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Kevin's TST Combine Journal

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Hi Everyone -

A few weeks ago the folks at TopStep Trader approached me about doing a guest webinar at their weekly Friday Educational session.

Since I love talking about trading, I eagerly said yes, provided I could do a Combine as part of a 2 webinar series.

They said "yes," so here I am!


Here's how it will go:

1. On Friday March 22 I'll be presenting at TopStep (details in the next post).

2. I started a 20 Day Combine today (March 20).

3. I'll return to TopStep on Friday, May 17th to show everyone how I did - good or bad.

4. Between March 22 and May 17th, I'll update my progress in this journal. I won't be revealing the strategies I am using, but I will provide a whole lot of detail about my experience. I will also gladly answer any questions.


I hope you find my "Combine Experiment" useful!

Kevin

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Join us for a TopStep Trader educational webinar with Kevin Davey...

You’re invited to attend our Featured Educational Guest of the Week segment with Kevin Davey Friday March 22, 2013 at 12 PM CST (note that this is Central Time).

Kevin's topic will be "Developing A Trading Plan To Pass the Combine and Stay Funded." It should be pretty interesting, since as part of the webinar, Kevin will actually be trying his own Combine. If you don't know what a "Combine" is, just check out TopStep's website. It is an interesting way to show your trading skills, and possibly get funded.


Remember, this dynamic, hands-on presentation will be held LIVE Friday, March 22, 2013 at 12 PM CST. Squawk Radio will be open to guests beginning at 7:15 AM CST (be sure to invite friends and colleagues).

To join the broadcast, follow this link TST Trading Floor and then:

Choose the "pit" that applies to the product you trade
Check the "Login as Guest" box
Enter a Display Name

We look forward to seeing you in the chat room Friday. Questions? Contact us at 312.252.9490 or support@TopstepTrader.com.

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Someone asked me via PM why I am doing a Combine. Here is what I told that person:

TopStep approached me about doing a webinar, and as I was thinking of a topic, I thought "it would be fun to try the Combine, and report on the results." That is how it started.

My motivation is that I always like trying different trading styles, for diversification and smoothing my overall equity curve. The requirements of the combine are strict, and way different than what I use (I had only one day trading system before this, for example).

So, developing a strategy for the Combine really stretched my thinking. It also put my development process to the test.

I ended up with what I think is a pretty good mechanical approach, one that I might trade with my own money even if I do not pass the combine (I have about a 48% chance of meeting all Combine goals). I started working on the strategy in early March, so given the timeframe I had to work with, I'm pretty satisfied with the results. Of course, I'd love to pass the Combine!

For the Combine, I am trading 3 mechanical strategies, at different times of the day and night. If I was running them automated, it would be fairly easy. Alas, I am not, since TopStep order entry through T4 is manual. It is a bit of a pain this way, but again, part of developing the strategy was knowing the rules and logistics in advance.

So, for me, this is a fun experiment, and a challenge for my trading. Pass or fail, I have already improved what I do in my day to day trading. And I may even have a new strategy to add to my portfolio.



Please join me tomorrow at TopStepTrader Squawk Radio at 12 PM CT.

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@kevinkdog, glad to hear it and best wishes for the combine!!

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I completed Day 1 of the Combine on Mar 20. I took 2 trades (see below). Started out Day 1 on the wrong foot...

I am running 3 different strategies for the Combine, all for the Euro Currency...

Strategy #1 - 105 minute bars - runs from 6 PM ET to 7 AM ET
Strategy #2 - 60 minute bars - runs from 7 AM ET to 2 PM ET
Strategy #3 - 30 minute bars - runs from 2 PM ET to 4 PM ET


Each strategy is independent, although they are linked by the $500 daily loss limit. So, for example, if Strategy #1 has a losing trade, I probably won't trade Strat #2 or Strat #3 that day. I do not want to break the daily loss limit rule (because then it is "game over.")


Each strategy has a different function/objective, which I'll probably get into later.

PLEASE feel free to ask any questions, or make any comments.








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Hey Kevin,

Just wanted to thank you for the webinar. I liked your Excel spreadsheet. Is this something you'd be favorably disposed to share?

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trendisyourfriend View Post
Hey Kevin,

Just wanted to thank you for the webinar. I liked your Excel spreadsheet. Is this something you'd be favorably disposed to share?

I'm glad you liked the webinar. I love doing them, but I can never tell if people are on the edge of their seat listening, or just sleeping... hopefully no one was doing the latter!

The spreadsheet I showed was one that I kind of cobbled together, and I think I'd only confuse people by distributing it as-is.

So, please give me some time, and I will clean it up, and post it (and explain it).

I will also post a simple Monte Carlo spreadsheet that I use for evaluating other (non-Combine) strategies.


Kevin

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While I am still working on cleaning up the Monte Carlo tool I showed in the webinar, here is another Monte Carlo simulator I use everyday.

I wrote this in Excel, with macros, and I use it to evaluate potential strategies. I have included a screenshot below, with some notes.

If you are good at Excel, you can easily modify this to suit your own needs.


Just for kicks, I put the combined results of the strategies I am using for the Combine. Compared to other non-Combine systems I currently trade live, this one looks really good. My plan is to watch it for a few months live (during the Combine), and then if the "incubation" performance is in line with the results shown, I'll probably start trading it live.







By the way, if you use this tool to evaluate your "live" systems, please feel free to post results. I think it would be neat for people to see how others are doing.

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Thanks for the simulator, here is what i got .

-Jinhar

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jinhar View Post
Thanks for the simulator, here is what i got .

-Jinhar


I have never seen real money performance that good. Pretty awesome!

Just for reference, many pros (CTAs) consider a number of 1.0 - 2.0 a good factor for annual % return / maximum % drawdown, especially over a 3-5 year period. Your 1 year number is at 40.

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kevinkdog View Post
I have never seen real money performance that good. Pretty awesome!

Just for reference, many pros (CTAs) consider a number of 1.0 - 2.0 a good factor for annual % return / maximum % drawdown, especially over a 3-5 year period. Your 1 year number is at 40.

Thanks my knowledge with stats is very limited I will have to take your word on it , I just used a smaller sample for analysis will use larger set later on and see what that produce over different simulations. happy trading and thanks again for this tool.

jinhar

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jinhar View Post
Thanks my knowledge with stats is very limited I will have to take your word on it , I just used a smaller sample for analysis will use larger set later on and see what that produce over different simulations. happy trading and thanks again for this tool.

jinhar

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I would recommend putting all the trades in the list (column A on the left), as that will give more meaningful statistics. The simulator only pulls 1 years worth of trades (in your case, you indicated 1000 trades per year, or 4 per day), so it should be drawing from the whole population of trades, not just a subset.

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kevinkdog View Post
I would recommend putting all the trades in the list (column A on the left), as that will give more meaningful statistics. The simulator only pulls 1 years worth of trades (in your case, you indicated 1000 trades per year, or 4 per day), so it should be drawing from the whole population of trades, not just a subset.

I did put each trades just this system is new one which m currently using so data is less then old one, the old system had more.data then this ... no.point to analyze half data..

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Here is the larger set .. Thanks.

jinhar

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jinhar View Post
Here is the larger set .. Thanks.

jinhar

That is still really good. Is that more than 1 year's worth of results? If less than 1 year, results might be misleading, since the simulation is for a year.

I typically use 5-10 years worth of data.

Are you trading this currently with real money?

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That is still really good. Is that more than 1 year's worth of results? If less than 1 year, results might be misleading, since the simulation is for a year.

I typically use 5-10 years worth of data.

Are you trading this currently with real money?

Yes trading live ... I haven't traded for 10 years .. So i cant say much about that only trading for half of what you suggested till what i can tell for 4+ years i am using same methodology just changing filter sets the smaller data set first simulation is latest set of filters applied on last years system so far performance is better then last same showed by your simulator too now i can go ahead more confidently... as i said stats are something i am not great at you made a tool available i just used it .. only thing important for me is making profit consistently till that's there m good. Thanks for taking time and analyzing the data.

