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Taking a Trading System Live

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  #301 (permalink)
 Silver Dragon 
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kevinkdog View Post
I am curious what people out there think. If this was your trading system, would you still be trading it?

Please answer a 1 question survey here: https://www.surveymonkey.com/s/XS6X7DN
(If this is against forum rules, I apologize and ask Big mike to delete the post).


Here are some performance curves to help you make a decision. For the sake of the survey, assume you started trading with real money on the green portion of the curve.



Attachment 126958


Attachment 126959

@kevinkdog

Sorry if some of these thoughts and observations are repeats... I have not read your entire thread but thought it was important to give some insight from a data perspective.

First and foremost; There is no way you should quit or even think about quitting unless you have data to back it up your decision. You posted some guidelines for quitting here: Have these changed? Have you hit one of these conditions?

From a data perspective you need more data points before you start asking if it is working or not. A data set needs a minimum of 30 data points to be statically significant. For trading you need more and from what I can see you are not there yet. Think of your entire equity curve as your arm. The live testing is about size of your fingernail. Your not comparing apples to apples . Give it time to develop and dont let your emotions get involved when determining if it is a good system or bad system. Emotions cloud your judgement and cause irrational decisions. If the system is truly bad, the data will bare it out in the in the end.

If you gave this system to me to manage here is the one question I would ask you:

What is max draw down for the system. In other words- What dollar amount are you willing to risk to properly test the system? Think of it as a longer term investment.. You have looked at the prospectus now you have to determine how much you want to risk and for how long you want to invest. I believe you have defined this in the post above as 10%

After that I would just let it run and DONT MESS WITH IT!!! Doing so nullifies your testing and any future comparisons... IMO you need to have at least 6 months to year worth of data for a proper comparison. This will capture different market conditions and news cycles. After this time is up then I would compare it to the past. (This assumes the max draw down has not been hit.)

My other suggestion would be to run the same strategy in SIM alongside live account. Maybe you are already doing this?? This will give you invaluable information. If there is a major difference in the day to day trades between the live and sim then I would stop immediately to find out whats going on. If it is taking similar trades, taking into account slippage and market conditions then you know it is working as designed. Finally I would run another back test after the 6 months is up to compare.

At this point you will have 3 data sets. In theory the two SIM back tests should be nearly, if not identical. The live set should be within acceptable levels of the SIM sets taking into account slippage and unforeseen market conditions which cause bad entries etc. If you do not want to wait the full six months to run the 3rd data set then run it monthly. Again, this will tell you if there is a problem in the code or the data. If it is significantly off then run a second month to see if the results are the similar. Stop the system if it is. Otherwise let it continue to play out.

The thing to remember is proper analysis takes time. Its easy to back test because of the 5 minute instant gratification factor. It is harder to stay the course and let the system play out for a year for better or for worse.

At this point I would not worry about $$ performance. Thats not important from an analysis standpoint. All that is going to do is cloud your judgement. Instead focus on the nuts and bolts of your operation. Make sure everything is running as expected. Do a weekly and monthly comparison of trades between SIM and Live and define the differences in a journal. In fact if you have time do it daily. Define the market conditions and what caused the difference. Once you get done with all that then you will have a detailed document of what went right and what went wrong. Then you can make a determination on if it was successful or not.

Finally, something to put things in perspective; Its possible to do everything right and still lose the game. So, you can have a losing system $$ wise but it still be a successful system from a execution stand point. In this case the detailed notes of the SIM vs Live executions will tell you where the adjustment needs to be made. Fact is systems have been known to fail $$ wise on as little as 1 tick slippage per trade.

BTW- I have had the same thing happen to me when I went live with my automated system; Results varied from the back test. I determined the issue had to do with the fills and the exotic bar type I was using. So your not alone.

Robert

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  #302 (permalink)
 tihfa 
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kevin,

thanks for the thread.

just looking at your hypothetical curve diagrams and assuming diagrams had significance then you are nowhere near quitting point.

1) would you consider the curve as representation (or sum total) of various statistics?
2) what about the curve during the backtesting and forward testing portion made you decided to use the system?
3) what about the curve during the backtesting and forward testing portion would make you decide to not pursue the system?

since you used period of about 4 years
5) you would have to wait perhaps at least that long to decide whether system is worth it?
6) or if you have drawdown much longer in time duration (1.5x or 2x) and/or in much greater dollar loss (1.5x or 2x)

in my dayjob we do accelerated testing to validate the life of the product. the test has duration, predefined stresses and reliability with confidence attribute in the event sample test parts successfully pass the test.

if the backtest period ( 4 years in this case) is the life of the product, do you have to wait for 4 years to find out whether your product survives the life or is there an accelerated way to stress your product in much shorter period of time ( this would not be a walkforward test and period)? i could further expand on the analogy. perhaps it could be a useful analogy to what you are trying to do or it is just misguided rambling....

regards,
tihfa

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  #303 (permalink)
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Silver Dragon View Post
@kevinkdog

Sorry if some of these thoughts and observations are repeats... I have not read your entire thread but thought it was important to give some insight from a data perspective.

First and foremost; There is no way you should quit or even think about quitting unless you have data to back it up your decision. You posted some guidelines for quitting here: Have these changed? Have you hit one of these conditions?

From a data perspective you need more data points before you start asking if it is working or not. A data set needs a minimum of 30 data points to be statically significant. For trading you need more and from what I can see you are not there yet. Think of your entire equity curve as your arm. The live testing is about size of your fingernail. Your not comparing apples to apples . Give it time to develop and dont let your emotions get involved when determining if it is a good system or bad system. Emotions cloud your judgement and cause irrational decisions. If the system is truly bad, the data will bare it out in the in the end.

If you gave this system to me to manage here is the one question I would ask you:

What is max draw down for the system. In other words- What dollar amount are you willing to risk to properly test the system? Think of it as a longer term investment.. You have looked at the prospectus now you have to determine how much you want to risk and for how long you want to invest. I believe you have defined this in the post above as 10%

After that I would just let it run and DONT MESS WITH IT!!! Doing so nullifies your testing and any future comparisons... IMO you need to have at least 6 months to year worth of data for a proper comparison. This will capture different market conditions and news cycles. After this time is up then I would compare it to the past. (This assumes the max draw down has not been hit.)

My other suggestion would be to run the same strategy in SIM alongside live account. Maybe you are already doing this?? This will give you invaluable information. If there is a major difference in the day to day trades between the live and sim then I would stop immediately to find out whats going on. If it is taking similar trades, taking into account slippage and market conditions then you know it is working as designed. Finally I would run another back test after the 6 months is up to compare.

At this point you will have 3 data sets. In theory the two SIM back tests should be nearly, if not identical. The live set should be within acceptable levels of the SIM sets taking into account slippage and unforeseen market conditions which cause bad entries etc. If you do not want to wait the full six months to run the 3rd data set then run it monthly. Again, this will tell you if there is a problem in the code or the data. If it is significantly off then run a second month to see if the results are the similar. Stop the system if it is. Otherwise let it continue to play out.

