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Kevin's TST Combine Journal


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Kevin's TST Combine Journal

  #61 (permalink)
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Big Mike View Post
How would this apply to real world trading year in, year out?

Mike


Yes, I am guilty as charged. I should have explained my reply to @artesimo when he discussed an "optimum strategy to pass the game." I was wrongfully neglecting the "and stayed funded " part of the bigger picture.


As an aside, does anyone have stats on percentage of people who pass the Combine and then stay funded for 6+ months? That would be interesting info.

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  #62 (permalink)
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kevinkdog View Post
As an aside, does anyone have stats on percentage of people who pass the Combine and then stay funded for 6+ months? That would be interesting info.

Has been talked about in almost every TopstepTrader webinar on futures.io (formerly BMT) but don't quote me on specific figures, better to go back and listen to recordings. But I think safe to say the numbers generally conform to what you would see otherwise in a group of more educated people, such as using futures.io (formerly BMT) as example. In other words being profitable for one day, one week, one month does not mean 1-year or consistent long term profitability. The longer the period the more difficult, as you know.

I think one of the challenges of keeping good traders for six months is they tend to go out on their own after a while. But earlier today Michael said they've had one guy for 18 months, for example.

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  #63 (permalink)
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Getting Close...To The Danger Zone


Yikes! One trade today, not a very good one. This completes Day 6. 2 more losing days like this in a row will spell FAILURE.

All I can do is keep on, keepin on. Follow the Plan.







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  #64 (permalink)
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Well, since you are getting close to the Max. DD, just an advice so you don't go full tilt tomorrow if you get really close to it.

As I explained in detail in my TST strategies thread, you can actually dip below the max. DD, as long as you close the day above it. So your real danger is the DLL, because hitting it even unrealized will take you out.
Let's say tomorrow is another bad day and you lose -480$. The DLL is still good, you didn't hit it, but the account is at 28618. You think you only have 118$ to go more down and game is over, but no, you still have the full DLL $500 to use as stop loss for the day, but you can not lose more than 118 by the end of the day.

This dip below the max. DD doesn't make sense, but it is according to the TST rules. Well, I hope I could help you and good luck!

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  #65 (permalink)
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Pedro40 View Post
Well, since you are getting close to the Max. DD, just an advice so you don't go full tilt tomorrow if you get really close to it.

As I explained in detail in my TST strategies thread, you can actually dip below the max. DD, as long as you close the day above it. So your real danger is the DLL, because hitting it even unrealized will take you out.
Let's say tomorrow is another bad day and you lose -480$. The DLL is still good, you didn't hit it, but the account is at 28618. You think you only have 118$ to go more down and game is over, but no, you still have the full DLL $500 to use as stop loss for the day, but you can not lose more than 118 by the end of the day.

This dip below the max. DD doesn't make sense, but it is according to the TST rules. Well, I hope I could help you and good luck!

Thanks for the info. It embarrasses me to no end that I even have to learn about that particular rule of the combine.

It is funny - I've spent more time fretting over the performance of this simulated account than most of my real accounts (which the past week have been hammered!)

I knew I was taking a risk in doing this whole thing publicly. Hopefully readers will benefit from my stumbles!



By the way, Day 7 has barely started, and I'm about 8 ticks negative already. Not too encouraging.

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  #66 (permalink)
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addchild View Post
Will you elaborate a bit?

@kevinkdog's reply covers the gist of my idea, with some minor differences.


kevinkdog View Post
Yes, there is probably a lot of merit to your idea: go for big gains at the beginning, and if you get them, the max drawdown rule becomes less of a worry.

I think the limits to that approach working are the 50% winning days rule, and the daily loss limit. So, with my approach, almost everyday I trade I take on the max risk ($425 before slippage and commissions) per trade, without risking blowing out because of the Daily Loss Limit rule.

But, certainly if one was to get $1,000 or $1,500 profit right at the beginning, they could lay off the risk the rest of the way and take it easy to the finish line.

One idea I had seriously played with was related to your idea:

1) My first trade of day would have stop loss of $425. If I lose I am done for the day.

2) If I win that first trade of the day, I go for homerun with next trade, using profits from first trade. For example:

trade#1 - win $400

trade #2 - trade single contract with $825 stop, or trade 2 contracts with $400 stop, etc.


Unfortunately, I could not get anything to work well with this approach, in the 3 weeks I had to develop the system.

I see, thanks for giving an honest recollection of the strategy construction process. I must admit though, you do have an additional constraint of presenting at the guest webinar, and certainly, the social repercussions of going on air explaining how you either (1) passed the game by gaming the rules or (2) made huge losses right on day 1 because you tried to game it, are very realistic reasons not to try out my suggestion in this particular instance.