Thanks.

- Jinhar

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I am afraid it might be off-topic from your Combine thread,

here is my stat, list contain 214 trades spanning over 34 months , since May-2010 to March -2013.

Can you explain why

1) Ruin is coming zero ?
2) why graph of Annual Rate of return - Start Equity decreases exponentially ( look so from diagram ).

any suggestion for tweak ?

PS : for 2)...is that so Simulator adjust Start Equity to profit re-invested level ?

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devdas View Post
I am afraid it might be off-topic from your Combine thread,

here is my stat, list contain 214 trades spanning over 34 months , since May-2010 to March -2013.

Can you explain why

1) Ruin is coming zero ?
2) why graph of Annual Rate of return - Start Equity decreases exponentially ( look so from diagram ).

any suggestion for tweak ?

1. In your case, "ruin" is going from taking your account down to $40,000 within a year's time. Since your result is "0%", it is saying that the probability of you hitting "ruin" within 1 year is basically zero.


2. Your annual rate of return will decrease as your starting equity increases, since the program assumes you are trading 1 contract throughout the year. (If you are good at excel macros, you can easily add your own position sizing to this). So, think of it this way: If you start with $100,000 and make $25,000, your return will be 25%. But double your equity (not your size), and you'll start with $200K, still make $25K, and your return will be $12.5%.

Hope this helps!

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kevinkdog View Post
1. In your case, "ruin" is going from taking your account down to $40,000 within a year's time. Since your result is "0%", it is saying that the probability of you hitting "ruin" within 1 year is basically zero.


2. Your annual rate of return will decrease as your starting equity increases, since the program assumes you are trading 1 contract throughout the year. (If you are good at excel macros, you can easily add your own position sizing to this). So, think of it this way: If you start with $100,000 and make $25,000, your return will be 25%. But double your equity (not your size), and you'll start with $200K, still make $25K, and your return will be $12.5%.

Hope this helps!

Ok got that.

If i choose stop trading level to some think like 75K to 85K , near good comparable to 100K, then ruin will eventually grow up .

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devdas View Post
Ok got that.

If i choose stop trading level to some think like 75K to 85K , near good comparable to 100K, then ruin will eventually grow up .

Yes, if you started with $40,001 and your ruin point was $40,000, your chance of ruin would probably be near 100%. The more equity cushion you initially have, the more likely you are to survive.



This is a super important lesson, especially for newbies who try to trade with a small account:

Take ANY* profitable trading system, and if you start with too small of an account, your chances of hitting your ruin point can almost be guaranteed.





* Obviously, a trading system that never loses, and has no intra-trade drawdown, is the exception. Think of interest on a bank account. That kind of "system" will never experience ruin, unless of course the government decides to take it. But that could never happen, right?

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For anyone interested, here is the You Tube version of the recorded webinar:

Kevin Davey presents, "Developing a Trading Plan to Pass the Combine and Stay Funded" - YouTube

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Results at the bottom as of Day 2 of my Combine...



The most interesting thing today was in me "chasing" a signal. I'm sure it happens to all of us...


For my overnight system, every 105 minutes I'll get notified if I have to place an order. Usually, I am close by the computer, but tonight I got there a little late (a sick child caused today's delay). Anyhow, when I finally saw the signal, the strategy order was already filled, and had run about 2-3 ticks. (this is why I like automated systems, rather than manual.)

Of course, the right thing to do would have been to immediately enter at market in T4 platform, thus establishing the position in the Combine.

Instead, since I was a bit mad and frustrated that I was late on the signal, I decided to get some of my missed profit back by placing a limit order to get a better price.

(If you've been trading a while, you probably know where this story is going...)


In the end, I finally got filled in the Combine acct 6 full ticks from my strategy entry point. So, I lost 4 ticks in my attempt to save 1 or 2 ticks. In the grand scheme of things, it isn't a big deal, but to a disciplined trader, it should be a big deal. These mistakes can add up!

The mistakes I made here:

1. Acting late on a signal. Eventually, there will be a big trade that gets missed because of this. If you have a system that requires your presence at certain times, you have to be there!

2. Chasing the market to get a better entry. I should have just entered at market.


Anyhow, I am close to even on the combine...


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Whoops, I forgot to show the trade from today. My stop was around 1.3066.

Looks like my strategy exited wayyy too early!



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trendisyourfriend View Post
Hey Kevin,

Just wanted to thank you for the webinar. I liked your Excel spreadsheet. Is this something you'd be favorably disposed to share?

@Trendisyourfriend -

As promised, here is the Monte Carlo spreadsheet I used for the Combine, to determine probabilities. It should be fairly self explanatory.

You do need to enter in results as "daily results" NOT individual trades.


Here are the results for my Combine system. I assume I will be trading 28 days in the 2 month period.





Please post questions here, and I will try to answer them.


Enjoy!

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Kevin,

During your TST webinar you stated that due to the time constraints of starting your combine, you were not able to incubate your strategies. You mentioned that you used an alternative method to analyze your strategies in place of the incubation phase. Could you explain the alternative method you used. Thanks.

KS

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KSurfmann View Post
Kevin,

During your TST webinar you stated that due to the time constraints of starting your combine, you were not able to incubate your strategies. You mentioned that you used an alternative method to analyze your strategies in place of the incubation phase. Could you explain the alternative method you used. Thanks.

KS


Thanks for the question, I'm glad you asked!

Normally, if I am doing my typical evaluation with walkforward testing, I will do it up to the present day. If the results look good, it goes into "incubation," where I look at the strategy every month or so going forward for 3 to 6 months. If results during incubation look "similar" to walkforward results, I may then decide to trade it.

For the combine, I started a brand new development effort on March 1, and began trading on March 19, leaving no time for incubation.

So I cheated a bit.

Instead of running walkforward until March 1, I ran it to Dec 31, 2012. The period from Jan - Mar 2013 then became a pseudo incubation period.

You can see the results below. I'm not real thrilled with the incubation performance. Had time not been an issue, I would choose to incubate this a bit longer, expecting new equity highs. This is, in fact, what I am doing before I commit my own funds to it.

Why is this "pseudo" incubation bad?

1. If the results of incubation would have been bad, I would have simply developed another system that gave better results. That sounds like a form of optimizing to me...

2. The Jan - Mar data was not truly "out of sample" as it should be, since deep in my brain, I generally know how the Euro has behaved these past few months. Maybe that knowledge crept into my thinking during rule creation. If so, it would be a case of unintentional hindsight bias.


I hope this explains it!


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Not very interesting today. One trade last night, profitable. That was with Strategy #1, which is intended to be a high winning percentage strategy. Almost had an entry with Strategy #2 (price came within 1 tick of my limit entry) that would have been a 35-40 tick winner. Oh well.

Following the trading plan 100% so far. We'll see where it leads!




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  #29 (permalink)
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Kevin:
Thanks, what are the rules of the Combine?

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Kevin:
Thanks, what are the rules of the Combine?

I'd look here:

Trading Simulator | Trading Program | TopstepTrader Combine

Make sure to view the Scouting Criteria rules too.

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Kevin: Thanks, very interesting!

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No trades today. All trades so far are shown at bottom (maroon chart is 6PM-7AM, black chart is 7AM - 2PM)
******************************************************************************

Why Combine?

I thought I'd share with you why I am doing the Topstep Trader Combine.


As a trader, I live in near constant fear that strategies I trade today, that work today, won't work tomorrow. Well, constant fear is a little strong, but it is always in the back of my mind. And maybe, my current strategies will last for years and years (some have), instead of breaking tomorrow. But I feel the need to continue to create new strategies, which also happen to get better the more I develop.