The thing to remember is proper analysis takes time. Its easy to back test because of the 5 minute instant gratification factor. It is harder to stay the course and let the system play out for a year for better or for worse.

At this point I would not worry about $$ performance. Thats not important from an analysis standpoint. All that is going to do is cloud your judgement. Instead focus on the nuts and bolts of your operation. Make sure everything is running as expected. Do a weekly and monthly comparison of trades between SIM and Live and define the differences in a journal. In fact if you have time do it daily. Define the market conditions and what caused the difference. Once you get done with all that then you will have a detailed document of what went right and what went wrong. Then you can make a determination on if it was successful or not.

Finally, something to put things in perspective; Its possible to do everything right and still lose the game. So, you can have a losing system $$ wise but it still be a successful system from a execution stand point. In this case the detailed notes of the SIM vs Live executions will tell you where the adjustment needs to be made. Fact is systems have been known to fail $$ wise on as little as 1 tick slippage per trade.

BTW- I have had the same thing happen to me when I went live with my automated system; Results varied from the back test. I determined the issue had to do with the fills and the exotic bar type I was using. So your not alone.

Robert


Thanks for the comments. I agree with pretty much everything you said.


One important part you mention is comparing SIM (or strategy results) vs. live. This is critical, especially for exotic bar types or strategies where slippage is a factor (and initial estimates of it were low).


I appreciate your excellent reply, even if you are a Bengals fan. But, they are doing much better than my Browns this year!

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tihfa View Post
kevin,



1) would you consider the curve as representation (or sum total) of various statistics?

Not sure I understand this question. Can you explain?


tihfa View Post
2) what about the curve during the backtesting and forward testing portion made you decided to use the system?

3) what about the curve during the backtesting and forward testing portion would make you decide to not pursue the system?

I set out my goals and objectives before developing the system. Since it met those goals, I then considered it for live trading. For me, the primary number I look at is Return/DD ratio.

There are a lot of reasons why I might not trade the system, even if the number look good. Let's say, for example, that the numbers are great, but the equity has been down the past 2 years. That might be a deal killer.



tihfa View Post
since you used period of about 4 years
5) you would have to wait perhaps at least that long to decide whether system is worth it?
6) or if you have drawdown much longer in time duration (1.5x or 2x) and/or in much greater dollar loss (1.5x or 2x)

I would use the 1.5-2.0 x drawdown before I'd wait 4 years. Your point is good though: the longer the real time out of sample period, the more confidence you'd have in the system.


tihfa View Post
in my dayjob we do accelerated testing to validate the life of the product. the test has duration, predefined stresses and reliability with confidence attribute in the event sample test parts successfully pass the test.

if the backtest period ( 4 years in this case) is the life of the product, do you have to wait for 4 years to find out whether your product survives the life or is there an accelerated way to stress your product in much shorter period of time ( this would not be a walkforward test and period)? i could further expand on the analogy. perhaps it could be a useful analogy to what you are trying to do or it is just misguided rambling....

regards,
tihfa

I understand what you are getting at, but I'm not sure how you could do this. A couple of thoughts come to mind:

1. Run the system on simulated data - data that isn't real, but has same general characteristics as real data. I think Tushar Chande's book describes this method.

2. You could arbitrarily reduce all trades by a certain percentage. Knock 25% off wins, and add 25% to losses. Does the system still work? This might simulates future performance.


Thanks for the comments. You've put forth some good ideas to think about.

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  #305 (permalink)
 tihfa 
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kevinkdog View Post
Not sure I understand this question. Can you explain?

kevin,

you have yourself pointed to the curves as basis for opinion whether to continue trading or not. yet you have statistics calculations which are calculated independently of the shape or form of the curve?

could you visually judge/compare Return/DD ratio of live trading period to that of backtested/walkforward period. If the answer is no, then you should not have offered the curves as the basis of opinion, but rather stats only. Anyhow a minor point...

regards,
tihfa

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  #306 (permalink)
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tihfa View Post
kevin,

you have yourself pointed to the curves as basis for opinion whether to continue trading or not. yet you have statistics calculations which are calculated independently of the shape or form of the curve?

could you visually judge/compare Return/DD ratio of live trading period to that of backtested/walkforward period. If the answer is no, then you should not have offered the curves as the basis of opinion, but rather stats only. Anyhow a minor point...

regards,
tihfa

Thanks for clarifying. I would not recommend looking at Return/DD for such a short period of time as I have so far in live testing. Maybe in a few years that will be appropriate. Hopefully I will still be trading it at that time!

Thanks for your comment!

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  #307 (permalink)
 Big Mike 
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kevinkdog View Post
1. Run the system on simulated data - data that isn't real, but has same general characteristics as real data. I think Tushar Chande's book describes this method.

BTW, if you are interested in this, there is a data generation thread here that creates data based on samples you provide:



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  #308 (permalink)
 Luger 
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I took the equity curve chart (most of it) and windowed it (cutting it in half and then cutting the pieces in half) until I reached a point where there were sections that significantly underperformed the "average performance" of the total equity curve. Place smallest oval possible around each section that contains the start, finish, and all equity curve action in between. Make copies of oval or ovals and place in such a manner that would be inherently pessimistic to the "live trade section". Exits outside the bottom side of the risk ovals would indicate problems.

Going forward, move the ovals to new start point as new data points come in at intervals the size of the windowed region the ovals originated from. Looks like a few weeks ago there should a new start point for the small oval if you keep my windowing points.

The large oval appears to be about $7,500 profit top to bottom. Since the oval won't allow for placement that takes the full range, probably 2/3rds of that would be enough to get the equity curve outside the range...your $5k drawdown power-off button seems right.

Can't say I know of a proof or theory that legitimizes this as a means to test an equity curve going forward. I'll let someone else do the math. Fun with Ovals....yay!!!

If nothing else, it shows that you have plenty of time to consider performance.


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  #309 (permalink)
 kevinkdog   is a Vendor
 
 
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Very interesting analysis. Thanks for taking the time to do it, and to share it. Looks like I need to avoid the ovals!

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  #310 (permalink)
 Luger 
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I should have given a bit more background about my analysis but it was late. Your survey about continuing or quitting the system got me thinking.

The statistics of how much data you need to say that your live sample is different from the in-sample period seemed to be the most important factor. That is what got me slicing up the data into windows to see how much time constituted a period of underperformance in the in-sample data.

Also I've known traders that have used ovals on price/time squared charts. The basic shape is interesting when you think about how positive and negative volatility works over time.

Sure the analysis is subjective, but it adds a visual component that is representative of underperforming periods in the in-sample data. In this case it shows that you need a good bit more time before trashing the system. It also frames the volatility of in-sample underperforming periods which should helpful in determining drawdown potential going forward.

You may laugh, but I am going to be adding this as a subjective component to my system tracking. I'll be doing it in excel instead of paint though...lol

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  #311 (permalink)
 kevinkdog   is a Vendor
 
 
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Not a statistically significant number of results, but most people say "keep trading."


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Luger View Post
I should have given a bit more background about my analysis but it was late. Your survey about continuing or quitting the system got me thinking.

