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Here we are again at the close of another week. I ended today a bit early....my first entry was @ 8:04am and I exited my final trade at 9:16am. I had a goal of 75 ticks for the week and I hit it w/ that trade...as well, market action began getting a bit choppier and less apparent to me, and my concentration was not there. So I called it a day and I'm happy for that decision. I'm looking at the 6E trade 72's now and verrrrry happy.
As I mentioned in my last post, I've shifted to focusing on each Week as the main period to measure performance. This is much more familiar and useful to me. My goal is to be trading 3 to 5 days a week, this week I was able to trade 4 days.
I am still trading the Micro. As you can see from the sheets, I opened this account in Feb and began trading for the first time in 8 years, and as you'd expect made a mess of things, at the worst the account was down 453 micro ticks.
My benchmark for moving into the 6E from micro will be taking that tick total positive. After today, I'm negative 128. I feel that is a necessary step in my progression, establishing that level of consistency w/ my interaction with the market.
As always, I am open and eager to receive any meaningful, constructive feedback from those that feel they have something valuable to share.
Something that I would like a knowledgeable opinion about...if its out there....is just the fact that...considering my past week....I feel like I probably did not trade quite enough...did not take enough risk...ave winner too low...and therefore left a lot of ticks on the table. But when I just look at the stats....if I can consistently do that in the 6E and build size...I will build my account.
I think the way to take that is that I have a potential for a higher expectancy with my style. As I've noted in this journal, historically my style is more conservative and risk averse...generally don't like much heat...and that has been a problem that has limited my profits in the past....but also in the past produced an expectancy much higher than my peers (even those that made much more money overall).
So there's some confusion over how to interpret that/coach myself.
But the ultimate goals are unchanging: Build CONSISTENCY with expectancy, and add SIZE. That is the ultimate formula.
Not following what you are doing closely but my best insights below
Trade Frequency, Expectancy, Profit Factor, Net Profit, and Trade Quality Considerations
Profit factor and R (as in reward multiples) is associated with trade quality. Increasing trade selectivity will tend to produce higher quality trades at cost of net profit because of selectivity. In order to generate the same degree of profit with fewer trades compared to more trades, you need to risk more per trade. There is an important trade off here that needs to be understood. As you increase your trade selectivity to get better trades, you are decreasing your total number of trades and thus concentrating risk. As you decrease your trade selectivity to risk less per trade, you are decreasing the quality of the trade and the certainty that you are trading with an edge. The factors of trading cost, capital, and uncertainty are the relevant variables.
Taking fewer trades over some interval, at least for an algorithm, is more likely to be correlated with trading higher quality trade as there is greater ability to implement selectivity based on function of trade of quality. Discretionary traders tend to benefit from seeing more opportunities because it helps with the feedback process.
You may find that being more selective, i.e. risk averse, in your trading opportunities but then allowing those opportunities adequate space works best. Even, if you are trading selectively, if you have higher market cognition and creativity then you should be able to find more opportunities. "Not liking heat", same here at times, but it is also typically a product of lack of confidence in methods or lack of knowledge of how much heat a trade should take.
Generalization vs Specialization
Experience often translates to generalized ability which translates to robustness and ability to find opportunity within certain considerations at medium leverage. I am not sure it translates to being able to scale up in the way you want. Cost/benefit to specialization, the benefit is ability to obtain higher returns but the cost is fragility when market changes. I am taking to the view of trading plans as "projects" vs. "generalization".
Regarding your focus
I am unsure of the benefit of trying to extrapolate from small sets of data. I think what may help is to focus on the variants and invariants in your trading method. There is reproducible input and reproducible output. Reproducible input means being able to trade in a consistent way but doesn't guarantee reproducible output. The other way is to focus on reproducible output. Reproducible output, always unknown, but might be expressed by seeking the best opportunity set.
Wow thank you for such a knowledgeable consideration of what I have going on here and my goals. You touched on a lot that is not familiar to me so I'll have to do some learning before I can abosorb all that you've said.
If I understand you correctly....are you saying that as I work to improve stat's and become more consistent....thus becoming more specialized...what I'm doing is actually becoming more fragile and likely to experience a drawdown if/when market environment changes?
"...at medium leverage.....not sure it translates to being able to scale up the way you want..."
Being more specific about scaling up....my goals for scaling would be to first hit my benchmarks allowing me to move into the 6E from micro....ideally that would mean I'd be maintaining/improving consistency and performance while executing the same 1-2 lot positions in the 6E.....in a nutshell intraday opportunities to capture 1:1 to 1:2 risk reward w/ maybe 18 ticks being the average target....though many scales and/or runners looking for less or more.
Vague description I'm sure...but in 6E based on volume/volatility etc I feel like I could scale from 1-2 lot positions to 10-20 lot positions at an absolute minimum, before slippage, partial fills, etc significantly affect profits.
Are you saying there are some issues I may run into in trying to do this that I'm not seeing?