I also worry that maybe I am just doing everything the wrong way (or in a sub-optimal way). I read and see people on the Internet that claim trading is easy, that they are raking in thousands a day with little effort, etc. Maybe they are, maybe they aren't. I don't know (although I have my doubts). But I do know that their claims of success make me wonder if I am doing things right, because for me, trading is anything but easy. "Trading is the hardest way to make easy money" is what I tell people. And the few times I thought trading was easy were inevitably followed by a humbling drawdown!

So, I am always on the lookout for ways to trade differently than I do today. Maybe it is discretionary trading, or order book trading, or different markets, different styles, etc. Maybe there is an "easier" way out there, and maybe there isn't, but I have to look. (As an aside, one big benefit in trading different styles etc. is in the diversification aspect. I am a huge fan of diversification. It really does smooth the equity curve.)

That is why I am doing the Combine. To compete, I had to create a strategy from scratch that met strict criteria. Some of the conditions are meaningless to me personally (I could care less if I win more than 50% of my trades), but it was a new way of thinking/developing for me. I really had to expand my comfort zone on strategy development to create something for the Combine.

In the end, passing the Combine would be really nice, but with the strategies I am trading, I know there is a good chance I won't pass. And that is OK, since I still might trade these strategies with my own money, and I now have a much better, focused technique for developing intraday strats.

So, pass or fail, this has been a great exercise. I think the strict rules they have for the Combine can benefit most traders out there, even if you don't even test them in the Combine.



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kevinkdog View Post
I also worry that maybe I am just doing everything the wrong way (or in a sub-optimal way). I read and see people on the Internet that claim trading is easy, that they are raking in thousands a day with little effort, etc. Maybe they are, maybe they aren't. I don't know (although I have my doubts). But I do know that their claims of success make me wonder if I am doing things right, because for me, trading is anything but easy.

I hear ya on that man. For all we know, you and I could be the best traders on earth, but we'll probably always wonder where we stack up to a certain extent.

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Kevin-

Listened to your webinar about the TST combine on Youtube. I've been practicing and doing combines on TST for 7 months. Just wanted to say that your emphasis on having a tested plan that can have a decent chance to pass all of the TST metrics really hit home with me. I've thought of these things more intuitively lately... but your webinar really showed me that I need to be very objective about my approach. Concluded that I have to be very patient and only take trades that have a favorable probability of picking 50% winners, avoiding max drawdowns, avoiding other rule-breakers, etc. There's no point in playing the game (TST combine) if you're not trying to avoid breaking the rules (game over) at all costs. You're right to only trade 2 to 4 contracts in my opinion. Yes, it makes it hard to hit the profit target but it keeps you in the game w/ a chance to pass w/ a few strong days and then tight risk control on the other days when you're mostly chopping around.

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Ezeboog View Post
Kevin-

Listened to your webinar about the TST combine on Youtube. I've been practicing and doing combines on TST for 7 months. Just wanted to say that your emphasis on having a tested plan that can have a decent chance to pass all of the TST metrics really hit home with me. I've thought of these things more intuitively lately... but your webinar really showed me that I need to be very objective about my approach. Concluded that I have to be very patient and only take trades that have a favorable probability of picking 50% winners, avoiding max drawdowns, avoiding other rule-breakers, etc. There's no point in playing the game (TST combine) if you're not trying to avoid breaking the rules (game over) at all costs. You're right to only trade 2 to 4 contracts in my opinion. Yes, it makes it hard to hit the profit target but it keeps you in the game w/ a chance to pass w/ a few strong days and then tight risk control on the other days when you're mostly chopping around.

Thanks for the comment. You packed a lot of good points into your first futures.io (formerly BMT) post!

You describe exactly how I'm playing the Combine "game." My primary profit strategy (Strategy #2) actually has no trade profit target - if I get 1 or 2 big winners from it during the combine, I'll probably be OK profit wise. The other 2 strategies should contribute a little profit, but they are really intended to boost other metrics (like win %, max drawdown, etc).

If I don't get a runner like that, I probably won't hit the profit target, but hopefully I'll meet the other rules (which in my book will be a partial success).


Good luck on your Combine!

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No trades for the Combine on Thursday 3/28. Over the long run, there should be trades on about 70% of days, or around 28 days for a 2 month Combine (40 possible trading days).

So far, I've traded 3 of 7 days. On days I do not trade, I almost always place orders that are not hit (two days have been within a few ticks of being hit).


When I get to 5 days completed, I'll update my chances of passing the combine requirements, based on actual performance to date. I'll be using the spreadsheet you can find earlier in the thread.


Have a great Easter weekend everyone!

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Combine, Day 4 of 20


Not a good day. 3 signals, see below. 2 were losers, 1 was a winner. Guess which trades I took?


If there was no daily loss limit, I would have taken all 3 trades, but still would have lost on the day.

For the middle trade (the profitable one), my system stop, if hit, would have knocked me out (over $500 daily loss). So, I did not take the

trade (that was per my plan). That was the right decision (although that trade ended up only taking 2 ticks of heat).

OK, so I have at least 16 days left, and $2500 in profit to make. It is going to be tough...

At this point, I'll do the only sensible thing: follow my plan exactly, just as I have been doing.








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kevinkdog View Post
OK, so I have at least 16 days left, and $2500 in profit to make. It is going to be tough...

Unless you have some self-imposed limit, you have more than 16 days left--it's a 20 day minimum, with a 60 calendar day limit, so you have about 40 trading days total to meet the objectives. So you actually have about 35 or so trading days available for you to trade, as long as you stay within loss parameters.

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kevinkdog View Post

At this point, I'll do the only sensible thing: follow my plan exactly, just as I have been doing.



This is the only thing you need. Follow your plan. keep controlling risk.

Best of luck.

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josh View Post
Unless you have some self-imposed limit, you have more than 16 days left--it's a 20 day minimum, with a 60 calendar day limit, so you have about 40 trading days total to meet the objectives. So you actually have about 35 or so trading days available for you to trade, as long as you stay within loss parameters.

Yes, you are correct.

Based on the histories of the systems I developed specifically for this Combine, I believe I will trade 16-24 more days in what is left in the 2 month period.

An interesting question: what will I do if my system doesn't give me 20 trading days in the 2 month period? Will I take non-system trades just to hit the 20 day mark? I don't know...

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A word of advice to anyone trying the Combine...

Make sure your stop loss is at least 1 or 2 ticks away from your Daily Loss Limit. There is slippage in the Simulator, just like real life.

For example, had I used a 5 tick stop on my second trade today (and incurred any slippage), I would have FAILED the Combine for exceeding the Daily Loss Limit of $500.

As it turned out, I used a 4 tick stop, was slipped 1 tick on the fill, and ended the day down $497.50, after commissions. Pretty close to my $500 daily limit!

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I just wanted to say, boy, this guy likes to live dangerously!

2 bucks away from the DLL, now that's what I call risk taking! As you mentioned it could be slippage, or forgetting about the commission, and you are out of the game. I personally always stop at least 20 bucks away from the DLL.
There is simply no point in getting very close, chances are the market won't turn back just right at your DLL...

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Pedro40 View Post
I just wanted to say, boy, this guy likes to live dangerously!

2 bucks away from the DLL, now that's what I call risk taking! As you mentioned it could be slippage, or forgetting about the commission, and you are out of the game. I personally always stop at least 20 bucks away from the DLL.
There is simply no point in getting very close, chances are the market won't turn back just right at your DLL...

Yes, "normal" losing days for me should be $430, assuming one trade. The last trade I took today was around 2:30 PM, and there usually is not much movement (hence the small stop loss), but the liquidity is also a lot less (hence the 1 tick slippage).

Thinking about it now, I probably should have just passed on the last trade, too - given that 2 ticks of slippage in EC is very possible.

I think I got away with some bad judgment today...

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kevinkdog View Post
A word of advice to anyone trying the Combine...