The statistics of how much data you need to say that your live sample is different from the in-sample period seemed to be the most important factor. That is what got me slicing up the data into windows to see how much time constituted a period of underperformance in the in-sample data.

Also I've known traders that have used ovals on price/time squared charts. The basic shape is interesting when you think about how positive and negative volatility works over time.

Sure the analysis is subjective, but it adds a visual component that is representative of underperforming periods in the in-sample data. In this case it shows that you need a good bit more time before trashing the system. It also frames the volatility of in-sample underperforming periods which should helpful in determining drawdown potential going forward.

You may laugh, but I am going to be adding this as a subjective component to my system tracking. I'll be doing it in excel instead of paint though...lol


I think it is a good way to quantify what you can see visually. Thanks for sharing!

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  #313 (permalink)
 kevinkdog   is a Vendor
 
 
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  #314 (permalink)
 indextrader7 
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kevinkdog View Post
Very interesting analysis. Thanks for taking the time to do it, and to share it. Looks like I need to avoid the ovals!

Avoiding one oval will introduce another. You know this. Most don't.

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Summary: First, let's look at the big picture. I like to do this every month or so, because at a glance I can tell if things are going as planned or not. From look at this first chart, a couple of things are clear:




1. Over the whole course of the system history (walkforward, incubation, live), the system performance hasn't changed much. I could draw a line from the start of walkforward to the start on incubation, and then another line from the start of incubation until the present time, and the slopes of those two lines would be about the same - with the slope from start of incubation to present being a little flatter. This gives me some reassurance that the system is behaving, subject to point 2 below.

2. It is easy to see that the live trading (green line) has been lagging long term performance. The performance these past 3 months has been down, and while it has not crashed and burned, it certainly has been a disappointment.


So, after 12 weeks of trading this system live, I am down about 10% from the start for the strategy calculated performance, and about 4.5% for the actual performance.

Am I surprised at this result? Yes. I had expected better, certainly close to breakeven by now - at the very worst.

Am I disappointed in the results so far? Very much so. The performance these past 12 weeks is way behind the long term average, so it is very disappointing.

Are results in line with expectations? Just barely. Results are around the lower 10% line, which means the system in real time is close to being a different system that walkforward and iuncubation. Not quite different yet, but getting close.

Are fills and trades live comparable to Tradestation strategy report? No, but it is a good thing! I am doing about $550 better live than the strategy predicts because of 1) less slippage than I had planned for and 2) a few trades where I was filled in real life when price just touched, but did not exceed, my limit price.

Do I see any reason to stop trading this system? No.

Do I see any reason to change my position sizing plan, i.e. reduce or increase my risk? No.


So, after 12 weeks, I will keep on trading per the plan, but this system is just kind of floundering. A couple of big winners, which is what the system is based on, are needed.






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  #316 (permalink)
 deaddog 
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kevinkdog View Post




Are fills and trades live comparable to Tradestation strategy report? No, but it is a good thing! I am doing about $550 better live than the strategy predicts because of 1) less slippage than I had planned for and 2) a few trades where I was filled in real life when price just touched, but did not exceed, my limit price.

A couple questions on this topic.

Was this expected? Has it happened with other systems?

Can you expand on the days that seem like anomalies; Day 12, 21, 27 and 33.

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 Big Mike 
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@kevinkdog,

Have you considered any type of volatility comparison to go along with your strategies performance? And then to compare recent volatility (live) to historical periods to see if there is a pattern?

In other words, have these last 12 weeks been unusual or do they fit with prior data (like another segment with similar volatility and similar results)?

Mike

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deaddog View Post
A couple questions on this topic.

Was this expected? Has it happened with other systems?

When I develop a system, I include a certain about for slippage. In this case, I am using 1.5 ticks ($17.50). Over a long period of time, this is a pretty decent estimate.

So, far there have been 2 trades that have benefited from the "limit price fill only if exceeded rule." In one case, on an entry my limit price was just hit, and I was filled. The strategy, though, expects the price to be exceeded before giving me a fill at my limit price. In the other case, I was filled for an exit at a limit touch.

When I add contracts, I expect this benefit of "touch" fills to only occur on 1 or 2 of the contracts I trade.



deaddog View Post
Can you expand on the days that seem like anomalies; Day 12, 21, 27 and 33.


Day 12 - Not sure what happened here. Possibly a computer issue.

Day 21 - computer issue (discussed earlier in the thread)

Day 27 - limit order entry fill (discussed earlier in thread)

Day 33 - limit order exit fill

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Big Mike View Post
@kevinkdog,

Have you considered any type of volatility comparison to go along with your strategies performance? And then to compare recent volatility (live) to historical periods to see if there is a pattern?

In other words, have these last 12 weeks been unusual or do they fit with prior data (like another segment with similar volatility and similar results)?

Mike

No I have not, but it is a good idea. I will try to do this in the next week. I have to think about how to analyze and present it. I do expect it to show high volatilty = higher probability of trading that day >>> more profits.

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 Big Mike 
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kevinkdog View Post
I do expect it to show high volatilty = higher probability of trading that day >>> more profits.

Agreed based on what I understand of your strategy, so I think it could show useful info.

Mike

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@kevinkdog,

Have you considered any type of volatility comparison to go along with your strategies performance? And then to compare recent volatility (live) to historical periods to see if there is a pattern?

In other words, have these last 12 weeks been unusual or do they fit with prior data (like another segment with similar volatility and similar results)?

Mike

There are a couple of ways to answer it:

First, just looking at the number of trades in the last 12 weeks, compared to the 4 years of history:

Night strategy: should have had 21 trades in the last 12 weeks, and it actually had 30 = +9 more trades than "normal"

Day strategy: should have had 25 trades in the last 12 weeks, and it actually had 14 = -11 less trades than "normal"

Overall, then it is close to normal.



Another method:

I charted the 5 period average true range vs. bar number. When there is a position initiated, those are marked pink.

The charts are below, and my comments are:

1. On both charts, the volatility (as shown by average true range) has been declining.

2. For the night strategy, note that the trades usually are in the upper part of the local average true range. This tells me that this strategy looks for entries that have high volatility, relative to very recent history. So, declining volatility over the years doesn't really decrease the number of trades (it is all relative to recent volatility).

3. For the day strategy, no noticeable trend emerges of volatility versus when trades are taken.



Comments and questions are welcome!






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Well, it only took a few months, but after today I am back in positive territory with the real money account that trades this strategy.

Maybe I should just stop right now, and declare the strategy a winner! Nah, that violates the plan...




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Considering the equity curve generated in your testing phases, after each drawdown or period of flat returns, you generally saw an expansion in equity. That makes me think that you're likely to see a continuation of the recent equity trend.

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Considering the equity curve generated in your testing phases, after each drawdown or period of flat returns, you generally saw an expansion in equity. That makes me think that you're likely to see a continuation of the recent equity trend.

Dude, that would be sweet! Any performance close to what I expect would certainly be welcomed. It has been more than a little frustrating so far.

