd also like to see the separate strategy backtest equity curve. On the same chart as the walk-forward ideally.

The individual performance reports are attached. The backtest historical equity curves, created using walkforward analysis, can be found in an earlier post. So the performance reports include all the walkforward history, and the "live" history since March 20, 2013.







sixtyseven View Post
What do you need to be ready? A handful of trades out of 600+ is insignificant.
Nothing on the face of it stands out to hold you back. Most traders would be chomping at the bit to get this going.
The only thing I can think of is that you took it "live" 2 times in the TST and as it didn't shine you are a little gunshy.

I'm not gun shy at all. Waiting is just part of the process, and it usually takes 3-6 months. In years past, I'd see a great walkforward equity curve, and then immediately start trading it. More than once, the strategy went bad as soon as I went live. Likely, it was something I was did wrong in testing - there are a million things you can do incorrectly, and they only show up with live data.

"Incubating" - watching a strategy live, and waiting for a few months to make sure the strategy does not fall to pieces in real time, has saved me a ton of money over the past few years. I recommend it for everyone.

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Register to download File Type: xls topstep2a.xls (198.5 KB, 32 views)
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LEARN HOW A PROFESSIONAL TRADER RECOVERED FROM A CLOSE CALL IN THE COMBINE

Tomorrow, August 16, we're spotlighting an important webinar from award-winning private futures trader, Kevin Davey. Kevin has been trading for over two decades, has finished first and second place in the World Cup Futures Trading Championship, and has been recognized as a "Market Master." He'll be discussing his time in the Combine and how he came back from being down -$4,300 to earning a rollover. Plus, you can submit questions and comments during his presentation. Don't miss it!

"Flirting with your Max Drawdown: What it Takes to Overcome Adversity in the Combine"
Presented by Kevin Davey on Squawk Radio
Friady, August 16 at 12:00 PM CST
Broadcast open to guests all day

To join the broadcast:

Follow this link: TST Trading Floor
Choose the "pit" of the product you trade
Check the "Login as guest box"
Enter a Display Name

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 Ddawg 
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Kevin, Do you have any research (or maybe gut instinct), on which of your trades on which days are higher percentage winners?

I have been looking at a strategy of trying to quantify the setup as a percentage, and then trade it with a size relative to its winning percentage. Basically, if I have a setup that runs at 70% (for example), trading it with much larger size. I am testing it out, and have not tried a combine yet...it may not even work.

Do you have any thoughts on how to improve/adapt this idea?

To try and explain it a little more: Lets say you had a strategy to fade the gap if it was more than 8 points, and found it was most effective on Fridays, could you model an expectancy for this idea? If Mon-Thurs was say 55%, but Friday jumped up to 70%, could you increase position sizing on this day to try to ramp up profitability?

Hopefully, this post makes sense.

Thanks
Danny
P.S. I really appreciate the discussion relative to sizing, and all the time you have put into these posts. It is very informative and interesting. Call me crazy but I love talking about trading

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Ddawg View Post
Kevin, Do you have any research (or maybe gut instinct), on which of your trades on which days are higher percentage winners?

I have been looking at a strategy of trying to quantify the setup as a percentage, and then trade it with a size relative to its winning percentage. Basically, if I have a setup that runs at 70% (for example), trading it with much larger size. I am testing it out, and have not tried a combine yet...it may not even work.

Do you have any thoughts on how to improve/adapt this idea?

To try and explain it a little more: Lets say you had a strategy to fade the gap if it was more than 8 points, and found it was most effective on Fridays, could you model an expectancy for this idea? If Mon-Thurs was say 55%, but Friday jumped up to 70%, could you increase position sizing on this day to try to ramp up profitability?

Hopefully, this post makes sense.

Thanks
Danny
P.S. I really appreciate the discussion relative to sizing, and all the time you have put into these posts. It is very informative and interesting. Call me crazy but I love talking about trading


Thanks for your comment. I appreciate it.

A "day of the week" can be useful, if you have enough data backing it up, and you actually test the idea from the start. What many people do, though, is to run a system for a while, and after a couple of months say "Fridays I always win. Maybe I'll try double size on Fridays." With that approach, they are optimizing for day of the week after the fact, and probably without enough data. So, in that case I would not recommend it.

In using "day of week" approaches, I've started with the idea at the beginning of development. For example, I might say "every Friday, if the trend is up, I will look to buy Crude Oil near the close, and sell on Monday morning. The theory is that any natural disasters, terrorist attacks, wars/conflicts that start on the weekend might send crude much higher, especially when the general trend is up." My point is I try to build in the day of week idea before I actually test.


For position sizing purposes, I personally would not use winning percentage as the criteria. I'd use expectancy, or maybe largest loss, instead. The reason is that a 70% win system probably has small wins, and bigger losses. If you trade bigger size, and get hit with a loss, it will hurt a lot more.

But, every system is different, and it may be worth running some random simulations with different ideas, and see if one stands out.

I hope this answers your questions, if not please reply back.

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