Make sure your stop loss is at least 1 or 2 ticks away from your Daily Loss Limit. There is slippage in the Simulator, just like real life.

For example, had I used a 5 tick stop on my second trade today (and incurred any slippage), I would have FAILED the Combine for exceeding the Daily Loss Limit of $500.

As it turned out, I used a 4 tick stop, was slipped 1 tick on the fill, and ended the day down $497.50, after commissions. Pretty close to my $500 daily limit!

@kevinkdog

I think if your total losses exceed 500 during a week time period that you will no longer be able to trade the account till the following week. You might want to check to be sure.

Can someone else confirm this is correct?

Robert

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Silver Dragon View Post
@kevinkdog

I think if your total losses exceed 500 during a week time period that you will no longer be able to trade the account till the following week. You might want to check to be sure.

Can someone else confirm this is correct?

Robert

I think that requirement is in step 3, once you pass the combine (which in TST terminology is "step 2.").

You can see the weekly loss limit here: Live Trading Room | Trading Program | Topstep Funded Trader


I noticed the weekly requirement for step 3 after I developed my system, which of course may have bigger losses than that in a week, since the daily loss limit = weekly loss limit.

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Silver Dragon View Post
I think if your total losses exceed 500 during a week time period that you will no longer be able to trade the account till the following week. You might want to check to be sure.

Can someone else confirm this is correct?

In the Live Trader Prep, which I assume most traders are having to do after a successful combine, there is a daily and weekly drawdown of the same amount. This is also the case for funded traders. This is quite a tough requirement, because if you have a bad day or two at the beginning of the week, even if you don't approach your daily loss limit, it limits your options for the rest of the week.

However, I think it is a good requirement. It has the purpose of "slowing down" a slide. In the past I have had a blow-up kind of day usually after a down day or two, usually not after a few successful days. So, while it's frustrating to have to sit out days that one would be profitable trading potentially, it kind of serves as a cool down period.

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No trades today...

I thought I'd share with you some info on the strategies I developed for the Combine, along with how I developed them. If you are thinking about the Combine, or thinking of developing a strategy to meet the Combine's very strict rules, maybe this will give you some help.

First, I created a brand new strategy specifically for the Combine. I started from scratch, rather than try to modify a system I already had.

Why?

Mainly, I wanted to make sure I designed the system with the Combine rules in mind. I know a few people who've taken what they normally trade, and tweaked it a bit for the combine. Or worse yet, they were so confident in their strategy, that they did not even bother to check their strategy against the Combine goals. I think both of these approaches are wrong.

So, I started fresh by first reading the Combine rules and requirements. Obviously, you have to meet all the requirements, or you fail.

Some requirements, like the total profit or the max drawdown, are somewhat out of your control once you develop a system. Even a winning system could fail the Combine, if the trades fall the wrong way. Trading is all about probabilities.

Other requirements, such as max loss in a day, always having a stop, using a non-automated platform (like T4) for order entry, or being out by 4:10 PM ET, are COMPLETELY in your control. Well, max loss in a day is mostly in your control, except for excessive slippage - but you should account for it in your calculations. If you can't meet these requirements, there is no way you'll meet the profit and drawdown requirements.

Therefore, I made sure I read through the requirements 4 or 5 times, and asked TST questions when I had them. For example, TST's "max drawdown" is really "max drawdown of initial captital" not the traditional max drawdown based on highest equity point. That is an important difference when you are designing a strategy.


Next no-trade day I'll talk about some of the key points with the development of my strategies.

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  #48 (permalink)
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Thanks for sharing your TST experiences, Kevin. I think it really highlights a way of approaching the combines that we don't often get to see. Kudos for the transparency you are providing.

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Other requirements, such as max loss in a day, always having a stop, using a non-automated platform (like T4) for order entry, or being out by 4:10 PM ET, are COMPLETELY in your control. Well, max loss in a day is mostly in your control, except for excessive slippage - but you should account for it in your calculations. If you can't meet these requirements, there is no way you'll meet the profit and drawdown requirements.

It may have already been mentioned, but you can use Sierra Chart for automated trading within the Combines. I am sure you can with NT as well, but I don't have any experiences with it. My guess is it would be a short learning curve for you before you are up and automatically running with SC.

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Thanks for sharing your TST experiences, Kevin. I think it really highlights a way of approaching the combines that we don't often get to see. Kudos for the transparency you are providing.


It may have already been mentioned, but you can use Sierra Chart for automated trading within the Combines. I am sure you can with NT as well, but I don't have any experiences with it. My guess is it would be a short learning curve for you before you are up and automatically running with SC.


Thanks for the kind words. I really want this journal to be useful, so everyone please feel free to ask questions.

I was going to use Ninja trader for auto trading, but it is not up and running with the Combine. Ninja provides a nice dll that interfaces between Tradestation and Ninja (so I can use Tradestation to generate signals, then send them to Ninja).

If I end up trading this strategy with my own money, I probably will look to have it run automated - I don;t like checking for new orders every hour or so.

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Fairly boring day today. Due to family commitments, I had to exit my short and hour and a half early, and was not able able to take 1 trade, since I was not near my computer. Net impact - saved me 3-4 pips, and kept the day a winning day (maybe it will be important later on, since there is a requirement for percentage of winning days).

Later today I'll update probabilities, as I am now 25% completed with the combine.





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As I have said many times, even with a winning strategy, you have no guarantee to pass the Combine. It is really about probabilities.

So, I use a Monte Carlo probability calculator I created (found earlier in the thread) to calculate the odds of success for 4 major Combine criteria:

Reaching Profit Target - how likely am I to hit the Combine profit requirement?
Stay under Max Drawdown? - how likely am I to stay above the max drawdown value (which is actually the drawdown from the initial account value)?
50% or Higher Winning Days - How likely am I to have more than 50% winning days?
Stay Under Daily Loss Limit - How likely am I to stay under the daily loss limit?


With 5 days completed, I estimate that I'll trade for another 23 days in the 60 calendar day window.

It looks like my odds of passing the combine have gotten significantly worse. I am more likely to exceed the max drawdown, and I am likely NOT to hit the profit target.


This obviously could change with a big positive trade or 2, but I would not bet on it...

I'll update this again at the halfway (10 day) point...



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kevinkdog View Post



I see you have based "original" probabilities on trade list which contain the historic backtesting trades ( correct me if its something else . ) and added next 5 day combine trades in list to reach "current" probabilities ?

If its so then how many days of trade in that trade list ?
and how you decided to take that number of days in trade list.

Cause i feel this might change your "original" probabilities if you change the trade list, that would directly depend on number of days.

Hope i clearly explain my doubt to you.

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devdas View Post
I see you have based "original" probabilities on trade list which contain the historic backtesting trades ( correct me if its something else . ) and added next 5 day combine trades in list to reach "current" probabilities ?

If its so then how many days of trade in that trade list ?
and how you decided to take that number of days in trade list.

Cause i feel this might change your "original" probabilities if you change the trade list, that would directly depend on number of days.

Hope i clearly explain my doubt to you.


For the Trade List in the Monte Carlo calculator, I took all the daily results I had from my walkforward testing. I believe it was about 3 years worth of walkforward test results.

For the original probabilities, I assumed I would be trading on 28 days in the 60 day calendar combine, based on history of around 170 active trading days per year.

For the original case, I assumed I started with $30,000, and had to make $2,000 during the combine. I had 28 trading days to do this.

After 5 trades, I updated the inputs - start with $29,520, and had to make $2,480 during the combine, in 23 trading days. So, my odds of success have fallen.


I hope this answers your question. If not, please explain some more and I'll try to answer.



Those results don't include today's results, which I'll post later. (Spoiler: passing just got even tougher after today!)

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Just a thought off my head, I just looked at the game rules, and it seems for the optimum strategy to pass the game, your riskiest trades should be your first few. I think you should have been extremely aggressive at the start rather than applying a consistent set of rules throughout the game.