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Nice @kevinkdog, I hope things continuing performing well!

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In positive territory, so that is a start. This is a real money account.

Still waiting for the big winning trade to come along...








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gulabv View Post
Hi @kevinkdog,

Thanks for starting this thread. Would you mind sharing the R:R ratio for the 2 strategies?

Hi, i need your help, i saw you trade zn, and i am planning to go live with my scalping system

here are the details

hi, i would appreciatte your help, i am planning to go live and i see you trade zn,

you can check my strategy details here:

thanks a lot

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You make good points and I agree completely.

I see the same stuff vendors are selling, and the worse thing is -- people are buying it. The other real problem with NinjaTrader's summary page is there is no position sizing anywhere. So you can make a system look great by just adding a few zero's to the position size, and it shows more trades, more profit. People then think it is not curve fitted because it has so many more trades.

The other big one is when people use limit orders. That's an easy way to make NT reports inaccurate.

I generally prefer systems that trade 1,000 times a year or more on 1 contract. If I start dipping below 500 trades a year, I get worried about over fitting. Obviously you take a very different approach, and this is just one of many ways we make a market together

I prefer systems that have very few input parameters, like 1 or 2 ideally, where everything else is dynamic and based on volatility and such in the market. That way I can optimize for my best score, and that golden looking equity curve we are all after, by combining that system along with many more into a portfolio and looking at how it benefits or balances the portfolio as a whole.

As for keeping track of the system, I wish I had fixed the code I was using to automatically post charts and trade results into a futures.io (formerly BMT) thread via the futures.io (formerly BMT) API. I just never had time to fix it, and certainly don't want to start now (I am preparing for vacation mode...). So I can't do any kind of live test. Closest I could do would be to shelf it and come back in two months and just run a new report to see how that out of sample data looks, but it would still be historical sim not live.

Mike

sorry for my interruption, why is this?
thanks

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Hi, Kevindog
i was trying to use your excell to make montecarlo test, and i paste the 136 trades results i made from 31/10/2013 to 20/11/2013
and i was wondering what happens with
amount in " trades in 1 year"?



thanks

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I entered the historical data, and the live data, into the T test calculator here:
Student's t-test: Results


Results are here:





If the result was 0, I believe that indicates that the 2 samples (historical backtest and live testing) are definitely different (ie, the system has changed). If the result was 1, then the 2 samples are definitely the same.

Just for kicks, I took some random groups of 25 historical trades, and put them as sample #2. These are obviously from the historical sample, but the null hypothesis result varied from .09 to 0.82, with a mean of 0.51.

Based on these results, and assuming I did this right and that the analysis is appropriate in the first place, it looks like the two samples are leaning towards being different, but it is not conclusive.

One other interesting tidbit: If I add one $1000 winning trade to my actual results, the null hypothesis test jumps from 0.26 to 0.47. This tells me that the one big winning trade I have been waiting for will move actual results much closer to backtest (which I kind of knew anyhow)...

kevindog
could you tell us the url of t test please,
the link it looks missing for the t-test
thanks


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i have an strategy, that use as block, a minimun starting pack of 3 lots in 1 entry, this is the minimum risk, and in the future i can multiply xn

i managing the trade and i can get several results combining this initials possibilities:
target1 2l at 1tick exit1
target2 1l at 2tick exit2
sl -3 and if goes bad i can close it quickly before-3
theres several possibilities according if I reach or not t1 ,t2 and if the left if close it between -3,-2,-1,0,+1

i made 68 trades
i running on tradestation and tradestation consideres a trade each exit(t1and t2, or t1 and stop)), then i have
136 trades according to tradestation

i want to apply montecarlo analisys to my system, then i have 2 possibilities

my initial list of trades, or the tradestation list of trades

my questions are:
1)is correct the hypotesis to apply montecarlo with this samples, if always i use the 3lot as a block

2)which is better approach: initial list or tradestation list?

3)if i made the trades between 31/10/2013 and 20/11/2013 how can i get annual results?

thank you very much

alejo

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kevindog
could you tell us the url of t test please,
the link it looks missing for the t-test
thanks


alejo


Looks like the website changed location of file. You might try google to see if you can find one.

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Hi, Kevindog
i was trying to use your excell to make montecarlo test, and i paste the 136 trades results i made from 31/10/2013 to 20/11/2013
and i was wondering what happens with
amount in " trades in 1 year"?



thanks

alejo

If you have 136 trades in one month, multiply by 12 to get number of trades on 1 year.

I would not rely on results from just 1 month, though.

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alejo View Post
i have an strategy, that use as block, a minimun starting pack of 3 lots in 1 entry, this is the minimum risk, and in the future i can multiply xn

i managing the trade and i can get several results combining this initials possibilities:
target1 2l at 1tick exit1
target2 1l at 2tick exit2
sl -3 and if goes bad i can close it quickly before-3
theres several possibilities according if I reach or not t1 ,t2 and if the left if close it between -3,-2,-1,0,+1

i made 68 trades
i running on tradestation and tradestation consideres a trade each exit(t1and t2, or t1 and stop)), then i have
136 trades according to tradestation

i want to apply montecarlo analisys to my system, then i have 2 possibilities

my initial list of trades, or the tradestation list of trades

my questions are:
1)is correct the hypotesis to apply montecarlo with this samples, if always i use the 3lot as a block

2)which is better approach: initial list or tradestation list?

3)if i made the trades between 31/10/2013 and 20/11/2013 how can i get annual results?

thank you very much

alejo

I would use the block approach, with the initial list. I would use one month of results to draw any conclsuions. Just not enough data.

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I would use the block approach, with the initial list. I would use one month of results to draw any conclsuions. Just not enough data.

thanks kevin

what do you think about this comparison between different possibilities strategies?



what could be better?, or what i need to do to found that?

thanks


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No big winners in the past week or 2, but a half dozen small winners have propelled the strategy to new equity highs - and semi-respectable performance.

Let's hope it lasts...


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Just a quick note that @kevinkdog will be presenting a webinar on futures.io (formerly BMT) Wednesday, December 4th @ 4:30 PM Eastern. The topic of the webinar is "Algorithmic Trading System Challenge: 5 Ways to incorrectly build a system".

You can find more info here:



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Big Mike View Post
Just a quick note that @kevinkdog will be presenting a webinar on futures.io (formerly BMT) Wednesday, December 4th @ 4:30 PM Eastern. The topic of the webinar is "Algorithmic Trading System Challenge: 5 Ways to incorrectly build a system".

You can find more info here:



Mike

Excellent webinar as usual, you can find recording here:

https://futures.io/webinars/dec4_2013/algorithmic_trading_challenge_kevin_davey/

I liked the Q&A the most, but I always do...

Mike

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Very good webinar, thanks, Kevin and Mike

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There was no Week 15 summary, so here is Week 15+16. As you can see, I have had 10 winning days in a row. That feels pretty good!


