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20 mini dax points a day
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Created: by rosmerta Attachments:3

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20 mini dax points a day

  #11 (permalink)
Market Wizard
Germany
 
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rosmerta View Post
A daily stop of 200 points down for the day is way too much for my comfort level. While I understand that I need room to move, I don't feel comfortable having this so much more than my target now that I am using real money.
Action - revise daily max stoploss to 80 points. If I am running this regularly while chasing 20 points there is something wrong.

Sorry to say, but your minimal targets combined with your "personal" stop loss comfort level are a recipe for disaster.
Just to do the math for you: With your "strategy" you need a hit ratio of 91% (10/11) or 80% (4/5)
before commissions as soon as your first stop is hit just to break even again. Ambitious at least.

Even with the reduced March volatility the FDAX has an ADR10 / ADR20 of ~200p.
Average daily noise is between ADN10 ~43p and ADN20 ~52p.

So what you basically do is setting pure noise targets combined with stop losses that strike whenever moves get
meaningful - regardless whether you do that with 80p or 200p.

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  #12 (permalink)
Apprentice
BRISBANE, Queensland, Australia
 
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Thanks choke35. Just so I'm clear - that daily stop loss of 80 or 200 (as it used to be) was when I plan to quit for the day. It is not a per trade stop loss. That's formulated based on a recent high / low when I think I will be proven wrong and I am still experimenting with the target per trade, but it is at least as big as the stop loss which normally is about 15 to 25 points. Does that make sense? Does that change anything of your assessment? I appreciate your input.

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  #13 (permalink)
Apprentice
BRISBANE, Queensland, Australia
 
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choke35 View Post
Sorry to say, but your minimal targets combined with your "personal" stop loss comfort level are a recipe for disaster.
Just to do the math for you: With your "strategy" you need a hit ratio of 91% (10/11) or 80% (4/5)
before commissions as soon as your first stop is hit just to break even again. Ambitious at least.

Even with the reduced March volatility the FDAX has an ADR10 / ADR20 of ~200p.
Average daily noise is between ADN10 ~43p and ADN20 ~52p.

So what you basically do is setting pure noise targets combined with stop losses that strike whenever moves get
meaningful - regardless whether you do that with 80p or 200p.

Ok, after reading and thinking about it some more I think I get you now (I responded initially above but forgot to quote you). What I understand you are saying is that by setting a 20 point target for the day, I am loading the deck against me. To get a return overall and that I should be setting the target a similar level to my daily stop loss. I may even have the terminology wrong. Perhaps I should be using stop trading for the day limit, and given your feedback that should be the similar whether positive or negative. If I understand you right, either my "system" or reading of the market has an edge or it doesn't. I should just trade when I can and overall it should come up positive. The 80, or 200 was a figure that I was using as an emergency stop - i.e. go home its not working today. As I mentioned in the last post (but I forgot to quote you), there will be something wrong with my system or my reading of the market or my execution if I am hitting my emergency break glass stop regularly. I am trading on short time frames, 5 min bars, and ~5 point renko and I don't want to hold overnight, as I want the cash available for an automated EOD system I run. Does that change your opinion at all? I would be interested in how

Although, I don't plan to hit the 80 point loss (nor did I plan to hit the 200 loss - but inexperience is what I am trying to beat out of me here), there will be days when I do and it will take 4 positive days (or a lot more to make up for my second day) to make up for it, if I stop trading when I hit a daily target of 20 points. If my trades are right 55% of the time there is a chance with 4 or 5 individual trades going against me in a row will take out the 80 point stop. Initially I had placed a 200 point emergency loss as quite far away as in my experience with algorithmic equity long only trading is that for some of the systems I use, stops, especially tight ones can reduce performance significantly overall. The 200 down was something I was never going to hit, but when I did on the second day with real money I realised I had been too flippant and I had to reduce it, at least until I get more of an understanding on what was going on.

I am under no illusions that I am a beginner here. Initially I expect that it will take me some time and money to get a good read on what the market is doing (if indeed I can at all) and perhaps I will take out my emergency stop more frequently at the beginning. If I am honest (and I don't want to scare you here), my aim is to move up to the Dax or other equities in time, if I can gain confidence and I have allocated some funds to "learn" while doing. I have done enough paper trading, and although I consider myself reasonably experienced in equity EOD and EOW trading, intraday trading and futures trading is totally new to me. I am still considering the CFD for the dax as an alternative as forexoil suggested.

Your prompts and feedback have really got me thinking about my approach. Much appreciated as that is why I am here. Thanks again.