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kevinkdog View Post

For the original case, I assumed I started with $30,000, and had to make $2,000 during the combine. I had 28 trading days to do this.

After 5 trades, I updated the inputs - start with $29,520, and had to make $2,480 during the combine, in 23 trading days. So, my odds of success have fallen.


thanx , that make sense now.

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Just a thought off my head, I just looked at the game rules, and it seems for the optimum strategy to pass the game, your riskiest trades should be your first few. I think you should have been extremely aggressive at the start rather than applying a consistent set of rules throughout the game.

Will you elaborate a bit?

.
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artemiso View Post
Just a thought off my head, I just looked at the game rules, and it seems for the optimum strategy to pass the game, your riskiest trades should be your first few. I think you should have been extremely aggressive at the start rather than applying a consistent set of rules throughout the game.

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.

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The problem is -- are you trying to game the Combine to pass? Or are you developing useful skills for real-world trading for years to come?

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Big Mike View Post
The problem is -- are you trying to game the Combine to pass? Or are you developing useful skills for real-world trading for years to come?

Mike


I don't see the 2 as mutually exclusive, although they certainly can be. At its core, trading is just a game, and the Combine is just a game, just like life is just a game. There are rules to all of them, and the goal (at least for me) is to develop tactics and strategies to be as successful as possible in all 3.

The trick is realizing the "game" isn't just passing the Combine. It is passing the Combine AND getting and staying funded. At least, that is the game I am trying to win (pretty unsuccessfully at this point, I might add!).

If you were to say "the combine rules are the trading rules for the rest of my trading career" you'd probably do pretty well, if you survived. Most people would not survive, but that might be the best thing for them (instead of spending years and years losing).

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kevinkdog View Post
go for big gains at the beginning

.
.
.


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.

How would this apply to real world trading year in, year out?

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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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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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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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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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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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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.

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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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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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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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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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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.

Would one of the larger combines work better? This would give you more room. But of course the profit objective become larger as well.

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

Quite to the contrary. Maybe if you have a wide DLL in your own account, but the combine has special rules with a tight DLL and you have to strategize accordingly.

Let's have an example. In the 30K Combine Kevin is trading 2 ES contracts. the DLL says he can be wrong up to 4.5 points, and no more. If he has two 2-2 points losers at the beginning of the day, the trading for the day is pretty much over, because very little cushion is left. Now if he has 2-2 pts winners, he has a 8 pts cushion and he can go 3 contracts for the next few trades.

The same logic if he starts out with 1 contract. If he wins 4 points in the morning, his cushion for even 2 contracts is now 7 pts for the rest of the day. In my first Combine I played it too safe, used only 1 contract and although I was profitable, I didn't make enough...

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Brewer20 View Post
Would one of the larger combines work better? This would give you more room. But of course the profit objective become larger as well.

Good point. Potential Combiners should take a look at the different levels, because the profit targets , daily loss limit, and max drawdown don't scale linearly.

Compare the $30K and $150K 20 day Combines, for example...

The starting amount is a factor of 5.
The max position size is a factor of 5.
The Daily loss limit, though, is a factor of 6. (better to do $150K)
The max drawdown is only a factor of 3 higher. (better to do 30K)
The profit factor is a factor of 8 higher, though. (better to do 30K)

So, depending on one's strategy, one size combine may be much more desirable than another.

The caveat here is that after the Combine, some of the rules change, so designing JUST for the Combine may not work in the long run. And if you are not doing this for long term success, what is the point?

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Kevin, let me know if we are offtopic, I can move the conversation, but I like to discuss the Combine.

For most people I would say the 50K combines are the best and Mr. Patak said those are the ones passed successfully by most. It gives more contracts so one can trade 2-3 instruments at the same time, if passed you can actually make decent money with it (unlike the 30K) and it is relative cheap. Also wider DLL.

If someone is real good, they can always try bigger combines later, but to start out right away with the 100K and 150K, you need balls and you have to be cocksure of yourself. But there is really no point in trying to climb the highest mountain first...

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Pedro40 View Post
Quite to the contrary. Maybe if you have a wide DLL in your own account, but the combine has special rules with a tight DLL and you have to strategize accordingly.

Let's have an example. In the 30K Combine Kevin is trading 2 ES contracts. the DLL says he can be wrong up to 4.5 points, and no more. If he has two 2-2 points losers at the beginning of the day, the trading for the day is pretty much over, because very little cushion is left. Now if he has 2-2 pts winners, he has a 8 pts cushion and he can go 3 contracts for the next few trades.

The same logic if he starts out with 1 contract. If he wins 4 points in the morning, his cushion for even 2 contracts is now 7 pts for the rest of the day. In my first Combine I played it too safe, used only 1 contract and although I was profitable, I didn't make enough...

I admit I haven't run the math on this...but if the probability of a win is the same for each trade. When he scales up, isn't he as likely to get close to the DLL as he is to have a stellar gain. Keeping the lot size the same, seems more likely to keep you the game. But I could be wrong...

However, the strategy will have to generate enough profit to pass the combine. If it won't, then you do have an issue.

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Pedro40 View Post
Kevin, let me know if we are offtopic, I can move the conversation, but I like to discus the Combine.

For most people I would say the 50K combines are the best and Mr. Patak said those are the ones passed successfully by most. It gives more contracts so one can trade 2-3 instruments at the same time, if passed you can actually make decent money with it (unlike the 30K) and it is relative cheap. Also wider DLL.

If someone is real good, they can always try bigger combines later, but to start out right away with the 100K and 150K, you need balls and you have to be cocksure of yourself. But there is really no point in trying to climb the highest mountain first...


To me, so much of the Combine starts with your goals and objectives. Some people may just want to get a "foot in the door" and have limited funds to spend on Combines (I bet most people don't pass the first one). They might be better off doing the $30K. Others may think "I'm only in this for the possible money down the road" in which case maybe $150K is better, although if you are not used to trading that level in real life, you might have problems trading it in a Combine or afterwards if you pass.

The key, in my opinion, is to base your Combine start amount on your long term objectives. Once you have that established, you can look at developing/altering your trading strategy to meet all the rules of the Combine and beyond.


I'll give an example of how I did NOT do that: after I developed my strategy for the Combine, I found that once you pass, your daily loss limit also becomes your weekly loss limit (a new requirement). Had I checked this beforehand, I would have developed my strategy differently.

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kevinkdog View Post
and have limited funds to spend on Combines

The price difference is minoscule between the 30K and 50K, only $15... Passing the 30K is only good for pocketmoney, after taxes and profitshare...

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kevinkdog View Post
The caveat here is that after the Combine, some of the rules change, so designing JUST for the Combine may not work in the long run. And if you are not doing this for long term success, what is the point?

This point right here is the most salient point made about the combines. The rules change AFTER you win a combine and trading to pass the combine is simply short sighted in my view.

A better strategy would be to submit a custom combine proposal that mirrors what the rules change to after the combine is won. Admittedly, this can be an even tougher way to win a combine but its far more realistic of what you will be trading if you win.

The smart trader will include in the proposal those metrics he/she knows they can achieve and ask for those metrics they have trouble with or have kept them from winning a combine in the past excluded from metrics the scouts review.

If anyone has any questions regarding this, PM me and I will be more specific.

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PandaWarrior View Post
This point right here is the most salient point made about the combines. The rules change AFTER you win a combine and trading to pass the combine is simply short sighted in my view.

A better strategy would be to submit a custom combine proposal that mirrors what the rules change to after the combine is won. Admittedly, this can be an even tougher way to win a combine but its far more realistic of what you will be trading if you win.

The smart trader will include in the proposal those metrics he/she knows they can achieve and ask for those metrics they have trouble with or have kept them from winning a combine in the past excluded from metrics the scouts review.

If anyone has any questions regarding this, PM me and I will be more specific.