Summary: First, let's look at the big picture. I like to do this every month or so, because at a glance I can tell if things are going as planned or not. From look at this first chart, a couple of things are clear:





1. Over the whole course of the system history (walkforward, incubation, live), the system performance hasn't changed much. I could draw a line from the start of walkforward to the start on incubation, and then another line from the start of incubation until the present time, and the slopes of those two lines would be about the same - with the slope from start of incubation to present being a little flatter. This gives me some reassurance that the system is behaving, subject to point 2 below.

2. It is easy to see that the live trading (blue line) has been lagging long term performance. The performance these past 3 months has been lagging.

3. The system, overall is at a new equity high!


So, after 16 weeks of trading this system live, I am up 18% for real world trading. I am fairly happy with that.


Am I surprised at this result? No, this is still below my expectation, but the system is doing OK.

Am I disappointed in the results so far? No.

Are results in line with expectations? Yes, although still below the average expected line.

Are fills and trades live comparable to Tradestation strategy report? Due to a myriad of reasons, I am +$715 better in the real world than I should be. This is good!

Do I see any reason to stop trading this system? No.

Do I see any reason to change my position sizing plan, i.e. reduce or increase my risk? No, although I am about $50 below the point of adding another contract. See the chart below, from an earlier post. Once I exceed $10,114, I will begin trading 2 contracts.












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Congrats @kevinkdog, and thanks for the detailed report.

Mike

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Well, after 16+ weeks of live trading, I finally reached one of the targets I set out at the beginning. Thankfully, it was not the drawdown limit that I hit!

I am at the point where I can start trading 2 contracts, per the plan presented earlier:




Most of the tracking I am doing will remain the same - based on 1 contract. I will add in an additional tracker or two to show the actual number of contracts traded.

My quit point, as you may recall, is based on single contract drawdown, and that will not change.

If my equity falls below $10,114 on a closed day basis, I will revert back to trading one contract.

It may seem confusing (trade metrics will be single contract, but position sizing will be based on actual equity and therefore actual number of contracts, and quit point and drawdown are based on single contract), but I think my reasons for doing this will be clear as time progresses.


I expect the journey from this point on to get a lot more interesting!

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Kevin,

I just finished spending several hours each day over each of the last three days going over this and your Combine journals, and wanted to send a huge thank you for spending the time sharing and educating all of us with your studies. I want to applaud your steadfastness at applying your methodologies and process. It is quite encouraging to see behind the curtain, and also to know the processes you go through to see a strategy through its conception, birth, infancy, and adolescent period. I am thinking your Karma account will increase in multiples for taking your time to assist others in this lofty endeavor, and I for one appreciate it immensely.

Thank you again,

Scott

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Kevin,

I just finished spending several hours each day over each of the last three days going over this and your Combine journals, and wanted to send a huge thank you for spending the time sharing and educating all of us with your studies. I want to applaud your steadfastness at applying your methodologies and process. It is quite encouraging to see behind the curtain, and also to know the processes you go through to see a strategy through its conception, birth, infancy, and adolescent period. I am thinking your Karma account will increase in multiples for taking your time to assist others in this lofty endeavor, and I for one appreciate it immensely.

Thank you again,

Scott

Thanks for the kind words! I appreciate it.

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OK, here is the story of this strategy...see if it sounds familiar to you:

"Sometimes When You Feel Paranoid, It Is Because They ARE Really Out To Get You!"


1. I started trading this strategy for the TopStepTrader Combine on March 20. My first trade was a loser. My first week was a loser.

2. After I finished the first Combine, the strategy performance was superb.

3. I started a second Combine on June 17th. 3 losers in a row to start!

4. After I finished the second Combine, the next month was very profitable.

5. I started real money trading August 20. The first trade was a loser. I was underwater overall after 7 of the first 10 days.

6. I started trading 2 contracts on Dec. 10 (today). The last 11 days were all winners, but of course the first trade with 2 contracts was a loser.


So every single "starting" event with this strategy has been bad. Is this just bad luck, or something more????

Think about my situation next time you feel like the market is out to get you...

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OK, here is the story of this strategy...see if it sounds familiar to you:

"Sometimes When You Feel Paranoid, It Is Because They ARE Really Out To Get You!"

All the more reason to have solid data you can rely on to help you have the confidence necessary to trade a system.

Mike

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So, by my count I have had 4 "rough" starts:

1. Losing day to start Combine #1
2. Losing day to Start Combine #2
3. Losing day to Start Real Money Trading
4. Losing day to Start Real Money Trading, 2 contracts



Based on my strategies (62.8% winning days). the chances of these 4 days all being negative are about 98% against. That is what I call bad luck!


By the way, with today's loss I am back down to trading 1 contract. The fun did not last long!!!!

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So, by my count I have had 4 "rough" starts:

1. Losing day to start Combine #1
2. Losing day to Start Combine #2
3. Losing day to Start Real Money Trading
4. Losing day to Start Real Money Trading, 2 contracts

LOL now here is a challenge for you -- name four positive things your strategy has accomplished and ask yourself if those things are more or less important than the four negative "luck of the draw" things you've listed above.

Mike

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LOL now here is a challenge for you -- name four positive things your strategy has accomplished and ask yourself if those things are more or less important than the four negative "luck of the draw" things you've listed above.

Mike


That is part of my point: most people's brains dwell on the negative things. Notice how I did not say "but I am still up over $1,000 so far." Surely that negates the impact of 4 meaningless (in the grand scheme of things) trades.

Let's flip the whole situation. Let's say I lost money overall so far. Would I also be saying: "but on each of the 4 start dates, I made money, so I am happy?" Probably not.


There is an important lesson here for everyone, especially if you tend to dwell on the negative.

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 OKshunalTrader 
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Kevin,

I just finished spending several hours each day over each of the last three days going over this and your Combine journals, and wanted to send a huge thank you for spending the time sharing and educating all of us with your studies. I want to applaud your steadfastness at applying your methodologies and process. It is quite encouraging to see behind the curtain, and also to know the processes you go through to see a strategy through its conception, birth, infancy, and adolescent period. I am thinking your Karma account will increase in multiples for taking your time to assist others in this lofty endeavor, and I for one appreciate it immensely.

Thank you again,

Scott

I spend quite a few hours Saturday reviewing this journal also and you have expressed my sentiments as well. Thank-you Kevin (and Scott)

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 trendisyourfriend 
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So, by my count I have had 4 "rough" starts:

1. Losing day to start Combine #1
2. Losing day to Start Combine #2
3. Losing day to Start Real Money Trading
4. Losing day to Start Real Money Trading, 2 contracts



Based on my strategies (62.8% winning days). the chances of these 4 days all being negative are about 98% against. That is what I call bad luck!


By the way, with today's loss I am back down to trading 1 contract. The fun did not last long!!!!

Given your results i would never try the famous lethal game called Russian roulette.

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 Big Mike 
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@kevinkdog, how are things? Is the system running over the holiday period?

Mike

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@kevinkdog, how are things? Is the system running over the holiday period?

Mike

Sorry for the lack of updates. The next big update will be at the end of this week.

Only a few trades since the last post. A nice winner today. Still at one contract size, but pretty close (about $200) to adding on a second contract.