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  #14 (permalink)
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choke35 View Post
Sorry to say, but your minimal targets combined with your "personal" stop loss comfort level are a recipe for disaster.
Just to do the math for you: With your "strategy" you need a hit ratio of 91% (10/11) or 80% (4/5)
before commissions as soon as your first stop is hit just to break even again. Ambitious at least.

Even with the reduced March volatility the FDAX has an ADR10 / ADR20 of ~200p.
Average daily noise is between ADN10 ~43p and ADN20 ~52p.

So what you basically do is setting pure noise targets combined with stop losses that strike whenever moves get
meaningful - regardless whether you do that with 80p or 200p.

Sorry to keep posting to myself but your prompts forced me to do some more work on my daily stop trading limit choice, and hopefully it makes sense, but I thought I would post what I have done here, to show you what I mean, and also maybe for others to benefit or set me straight.

I choose stop levels on each trade based on the price movement and pattern on the 5 minute and renko charts, not a hard 20 point stop. But for this exercise I have used the following:

Win Percentage = 55%
Average points win = 20
Average points loss = -20
Starting points = 0

Using a random number that allocates whether or not each trade is a successful trade (but will be 55% of the time) I get the following chart for maximum overall system drawdown of 10,000 trades.

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But then I only trade maybe 5 trades a day so the maximum daily trade drawdown will be based on 5 trades a day. Over 1000 trading days you get the following chart.

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I didn't plan this but it lines up with 80 points a day. The problem is, I don't really know what my successful trade % is, or what my average trade stop level or target / achieved profit level is. I don't think I am going to really get the results / data I need to establish this data accurately until I trade with real money for a period. I hope that all makes sense. Perhaps I should be looking at the ATR and noise levels for smaller time periods in line with what you suggested.

I am keen to hear any other "discretionary" traders manage their daily limits. All other things being equal, it would appear that I should ignore the target of 20 ticks per day and keep placing trades when I get the signals. The name of this trading journal may turn out to be a poor choice

Thanks again choke35

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20 mini dax points a day-max-draw-down-day-10-trades.jpg  
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  #15 (permalink)
Market Wizard
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@rosmerta

You exactly got the point.
And respect for dealing with the topic in that detailed and thoughtful way.
The method shows that your time with EOD/EOW certainly isn't/wasn't in vain.
Besides: It is way above your "Beginner" tag.

Enough flattering

For the next steps it is important that you a) find out if your system/method really
has the edge that you assume and b) can live with the real drawdowns. (CFDs can
only mitigate that pain in absolute terms, but all disadvantages aside they also will
show you if your (F)DAX trading works.)

For further thought try to keep in mind that any (static) target (mathematically) cuts down the P/L
- trivial so far. But try to find out if the trade-off between your targets, the lost profit of "normal"
moves of the FDAX and your (emergency) stops are balanced for you.

Good trades!

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  #16 (permalink)
Market Wizard
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rosmerta View Post
I dived in too early - At 5pm Brisbane time you can start trading DAX and Mini Dax. I was sitting ready and willing at 5pm. At about 5.12 pm I was placing my first trade while the signal bar was being drawn. I was counting on a breakup. The bar did not complete the way I thought it would and the action reversed. In hindsight I should have waited until at least some lines of support and resistance were formed and the initial trend for the day had been better established. Action - No trading before 5.45pm and at least some direction / support resistance has been established to start the day. THERE WILL ALWAYS BE ANOTHER TRADE!

hi @rosmerta,
Thanks for starting a journal and your detailed thoughtful commentary!
I noticed that you mentioned trading at 1745 your time, which I think is around 0845 in Berlin. Sounds like you are starting pre-cash open. the cash open is 0900 and initial balance lasts till about 0930. Nice failure test/pull-back setups can be found after the initial balance.
I started trading the DAX with small time frames (1M/5m) and tight stops and was chopped in to pieces. I opened up to 30 minute and 2 hour charts and saw the "light". @choke35 mentioned about the stops and noise. You may find a large stop such as 50/100 points and one or two trades with positive expectancy to get the major swings of the day bears some nice fruit. There is a big benefit of fewer trades and big stops: mental fatigue. Getting chewed up with stop-losses reduces the quality of my decision making and confidence.

For developing an edge, I found Adam H. Grimes free course to be one of the best resources. Plan to invest 100 or so hours but it's worth it. The Course - The Art and Science of Trading. Also, I traded the CFD before the mini-DAX, which allows you to practice with real money and trade in 1euro increments. The other benefit of the CFD from a reputable dealer is that they roll over so you can almost treat them like a leveraged ETF so you can trade a large time frame.

Good Trades!
JohnS

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