I agree. I think you have the best chance of long term success by following the same rules during the Combine, and afterwards.

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Day 7 of my 20 Day Combine -

A nice small winner overnight.


If you look through all my trades, you may be thinking "how in the world will you pass the Combine taking small profits and bigger losses?"

The short answer is "I won't. I need big winners."

The slightly longer answer is that my Strategy #2, that trades during the day, should be my "workhouse" strategy, providing most of the profits. So far, it has not done that. It goes for the big win (essentially no profit target, but rather a time exit at 3 PM). The drawbacks to this strategy are
1) it does not trade often enough
2) it has around only 45% winning percentage.


Note that both of Strat #2 drawbacks will cause me to fail the combine. So, I had to develop some other strategies which
1) traded more, so I would hit the 20 day minimum within 60 calendar days
2) would raise the overall winning percentage above 50%
3) would provide extra profit to meet the profit goal.

So that is what you see with the overnight strat #1 - a high percentage strat, that is mildly profitable. It definitely will help me meet the Combine goals.



OK, now I know you guys are smart enough to be thinking "your approach of 3 strategies seems awfully complicated. Why not just create one good strategy and be done with it?"


Short answer: "I couldn't."

Long answer: I had only 3 weeks to develop this strategy. When I got relatively close to Combine goals with Strategy #2, the best option was to add 2 additional strategies to get me over the hump (rather than chuck the almost good strat #2 in hopes of finding an even better one).

As for excuses, I typically don't devise intraday strats (although I am looking at them more), and I have never developed a strategy with so many requirements. But I took on this Combine challenge knowing all this, so the excuses are not valid at all. Frankly, all things considered, I'm lucky I created what I did.

Is what I developed good enough? I guess we will see...





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  #81 (permalink)
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Once again, a small overnight win, and no other trades.

At this point, I can't say I am happy with the system's performance, but I can't say I'm surprised either. The current results are easily in the distribution of possible outcomes for the system. (if anyone is interested in seeing this, just reply and I'll do the analysis. Otherwise, I won't)

So, I obviously will be sticking to the plan. One benefit of sticking to a plan is that is reduces stress, at least for me. I don't worry if I should move stops, or profit targets, or go to a new system. I think many people, at this point (40% completed with combine), would start implementing a new technique.

What would you do?





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kevinkdog View Post
...What would you do?
...

There is an old Persian proverb, which says: “Trust in God, but tie your camel.” It
acknowledges the tension we often come up against when we talk about trust – what is God’s
part and what is our part? When does trust mean that we do nothing except let go and sit and
wait for God? When does trust mean that we get active and make some plans and start to do
things and allow God to empower and guide while we are in motion? I can tell convincing
stories from both perspectives:

Let Go”: A tourist came too close to the edge of the Grand Canyon, lost his footing and
plunged over the side, clawing and scratching to save himself. After he went out of sight and
just before he fell into space, he encountered a scrubby bush which he desperately grabbed
with both hands. Filled with terror, he called out toward heaven, "Is there anyone up there?" A
calm, powerful voice came out of the sky, "Yes, there is." The tourist pleaded, "Can you help
me? Can you help me?" The calm voice replied, "Yes, I can. What is your problem?" "I fell
over the cliff and am dangling in space holding to a bush that is about to let go. Please help
me." "The voice from above said, "I’ll try. Do you believe?" "Yes, yes, I believe."’ "Do you
have faith?" "Yes, yes. I have strong faith." The calm voice said, "Well, in that case, simply let
loose of the bush and everything will turn out fine." There was a tense pause, then the tourist
yelled, "Is there anyone else up there?"

Get Going”: “A church member was having trouble with the concept of tithing. One day
he revealed his doubts to his minister: "Pastor, I just don’t see how I can give 10 percent of
my income to the church when I can’t even keep on top of our bills." The pastor replied,
"John, if I promise to make up the difference in your bills if you should fall short, do you think
you could try tithing for just one month?" After a moment’s pause, John responded, "Sure, if
you promise to make up any shortage, I guess I could try tithing for one month." "Now, what
do you think of that," mused the pastor. "You say you’d be willing to put your trust in a mere
man like myself’ who possesses so little materially, but you couldn’t trust your Heavenly
Father who owns the whole universe!" The next Sunday, John gave his tithe, and has been
doing so faithfully ever since.

In the first story, trust meant letting go. In the second, it meant doing something and
trusting God to take care of the rest. On the one hand, you’ve heard the saying, “You can’t
steer a boat that isn’t moving.” On the other hand, “Let go and Let God.” Do you see the
tension? Does trusting mean that we do nothing and wait on God, or does it mean that we
seek God actively as we get moving along?
---

Question remains open
source: https://www.pastorpauley.com/sermons/TrustGodTieYourCamel.pdf

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  #83 (permalink)
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kevinkdog View Post
Once again, a small overnight win, and no other trades.

................... (if anyone is interested in seeing this, just reply and I'll do the analysis. Otherwise, I won't)

So, I obviously will be sticking to the plan. One benefit of sticking to a plan is that is reduces stress, at least for me. I don't worry if I should move stops, or profit targets, or go to a new system. I think many people, at this point (40% completed with combine), would start implementing a new technique.

What would you do?

Is this a trick question? I'm enjoying this project you've initiated. I agree, many people would start changing things and as you (more than most) would be quick to point out all the analysis of the system/method would be meaningless. I'm in your corner Kevin and expect to see your system latch on to a nice trend or two before this is over. "40% complete," That's impressive in it's self, nice job. We've all seen combines posted here on futures.io (formerly BMT) that lasted hours not days. Thanks for spending the time with this project and sharing with us..... Let it ride!

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kevinkdog View Post
Once again, a small overnight win, and no other trades.

At this point, I can't say I am happy with the system's performance, but I can't say I'm surprised either. The current results are easily in the distribution of possible outcomes for the system. (if anyone is interested in seeing this, just reply and I'll do the analysis. Otherwise, I won't)

So, I obviously will be sticking to the plan. One benefit of sticking to a plan is that is reduces stress, at least for me. I don't worry if I should move stops, or profit targets, or go to a new system. I think many people, at this point (40% completed with combine), would start implementing a new technique.

What would you do?

I am guilty of switching the plan. Its one of my revelations with my first combine. They call it Style Drift. There is a good interview here about it: https://futures.io/psychology-money-management/26596-style-drift-changing-your-strategy-mid-stream.html#post314039 I agree with you that when you trade your plan, there is a lot less stress. My biggest problem now is converting from a scalper to longer term trader. Old habits die hard.

I was talking to a funded trader on Friday who was telling me another trader he knows had 19 losing trades in a row with his system. He didn't deviate from the plan and it eventually worked itself out. I would have dumped it at 10. I would bet most traders have come across a system that would work for them long term but ended up discarding because it didnt work in the short term. I would also bet I am in that group of traders.

Something else that struck me.. I was naive to think I could come into this and pass the combine quickly. I have realized I have a lot to learn and it may take 20 combines (or more) till I get it. Once I accepted that this was a long term commitment it lifted a huge weight off my shoulders and has allowed me to focus on areas that need improvement. Now I am working within the confines of the TST job requirements and becoming good at what I am currently bad at.

This is really like a day job... you dont come in and get promoted in 10 days.. you have to prove yourself first. This may take months or even years. But, I am in it for the long haul and will do what it takes to succeed no matter how long it takes.

(Stepping down from my soap box.. )

Robert

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You make your own opportunities in life.
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  #85 (permalink)
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Whether you are a discretionary trade or a rule based mechanical trader, I'm sure at some point you've wondered why your real time performance doesn't match what you think it should be.

For discretionary traders, many times it happens because what you see and do in market reply / historical backtest etc. is not the same thing you do in real time. I was briefly in a trading room once where this occurred. In real time, the "guru" hemmed and hawed and did not seem to do too good. But in his analysis after the fact, he hit every trade dead on!