Regarding holidays, I treat that as "trade just how you test." In this case, I tested with trading during holiday periods, so I will be real money trading during holiday period.

There are some funky things that occur during this period, though, so I certainly understand anyone who doesn't trade during this time. Hopefully, they excluded the year end holiday period from testing.


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Week 18 is in the books. Profitable week, but I am still only trading 1 contract. Currently tracking at a 42% annual rate of return, which is OK, but well below expectations.

Comments and questions are always welcome.










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Happy New Year.

How are things?

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Happy New Year.

How are things?

Mike

Happy New Year to you, too @Bigmike, and to everyone else following this journal.

Right now, I have completed week 20 of live trading. Since the last 2 weeks had a few holidays in them, there was not much trading. But, the system managed to sneak a couple of losses in, so the past 2 weeks were downer.

Overall, still running below expectations.

Still trading 1 contract. Once equity gets above approx $10,100, I will trade 2 contracts.

After 20 weeks, I am up 9.1%. That equates to a 23.7% annual rate of return. Very unspectacular.


Questions and comments, as always, are welcome.








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 tihfa 
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Kevin,

congrats on running the system live this far long. Considering this is a long term endeavor, actually a chosen profession, the 23.7% annual rate of return on the initial 20 week long only window is pretty good, considering your historic trading equity curve had few months long flat periods.

For what it's worth, your work has been motivating and encouraging for trader wannabe like myself.

Wish you much success in 2014.

Regards,
tihfa

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I haven't posted here in a week or 2, since there really has not been much of interest. I'll post an update at end of week, but performance since the last update has been choppy - up and down. Up a little bit since the last update, but still trading 1 contract.

The most interesting trade happened on Jan 10th. The system put a sell short limit order in at 8 AM. At 8:30:01, the short was filled. At 8:30:06, the stop was hit. 5 seconds for a loss of $450! Fun times!!!


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Here are the updated charts as of Week 22 (plus 1 Sunday night trade on Week 23).


So far, the system is at a 32% annual rate of return. Acceptable, but nowhere near what is should be doing. The last few weeks have been pretty representative of this system - meandering up and down, no real progress.

I am still trading with one contract, although I am about $200-300 away from adding on a contract. Hopefully soon.

Questions or comments? Please feel free to ask...













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After 23 weeks, it is time to increase size (again!). If you will recall the first time I increased size, I was hit with a couple of losers, and had to drop back down to 1 contract. It took a while to get me back up above the contract adding equity point ($10,114), but I am now there. Hopefully for a while!



Annualized Return = 48.9%

Max Month End Drawdown = 7.3%














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Here are the equity curves as generated by the Tradestation Strategy Backtest Engine. I consider these "perfect" performance - if my real money results match these results, that is good.

As it turns out, I am doing better than "perfect" - you can see that in the table in the post right above (compare "Perfect Cumu" with "Actual Cumulative").

Anyhow, my point for showing this is to show how the walkforward test results match up with the incubation/real money results. I'd say they are both performing as planned, although the nighttime strategy has been in a drawdown for quite a while.







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So, after finally increasing account equity enough to jump from 1 contracts to 2 contracts (per the plan), this week I have been ready to trade 2 contracts for any trade, at long as my equity stays above the predetermined cutoff point.

Last night I took the week's first 2 contract trade. Guess what happened?


Of course, a full size loss occurred.


What makes it even worse is that I was 1 or 2 ticks from hitting my profit target, before price dropped, hitting my stop (but turning around only a few ticks lower) and then zooming up past where my profit target was! See the chart below.

Once again, I am left feeling like the market is out to get me...

Next week will probably be back down to 1 contract again.



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 tihfa 
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kevinkdog View Post
.



kevin,

i am assuming you have done ? the study, individual chart reads, for your losses to optimize against "market is out to get me" few or several ticks stop levels?

are the last few stop-outs simply 'outside x sigma' that you used to define your stop level?

if you were to make stops more robust, wider, how would that affect you historical back-test curve?

regards,
tihfa

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kevin,

i am assuming you have done ? the study, individual chart reads, for your losses to optimize against "market is out to get me" few or several ticks stop levels?

are the last few stop-outs simply 'outside x sigma' that you used to define your stop level?

if you were to make stops more robust, wider, how would that affect you historical back-test curve?

regards,
tihfa

It is very probable that my stops right now are not be in the best location. For this strategy, the stop is 34 ticks, which originally came from the TopStep Combine I used this system for. I had to keep the max loss after slippage and commissions to $500 - hence 34 tick limit.

So, when I ran my walkforward analysis, I let the stop be anywhere from 1 tick to 34 ticks. Not surprisingly, 34 ticks was chosen for most walkforward periods as the "optimum." If I had 40 ticks max allowable, I bet the optimum would have been close to 40.

A good question for me now is "since the TopStep loss limit doesn't apply to you now, why not just change your stop?" The answer is that I could, but I decided instead to let "sleeping dogs lie" rather than continuously tinker and adjust what I felt was a decent strategy.

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 tturner86 
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This may seem silly, but why not wait until your account is a bit larger before increase your position size? i.e. ~$13000 or something.

If one trade with 2 cars that hits a loss throws you back below the limit, why not wait until the account is larger and has a cushion? That way you can survive to take multiple trades with 2 cars?

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kevinkdog View Post
It is very probable that my stops right now are not be in the best location. For this strategy, the stop is 34 ticks, which originally came from the TopStep Combine I used this system for. I had to keep the max loss after slippage and commissions to $500 - hence 34 tick limit.

So, when I ran my walkforward analysis, I let the stop be anywhere from 1 tick to 34 ticks. Not surprisingly, 34 ticks was chosen for most walkforward periods as the "optimum." If I had 40 ticks max allowable, I bet the optimum would have been close to 40.

A good question for me now is "since the TopStep loss limit doesn't apply to you now, why not just change your stop?" The answer is that I could, but I decided instead to let "sleeping dogs lie" rather than continuously tinker and adjust what I felt was a decent strategy.

sounds to me your stop level for single individual trades is not adjusted based on some price action behavior and/or price structure but perhaps some type of MAE statistics including TopStep and personal account money availability?

if your stop loss amount cannot be modeled/"explained" through price 'action' then you will have frequently have MAE cases outside your static constant x sigma???

in any case, if this has been working out in your other models then like we established in prior discussions, then it is expected to see drawdowns and flat periods based on your historical curves. your true performance then is only to be accounted for over years not months.

tihfa

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This may seem silly, but why not wait until your account is a bit larger before increase your position size? i.e. ~$13000 or something.

If one trade with 2 cars that hits a loss throws you back below the limit, why not wait until the account is larger and has a cushion? That way you can survive to take multiple trades with 2 cars?


Not silly at all, you bring up a perfectly valid question. Earlier in the thread I explain why I chose the position sizing I did, and basically up front I wanted to add a second contract as quickly as possible, after some reasonable profits were achieved.