Big Mike View Post
How would this apply to real world trading year in, year out?

Mike

@Big Mike

Well, I rarely say something without a good reason behind it. I could see three very important lessons that could be learned from doing it; one that everyone could learn from; two that are more subtle and perhaps not as widely applicable.

(1) <removed>

(2) If you try raise capital for your trading, very often, people will frame you with artificial limitations, which require absurd solutions, although it may not appear so right away. Examples being first loss seeding or unfavorable electronic execution agreements. Learning to "game the rules" is in fact a realistic problem that most people face.

(3) Actually, the way Kevin described it had the same intuition as that behind a hugely successful macro trade in the Japanese market in early 1990. The analyst consensus on Japan at that time was that it was about time for the market to decline (classic, you either do it via DCF or relative valuation with P/E and find that the multiples were huge), but no one was willing to bet against the momentum. Now, Japanese fund managers had been expected to return 8% YOY to their investors for years, this seems like a passing assumption, but it was indeed so ingrained in their culture it was a hard-and-fast rule. In 01/1990, the short-term interest rates were about 7.25%, giving enough room for fund managers to speculate in equities in the first month, and escape to long term bonds after that to meet their quotas (pass their own TST combines ). One dude reasoned that this incentivized a flight of liquidity in February, and true enough, the Japanese stock market crashed. I don't usually think highly of macro trades, but you have to say Tudor Jones had some amazing economic insight.


Last edited by artemiso; April 4th, 2013 at 11:25 PM. Reason: Made explanation clearer, removed a paragraph for non-disclosure reasons
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  #67 (permalink)
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kevinkdog View Post
Yes, there is probably a lot of merit to your idea: go for big gains at the beginning, and if you get them, the max drawdown rule becomes less of a worry.

I don't really like this idea, but there might be a better approach. If you have a strategy where the set ups occurs very infrequently, wait until the occasion comes and start your Combine then. For example if you trade nat. gas and you can play well the Thursday 10:30 reports, start the Combine that day.

Wouldn't going for small gains in the beginning be a better approach? Using less contracts and build it up slowly in the first few days...

The same can be used daily for avoiding hitting the DLL to start out small and once you built an extra profit cushion you go heavier in the afternoon. This way you have more wiggle room to be wrong...

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  #68 (permalink)
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Pedro40 View Post
I don't really like this idea, but there might be a better approach. If you have a strategy where the set ups occurs very infrequently, wait until the occasion comes and start your Combine then. For example if you trade nat. gas and you can play well the Thursday 10:30 reports, start the Combine that day.

Wouldn't going for small gains in the beginning be a better approach? Using less contracts and build it up slowly in the first few days...

The same can be used daily for avoiding hitting the DLL to start out small and once you built an extra profit cushion you go heavier in the afternoon. This way you have more wiggle room to be wrong...

Somebody must have tried your Nat Gas idea...

"Natural Gas (NG) - (Product is not permitted
to be traded within 5 minutes before
or after the Natural Gas number is released) "


I was really interested in the "go heavier in the afternoon" idea, since it could apply to all trading, not just the Combine. I plan to look more into the idea on some intraday systems I am working on.

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  #69 (permalink)
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kevinkdog View Post

I was really interested in the "go heavier in the afternoon" idea, since it could apply to all trading, not just the Combine. I plan to look more into the idea on some intraday systems I am working on.

I be be hesitant to approach the Combine, or trading in general this way. Unless, your journal shows you have a better likelyhood of a profitable trade in the afternoon. If your plan gives you advantages during certain times of the day or days of the week, then by all means take advantage of that.

Assuming each trade has roughly the same probability, then the same risk should be used on each trade.

Plan your trade, trade your plan.
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  #70 (permalink)
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Brewer20 View Post
I be be hesitant to approach the Combine, or trading in general this way. Unless, your journal shows you have a better likelyhood of a profitable trade in the afternoon. If your plan gives you advantages during certain times of the day or days of the week, then by all means take advantage of that.

Assuming each trade has roughly the same probability, then the same risk should be used on each trade.


Agreed. This would have to be verified through historical testing. My initial testing did not yield anything worthwhile, so I am not doing it in the Combine.

The idea comes from the fact that most systems I have developed do better with bigger stops, and having a daily loss limit (stop) of $400-500 per trade is really a tough constraint. If the stop was instead $800-1000, a lot more trading systems become plausible.

Development of such a "two step" system is much more difficult, though.

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