Because of this, many discretionary traders try a rigid 100% rule based strategy. They figure that then the historical results will always match their real time results - ie - that they are trading EXACTLY per their strategy, and the results should therefore match EXACTLY.

Well, it is a nice thought, but I am here to tell you it is just not true. And I'll prove it with my Combine account.

For the Combine, I am running 3 strategies (1 overnight, 1 "pit hours", 1 late day). 100% rule based, no discretion.

In a PERFECT world, my Topstep performance report should match my Tradestation Strategy Engine Performance Report EXACTLY.

It doesn't, as shown below.

Why?

Reasons that I can identify so far (Execution Imperfections):

Missed trades (oversight, or away from my PC)

Late entry trades

Differences in slippage amounts

Mistake trades



As you can see, I'd be doing better if there were no imperfections in my execution. But that is not always the case. Sometimes these items lead to better results.


Most of my "execution imperfections" occur because I have to manually enter orders for this Combine. If I ran this automated, these issues would be seriously reduced.


So, how can you incorporate this in your trading? Simple, keep a log labeled "Execution Imperfections." Whenever your real trade result varies from the backtest (expected) trade result, record the amount and the reason. After a while, you quickly figure out what is driving the imperfections, and then you can work to fix it.




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  #86 (permalink)
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Same Old Story, Same Old Song and Dance


Day 9 - overnight trade, decent winner made larger by a late entry (Baseball coaches meeting)


The next few weeks will be interesting, as soccer, t-ball and baseball kick in for my kids, in addition to routine activities like gymnastics, swimming and cub scouts. I may miss some of these evening trades. Again, this is because of the T4 manual order entry. Auto trading would be no problem.

I really need a couple of runners to have any chance of passing. Unfortunately, I don't get to select when these occur. If history is any guide (and I am hoping it is), during the 2 month Combine I should get 3 days of more than $500 profit, with one of those days over $1,000 profit. All together, those 3 days should provide about $2,800 in profit, which is a little more than I need.

Alas, thus far I've had ZERO days with over $500 profit.

So, maybe I am due soon?





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  #87 (permalink)
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kevinkdog View Post
I may miss some of these evening trades. Again, this is because of the T4 manual order entry. Auto trading would be no problem.

If you had auto trading available, how would that change your daily Combine routine? Would that bring benefits only? I mean things like how many hours away from your screen would you tolerate without fearing too much that two trades, each legitimate on its own, would cause a disaster that you could have avoided with close supervision (like not taking the second one if you are too close to DLL)?

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  #88 (permalink)
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Trovatore View Post
If you had auto trading available, how would that change your daily Combine routine? Would that bring benefits only? I mean things like how many hours away from your screen would you tolerate without fearing too much that two trades, each legitimate on its own, would cause a disaster that you could have avoided with close supervision (like not taking the second one if you are too close to DLL)?

Thanks for the question. I'll explain the daily routine, and hopefully then the automation benefits will be clearer.

Night Session - Strategy #1 - 6 PM - 7 AM ET

This runs on 105 minute bars. So that means every 1 hour, 45 minutes, I have to be near the PC to place any orders when a particular bar closes. I have it set so that no new orders get placed after 1 AM (I have to sleep), and only 1 trade per session maximum is taken. So, automating this would mean I would not have to be at PC at 6:00PM, 7:45 PM, 9:30 PM, etc. I would still check things during the evening, but it would be much more flexible.


Day Session - Strategy #2 - 7 AM - 2 PM ET

NOTE: If I took a losing overnight trade of more than $50, I would NOT trade this strategy #2 on that day. That way, I would not run into Daily Loss Limit (DLL) issues.

This runs on 60 minute bars. So that means every 1 hour, I have to be near the PC to place any orders when a particular bar closes. I have it set so that only 1 trade per session maximum is taken. So, automating this would mean I would not have to be at PC at 7 AM, 8 AM, 9 Am, etc. I would still check things during the day, but it would be much more flexible.


Day Session2 - Strategy #3 - 2 PM - 4 PM ET

This only runs on 30 minute bars, but everything else I said about the other day session holds true here.



So, the big benefit in automation is that I would not be required to be at PC at particular times. Rather, I could just check at my convenience. That would make things a lot easier.

I hope this explains it, if not just let me know and I'll try again.

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kevinkdog View Post

I hope this explains it, if not just let me know and I'll try again.

It's very clear now! Thanks for reminding of the bar lengths, the 'max 1 trade per session' rule and the fact that each strategy has its own time window, not overlapping with any of the other two.

It's another interesting question how frequent and thorough checking auto trading requires in general (with a healthy amount of paranoia one can think of so many things that can go wrong) but I guess discussing it here would take us off topic.

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Trovatore View Post
It's very clear now! Thanks for reminding of the bar lengths, the 'max 1 trade per session' rule and the fact that each strategy has its own time window, not overlapping with any of the other two.

It's another interesting question how frequent and thorough checking auto trading requires in general (with a healthy amount of paranoia one can think of so many things that can go wrong) but I guess discussing it here would take us off topic.

Yes, you are right. Unfortunately, many people equate automated with unattended. The latter can be very dangerous!

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No trades today, so I'll talk about the strategies I am using...


A few posts ago ( ) I talked about the need to develop a system (strategy) that meets the rules of the Combine. Certain rules you have control over (daily loss limit, being out by 4:10 ET everyday), and certain rules you leave to your strategy (profit, drawdown).

Once I had spent some time examining the rules, I was ready to develop a strategy.

Since I am doing the $30K, 20 day combine, I felt the most constraining rule was the $500 daily loss limit. Exceed that, and the Combine game is over.

To account for slippage and commissions, I lowered this level to $425 maximum daily loss.

Based on my previous trading experience, I felt (and still feel) that this is a very low daily loss, even for one contract. If you try to trade Crude Oil, for example, a slightly misplaced entry, along with a strong market movement, could hit that daily loss pretty quick. Maybe my thinking is because most of my trading is swing trading (days to weeks), not intraday. $425 swings happen all the time.

So, I decided try the Euro for this Combine, and trade only 1 contract at a time. My stop loss would always be $425 (34 ticks) from entry, or less.

The Euro has been kind of crazy lately, and I felt that profit and loss goals, based on 1 contract, were not unreasonable.

With this rule established, now I just needed to find a strategy that could meet the $2,000 profit goal, and the $1,500 max drawdown goal.

But before I started development, I had to take care of something else. Another constraint. Because I am using the T4 platform to manually enter trades, I have to be around the computer to place orders. Not too much of a problem for me, since I trade full time. More of a nuisance, really.

Because of the manual entry requirement, I decided to trade only between 7 AM and 3 PM ET, and to use 60 minute bars. So, every hour, I'll get notified if I have to place or change an order. And I decided to use limit orders to enter, so typically if I am a few minutes late on an order, I'll have some leeway. I typically eschew limit orders, since backtest platforms can easily be tricked or manipulated with these kinds of orders. But in this case I felt it was necessary (and I know the backtest tricks with limit orders).

Hopefully, you understand my thinking up to this point: develop a trading strategy that meets the end requirements, but also meets my thoughts and desires. I'm sure I spent more time thinking about all this than I did actually developing the strategy itself!


Next non-trading day I'll develop the strategy. There is an interesting monkey wrench that gets thrown into the process...

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Once again, a small overnight win, and no other trades.

At this point, I can't say I am happy with the system's performance, but I can't say I'm surprised either. The current results are easily in the distribution of possible outcomes for the system. (if anyone is interested in seeing this, just reply and I'll do the analysis. Otherwise, I won't)

Hi Kevin - thanks for all the info in the thread. I'm interested in seeing the analysis of how the current results are easily in the distribution of the possible outcomes for the system, if you feeling like sharing. thanks.