You have hit on the flaw with the position sizing I am using - it is a straight calculation going up and going down. So, when I am over $10,140, I go from 1 to 2. If I fall back below $10,140, I drop from 2 to 1. This means that first trade after adding a contract has to be a winner, or I'll have to drop back down.

The alternative to this is to have 2 calculations - one for going up, and 1 for going down. In this case, maybe I would add 1 contract at $10,140, but stay at that level unless equity falls below $9500 (or some other number). Obviously, I'd have to adjust both numbers to meet any risk limits.

I have done exactly this with other systems, but I tried to keep things really simple in this case. That is not looking to be a good decision!

Thanks for the comment. You brought up a great idea!

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 tturner86 
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Not silly at all, you bring up a perfectly valid question. Earlier in the thread I explain why I chose the position sizing I did, and basically up front I wanted to add a second contract as quickly as possible, after some reasonable profits were achieved.

You have hit on the flaw with the position sizing I am using - it is a straight calculation going up and going down. So, when I am over $10,140, I go from 1 to 2. If I fall back below $10,140, I drop from 2 to 1. This means that first trade after adding a contract has to be a winner, or I'll have to drop back down.

The alternative to this is to have 2 calculations - one for going up, and 1 for going down. In this case, maybe I would add 1 contract at $10,140, but stay at that level unless equity falls below $9500 (or some other number). Obviously, I'd have to adjust both numbers to meet any risk limits.

I have done exactly this with other systems, but I tried to keep things really simple in this case. That is not looking to be a good decision!

Thanks for the comment. You brought up a great idea!

I have found if I make a mistake on the first trade or two, if I have the room to make the third / next trade I usually do very well. Being able to survive to take the best trade is really helpful. Just like baseball, you may miss a swing or two but you should learn about the pitcher from each miss.

Not talking about home runs, but again sometimes just a solid line drive can save the day.

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sounds to me your stop level for single individual trades is not adjusted based on some price action behavior and/or price structure but perhaps some type of MAE statistics including TopStep and personal account money availability?

if your stop loss amount cannot be modeled/"explained" through price 'action' then you will have frequently have MAE cases outside your static constant x sigma???

in any case, if this has been working out in your other models then like we established in prior discussions, then it is expected to see drawdowns and flat periods based on your historical curves. your true performance then is only to be accounted for over years not months.

tihfa


Yes, the stop for this system was not based on any price action or price behavior, except for volatility to a degree (if the volatility was really low, the stop would probably be below my 34 tick limit).

You bring up a good point!

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 Big Mike 
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I would look at the maximum number of losses in a row historically, and make the decision based on derivative of that (threshold + cushion).

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I would look at the maximum number of losses in a row historically, and make the decision based on derivative of that (threshold + cushion).

Mike


For the overnight system 3 losses in a row was the max, and for the day system, 5 losses in a row.


When I get some time, I probably will do a study of this sort of dual direction position sizing. The trick will be keeping it relatively simple.

Thanks to @tturner86 @tihfa and @Big Mike for the discussion!

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 tturner86 
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For the overnight system 3 losses in a row was the max, and for the day system, 5 losses in a row.


When I get some time, I probably will do a study of this sort of dual direction position sizing. The trick will be keeping it relatively simple.

Thanks to @tturner86 @tihfa and @Big Mike for the discussion!

Also just because you can trade the two, doesn't mean the current trade in front of you should be traded with 2 cars.

The way I am currently looking to increase my position size is: I will still enter the trade with my one contract and scale the second one in once price confirms the direction I am wanting. Or if I enter with 2, and my first contracts target is hit, my stop for the second goes to B/E until it's target is hit. Again which way I go will depend on what the market is doing and how much I can risk for the trade or the day.

I am still reading through your thread to fully understand your method, so my comments may not apply to you.

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The alternative to this is to have 2 calculations - one for going up, and 1 for going down. In this case, maybe I would add 1 contract at $10,140, but stay at that level unless equity falls below $9500 (or some other number). Obviously, I'd have to adjust both numbers to meet any risk limits.

I have done exactly this with other systems, but I tried to keep things really simple in this case. That is not looking to be a good decision!

Thanks for the comment. You brought up a great idea!

Position size increase suggestion;


The system seems to depend on a lot of small wins and the occasional homerun. Losses for the most part are larger than the wins. So even if you have a couple small wins right after you increase size a max loss will knock you back to one contract. What are the odds of hitting a big win right after you increase your position size?

With a starting capital of 8500 and quit point at 5000 you can withstand 8 max losses in a row.

At 10150 you can withstand 8 losses if you take 3 losses at 866 then revert to 433 max loss.

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Annualized Return = 23.7%

Max Month End Drawdown = 7.3%










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To make a long story short, I have incorporated some hysteresis in the calculation for number of contracts. This allows some leeway (losses in equity) after you add a contract before you drop down to previous level. I should have included it from the beginning.

The method is this:

As I hit new equity highs (UP), I use the original calculation method

As I fall back on the equity curve (DOWN), I adjust the number of contracts down more slowly than I added them going up.

The net impact of this is that I increase drawdown, and also increase median annual return. A fair tradeoff in my mind.

See details below...












So, as an example right now, I have fallen down the equity curve, after hitting 2 contracts maximum. So, I will stay at 2 contracts until I hit either $15,171 (when I will add a 3rd contract), or until I fall to $8,778, at which point I will drop back to 1 contract.

I basically can have 3 max losses in a row (-$1335 per contract and still trade the same size.


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kevinkdog View Post
GRRRRRR
So, after finally increasing account equity enough to jump from 1 contracts to 2 contracts (per the plan), this week I have been ready to trade 2 contracts for any trade, at long as my equity stays above the predetermined cutoff point.

Last night I took the week's first 2 contract trade. Guess what happened?


Of course, a full size loss occurred.


What makes it even worse is that I was 1 or 2 ticks from hitting my profit target, before price dropped, hitting my stop (but turning around only a few ticks lower) and then zooming up past where my profit target was! See the chart below.

Once again, I am left feeling like the market is out to get me...

Next week will probably be back down to 1 contract again.

(....)

Why would you care about the outcome of one trade? I can recall from earlier in this thread that you concluded, after multiple trades, that it was much too soon to abandon the strategy due to the low sample size.

So why is a sample size of 1 now given so much weight? Do you think this strategy suits your personality and trading style?

Edit: Just wondering how you perceive trading this system. As an outsider, it seems to me that you like the system (since you're trading it), but on the other hand you seem pessimistic about your own strategy and think the market is still out to get you. In such a case, it seems hard to me to confidently trade.

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Why would you care about the outcome of one trade? I can recall from earlier in this thread that you concluded, after multiple trades, that it was much too soon to abandon the strategy due to the low sample size.

So why is a sample size of 1 now given so much weight? Do you think this strategy suits your personality and trading style?

Edit: Just wondering how you perceive trading this system. As an outsider, it seems to me that you like the system (since you're trading it), but on the other hand you seem pessimistic about your own strategy and think the market is still out to get you. In such a case, it seems hard to me to confidently trade.