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  #93 (permalink)
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chambemk View Post
Hi Kevin - thanks for all the info in the thread. I'm interested in seeing the analysis of how the current results are easily in the distribution of the possible outcomes for the system, if you feeling like sharing. thanks.


I will try to do this over the weekend.

It is an interesting analysis, because it shows that even winning (positive expectancy) systems can start out in the red (losing) for a while, and it does NOT mean the system is broken.

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  #94 (permalink)
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No trades again today (Thursday), so I'll continue with discussing how I developed my primary strategy...

part 1 is located here:

part 2 is located here:


At this point, I knew the instrument (Euro), the time session (7AM - 3PM ET), number of contracts (1), entry type (limit orders), stop level (34 ticks, $425), and bar size (60 minute bars).

The biggest questions at this point were:

1) how much data to use in the backtest
2) what is the entry rule(s)
3) what is the profit target
4) any other rules (breakeven stops, trailing stop, etc)
5) the overall strategy development process


1) how much data to use in the backtest
Normally, I like to use as much data as possible. For the Euro, this would take me back to 2001, when the Euro started trading (really sophisticated users would create their own pseudo Euro datastream before 2001, use the mark, franc, lira, etc, weighted to create a synthetic Euro).

But, since this is an intraday strategy, and in my view electronic trading has really altered the intraday landscape, I decided to start my data Jan. 1, 2009. I purposely started after the financial crisis. I have mixed feelings about using only 4 years of data, but I thought I'd try it.

2) what is the entry rule(s)
After trying a few simple ideas, I decided to look for the highest high of the last X bars, and then sell short (vice versa for long trades). One last condition is that for a short signal the longer term trend is short, so in effect this strategy expects the long term trend to prevail, and for the price to change short term direction.

3) what is the profit target
After some preliminary tests, I found it was best (profit wise) to go for unlimited profit (no target). So, hop on a trend, and ride it. As you can imagine, though, this doesn't happen a lot, so the trick is to stay in the game until it does happen.

4) any other rules (breakeven stops, trailing stop, etc)
None. I decided to keep it simple.

5) the overall strategy development process
I used the strategy process that I describe in the 2 webinars I did for futures.io (formerly BMT). These are in the archives, for Elite Members. I also describe the process in the TST webinar I did. Kevin Davey presents, "Developing a Trading Plan to Pass the Combine and Stay Funded" - YouTube


After all this development, I had what I thought was a pretty good strategy. But here is the monkey wrench - the strategy is good, but not good enough to pass the Combine (not enough profit[although close], too few trading days in 2 month period, less than 50% wins). Finding this out, this is how I felt:


Since after developing the primary strategy, I only had about 1.5 weeks before the Combine start, I wondered what was best: 1) abandon this strategy, and start over from scratch, or 2) try to develop complementary strategies to trade with this strategy, to get the combined package of strategies to pass the combine.

Both options have merit, but eventually I decided on Option 2.

Next time, I'll talk about strategies #1 and #3, the strategies I added to this first strategy I developed.

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Almost a big day... almost. But still a pretty good day. I did make one mistake - one extra trade - but it went breakeven.

After 10 days of the Combine, I am close to breakeven overall. About $800 below where I expected to be at this point.

Let's hope the next 10-14 days I trade are much better than the first 10!


I think the most interesting thing is that I have 70% winning days, yet am still underwater...


Over the weekend, I'll update the probability table (spoiler: I have even less chance of passing Combine now), and also show how I determine if a strategy is on track or not.





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  #96 (permalink)
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First, here are the updated probabilities for me passing the Combine, at the 10 day mark.

Note that my chances of meeting the profit goal are much less now, which makes complete sense (I am still losing money in this Combine). So, now I have roughly a 1 in 4 chance of passing the Combine. On the good side, my chances of a "blow out" (exceeding the max drawdown) have gone down, too.

I think the benefit of doing this analysis is that it keeps my realistic and grounded about my chances. I am optimistic by nature, but I am also a realist. If I had the attitude "I'll still pass this Combine, no problem! I've got 10 days left." I would be ignoring the situation at hand. As a trader, ignoring reality (of price bars, of account equity, of margin calls, etc.) will eventually prove fatal.




As far as my performance versus "perfect" performance (as determined by my Tradestation strategies), I am now pretty close to that ideal performance. I'm pretty satisfied with that.


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  #97 (permalink)
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Kevin, appreciat your journal and research. However I think your formula does not account for the fact you can trade actually 40 days not 20? 20 is the minimmum required. Or have you decided to end it on day 20 no matter what?
Thanks.

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  #98 (permalink)
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xelaar View Post
Kevin, appreciat your journal and research. However I think your formula does not account for the fact you can trade actually 40 days not 20? 20 is the minimmum required. Or have you decided to end it on day 20 no matter what?
Thanks.

Hi @xelaar -

In post #36, Kevin explained that he expects the system to trade about 70% of the available days:


kevinkdog View Post
No trades for the Combine on Thursday 3/28. Over the long run, there should be trades on about 70% of days, or around 28 days for a 2 month Combine (40 possible trading days).


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omni72 View Post
Hi @xelaar -

In post #36, Kevin explained that he expects the system to trade about 70% of the available days:


Yes, my latest calculations assume that I'll be trading in the Combine for about 14 more days, give or take. I don't think it will hit 70% of days (28 trading days total).

Of course, if I pass at any time over 20 days, I'll just stop there.


Thanks for the comments!

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Legendary Market Wizard
Cleveland Ohio/United States
 
Experience: Advanced
Platform: Tradestation
Broker: Tradestation, DeCarley, others
Trading: futures
 
Posts: 2,917 since Jul 2012
Thanks: 1,534 given, 5,717 received

As you know, the strategies I am using for the Combine are brand new - created just for the Combine.

It is always a tough thing to bring a new strategy into your trading - those first few trades are really important to your mental state, and can reaffirm, or kill, the confidence you have in the strategy.

What if the first couple of trades are losers? Does that mean the strategy should be abandoned?

Or, better yet, what if the first few trades are home runs? Will that performance continue?

In my experience talking to other traders, it seems like a lot of people need a new strategy to be profitable after a very short time (maybe 2 weeks to 1 month), or a short number of trades (5-10 trades). If the strategy is not profitable by then, they alter the strategy, or dump it.

I have found there is a strong correlation between trader experience and this "demand" for quick profitability. Experienced traders have more patience, and know that even good strategies can start off as losers. So, they trade it until either the long term expectancy (profit) begins to show itself, or the strategy proves itself as bad.

Both inexperienced mechancial and discretionary traders have this quick trigger mentality. Mechanical traders, after 3 or 4 initial losses, will add a rule, or a filter to eliminate those early losers (after the fact). Discretionary traders will tweak their approach, with the same goal in mind.

The problem is that once they do that, all their historical testing is now worthless. They are, historically speaking, flying blind.


OK, all that might be well and true, but where am I going with this? In the next few posts, I am going to walk you through a method of monitoring your new strategy, to see if it is performing per its historical expectations.

I'll use my Combine strategy as an example. Please see the chart at the bottom for a sneak peek.


If you want to do this analysis with your own strategy, you'll need:

1. Historical results for your system, preferably walkforward or real time results. The more the results the better.

2. A Monte Carlo simulator. The Monte Carlo simulation spreadsheet found earlier in this thread will do the trick.

3. Ability to write macros in Excel (to automate some calculations). You can also do it by hand, but it will take a while. I've created an automated version for my own use, but it is so cobbled together that I cannot share it - it would cause others more problems.


If numbers scare or intimidate you, don't worry just yet about performing the analysis with your own strategy. Instead, just read along and try to understand the concepts. Afterwards, you'll hopefully have a good understanding of the process, even if it is just in general terms.


There will be 3 parts to this subject, over the next few days:
1. Part 1 - What you are reading now
2. Part 2 - A simple method to track performance
3. Part 3 - More complicated method, shown in chart below




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