You have pointed out something interesting. Although I believe in the system, and feel it fits my personality (or else I would not be trading it), I have found it an odd coincidence that at many times when one would expect the system to do well (first trade, first trade with adding on size, etc), it has failed.

Of course, the system (and the market) doesn't know when I went live, and it doesn't when I add size, and it doesn't know when I have order issues. But it sure seems it does, since most major milestones have yielded losers.

That's what I wanted to share with people. Most everyone has had the feeling of the market out to get them, and felt really disappointed when one particular trade was a loser. Discretionary traders probably know the feeling well, but the same feelings and emotions can be felt with an algorithmic system (which doesn't really seem possible).

A lot of people think algo systems are a way to avoid emotions. Unintentionally, I'm giving examples why emotions are still a part of automated trading.

Thanks for bringing this up. You made a great observation!

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 Big Mike 
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How are things?

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Update tomorrow.

Sneak peak: Back to 1 contract. Now underwater.

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kevinkdog View Post
Update tomorrow.

Sneak peak: Back to 1 contract. Now underwater.

Sorry to hear that.

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Sorry to hear that.

Mike

Hey, it happens. Over the years, every system I have ever had has experienced good and bad times.

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Hey, it happens. Over the years, every system I have ever had has experienced good and bad times.

I assume you didn't have a public journal about all of those

I appreciate the journal, and am actually really glad in many ways for the way things have unfolded. If your journal had documented a system that just skyrocketed up, then it wouldn't be a realistic assessment of what systems traders have to deal with on an ongoing basis.

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I assume you didn't have a public journal about all of those

I appreciate the journal, and am actually really glad in many ways for the way things have unfolded. If your journal had documented a system that just skyrocketed up, then it wouldn't be a realistic assessment of what systems traders have to deal with on an ongoing basis.

Mike


I'd prefer the skyrocketing up! But this is real life, so hopefully some newer traders walk away thinking "maybe trading is actually hard."

I always tell people that I used to be in charge of a flight critical component found on 70% of passenger jets. I routinely made decisions that, had I been wrong, many people would likely have died. No one ever died.

Trading is about 100 times harder than that job ever was.

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kevinkdog View Post
I'd prefer the skyrocketing up! But this is real life, so hopefully some newer traders walk away thinking "maybe trading is actually hard."

Trading is about 100 times harder than that job ever was.[/B][/COLOR]

Thanks Kevin for your journal! Trading has of course ups and down - every system has the same.
Some drawdowns are not important to change the system's basics.
The same is true if the big wins are flowing in
So stay on track and LET PLAY IT OUT.

GFIs1 wishing good relax this weekend

Edit: to judge a system over time - one has to look over 12 to 24 months..
of course if it is still staying in the race!

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I have now been trading this system live for 26 weeks, one half year.

The last 2 weeks the wheels fell off, so to speak. Trading 2 contracts for most of the time only made matters worse.

So, it is back to trading 1 contract for a while, until $10,114 in equity is hit. That, unfortunately, might be a while!



Annualized Return = -25%

Current Drawdown = 22%







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Any idea why? Did market change, was it execution? Or is it because of scaling to the second contract?

What are the results for trades with one car vs two cars?

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kevinkdog View Post
To make a long story short, I have incorporated some hysteresis in the calculation for number of contracts. This allows some leeway (losses in equity) after you add a contract before you drop down to previous level. I should have included it from the beginning.

The method is this:

As I hit new equity highs (UP), I use the original calculation method

As I fall back on the equity curve (DOWN), I adjust the number of contracts down more slowly than I added them going up.

The net impact of this is that I increase drawdown, and also increase median annual return. A fair tradeoff in my mind.

See details below...




Attachment 135774


Attachment 135775




So, as an example right now, I have fallen down the equity curve, after hitting 2 contracts maximum. So, I will stay at 2 contracts until I hit either $15,171 (when I will add a 3rd contract), or until I fall to $8,778, at which point I will drop back to 1 contract.

I basically can have 3 max losses in a row (-$1335 per contract and still trade the same size.


Did you stick to this when scaling down to the one contract?

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Any idea why? Did market change, was it execution? Or is it because of scaling to the second contract?

What are the results for trades with one car vs two cars?

Had I just stuck to 1 contract the whole time, I'd be up $494. Instead I am down $1K plus. So, switching to 2 contracts, and hitting a losing streak, definitely had a big impact.

Of course, had I encountered a winning streak after trading 2 contracts, I would be singing a different tune!

So, I'd say a bad run over a period of less than 10 trades(within expectations), coupled with increased size, caused this.

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Thanks for sharing Kevin. Any plans to start a second strategy?

Mike

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Thanks for sharing Kevin. Any plans to start a second strategy?

Mike

I bring new strategies online every few months. I started a couple new ones in Jan and Feb. But, I have no plans to journal them.

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I bring new strategies online every few months. I started a couple new ones in Jan and Feb. But, I have no plans to journal them.

Awww where is your sense of adventure?

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Awww where is your sense of adventure?

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The ironic thing is everything I have brought public lately (TST Combine #1, TST Combine #2, now this system with my own account) has suffered. A tad embarrassing, it tis...

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The ironic thing is everything I have brought public lately (TST Combine #1, TST Combine #2, now this system with my own account) has suffered. A tad embarrassing, it tis...

Completely understand.

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Hi,

First, thanks a lot for this journal. It is very inspiring!

I have noticed that you mentioned:

Quoting 
Had I just stuck to 1 contract the whole time, I'd be up $494. Instead I am down $1K plus.

May I know if you have backtested the system with this kind of non-constant position sizing?
If you cut size when you are in a drawdown, it is more difficult to get out of it.
Just thinking...

Nicolas

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Nicolas11 View Post
Hi,

First, thanks a lot for this journal. It is very inspiring!

I have noticed that you mentioned:


May I know if you have backtested the system with this kind of non-constant position sizing?
If you cut size when you are in a drawdown, it is more difficult to get out of it.
Just thinking...

Nicolas


I backtested with one contract, and added position sizing later.

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kevinkdog View Post
Hey, it happens. Over the years, every system I have ever had has experienced good and bad times.

Kevin,

to help put things into perspective, would it be possible that you plot separately couple or few times weeks/months long sideways/drawdown performance that occurred in your backtest curve with equity high being the starting point.

Once that is well understood then it will be clear that your current performance perhaps is just one of those periods already accounted for in your execution.

You may have to wait months and years for system to produce results. If this is the case then reflecting on weekly performance is too often, perhaps only a monthly performance is a proper zoom level?

Regards,
tihfa

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tihfa View Post
Kevin,

to help put things into perspective, would it be possible that you plot separately couple or few times weeks/months long sideways/drawdown performance that occurred in your backtest curve with equity high being the starting point.

Once that is well understood then it will be clear that your current performance perhaps is just one of those periods already accounted for in your execution.

You may have to wait months and years for system to produce results. If this is the case then reflecting on weekly performance is too often, perhaps only a monthly performance is a proper zoom level?

Regards,
tihfa


The 2nd chart in this post (link below) shows the walkforward and live equity curve. You can get a sense of drawdown amounts and durations from that chart.


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