Yes, very possibly but this wasn't the primary point. But, it is likely there is a trade off between consistency and robustness. There are a couple ways to think about it. The markets are very efficient and so they tend to "punish" optimization. One way to think about it is that if you achieve the ability to trade with say a tight X tick stop loss then your precision is must be Z or better. Another way to think about it, let us imagine your edge is such that you risk 1 tick and have a 4 tick profit. The other way to think is how it becomes easier to game, i.e. you are taking from the best traders and you can only take provided you stay ahead of them. This is a more fundamental problem in that it is not the lack of an edge that gets most traders: it is not knowing their precision. If you have a larger account and reduce your leverage, you can achieve better returns without risking an error in precision and you can do so with less risk of changes in your precision.
Here is another way to think about it, if you are trading in a more general way with less leverage then when the market changes the degree to which you adapt is less. So your performance over the entire year might be less variable even if your "consistency" is worse. On the other hand, if you achieve high levels of consistency then when the market changes, you are more likely to have to make big changes which means higher variability which means requirement to go back simulator or have to wait or take steeper drawdowns-- so over the year you will have bigger periods of out performance.
My only suggestion is that if you are trying to scale up and this was maybe already obvious to you then a specific edge will be more important (then a generalized trading ability). If you do not have a very specific edge then at a minimum, you need to be able to perform under invariant conditions. That is, you need certain controls so that you can have confidence you can execute when you go live. The biggest factor is probably going to be the volatility.
It is true that getting 1:1 targets or worse is typically more common in day trading mean reverting markets. The only downside is that if your win rate drops, then your return will drop quite low. If you can find 2:1 target then your win rate is less critical.
There many ways to trade. I would like to see you make this work. Good luck!
Read Van Tharp on market states. First step in making sure conditions have not changed on you. Also he wants you to test in those market states so you will know when to not use your system.
Read Van Tharp on his System Quality Number. Makes you calculate your edge and gives you a universal measure you can use to compare to other systems. I recalculate a couple of times a year. Lets me know if things are going consistently down hill. Building the distribution of R (histogram) is an eye opener. Elsewhere he (Van Tharp) has said in print (this is from memory so decent margin of error) better than 2.5 or so is tradable, 4 on up is decent and 9 is the holy grail. If you find another method of comparing systems (not just a single statistic) please share. I use Van Tharp because he makes the only hammer I have seen
Today we close out August. Updated numbers with updated tables, an attempt to display the metrics in a more meaningful way.
There's a lot of volatility here. I'm struggling with time, I want to trade five days a week but I'm finding it hard to find time each day to devote to preparing to trade. This then puts me in front of the screen with less time to plan/prep...which obviously means I'm gonna be armed for fewer scenarios even if I have the general idea right. That results in me taking trades then wanting to bail, or missing trades. There is no better example than today:
I had time to plan for one real trade...I was thinking test up to 11703 then get short to break yesterdays lows. Ironically enough it touched up to 11703 to the tick which never happens then broke over night. The second I turned on my screen it was trading 11680, my target, looking like a sale. BUT on the sheet taped next to my desk that says rules, one of them says "No Click Bang"....so I did not sell. I decided I'd sell 85's for sure but of course it didn't get that high and I never had a chance to reconsider the 80's either.
I eventually ended up short 4 @ 60...my stop was 71 (44 ticks). I had not planned to be that heavily short that low so I was very uncomfortable even though the most I got was 8 ticks of heat for a quick second. I'm disappointed to say I scratched 2 immediately and moved my target and only netted 34 ticks on the remaining two. This definitely should have been a 100 tick day for me.
That epitomizes the struggle and what I have to hone in on: I am not getting paid enough for the risk I'm putting on, and I'm definitely not getting paid enough when I am right on market direction. The second is mostly a function of some poor entries this week.
So essentially, as always, I have some work to do to scratch and claw and push to improve these numbers. I am obviously losing some battles and always will, as evidenced by my down 100 tick week a few weeks ago, but I am definitely winning the war. And I'm getting better at minimizing the damage done when I lose a battle, better at seeing a losing battle coming and avoiding if I can. And slowly...even more slowly...I'm getting better at winning. I'm getting better at getting on board and taking ticks out of a move. I don't feel like I am yet trading anywhere near where I am capable in this market, but each day I get a better feel for how I can trade it effectively and as I work over time my execution will get better and better.
I'm still in the micro. I missed my goal of being ready for the 6E by Sept 1 by 120 ticks. So essentially, to get to the consistency I'm deeming ready for the 6E, I need to make 120 more ticks (and running) thus bringing my all time micro expectancy in this account positive. I also want to see on a weekly basis that I'm staying a bit more consistent and probably more importantly an expectancy great than 1 (micro ticks..which is 2 6e ticks...which I guess I do have over the past several weeks).
Thank you all for your comments, advice, and readership. Cheers!
Just wanted to mention that 17ms latency in your connection (somewhere on page 2? of this journal) is more than fast enough imo, taking into account human minimum reaction time is +- 200ms anyway and you don't compete with HFT anyway. I am on page 5 now, looks good, interesting, will continue reading tomorrow.
I really liked your reply here. Optimization is great, but it's not just a stats thing...your head needs to be treated just as carefully.
You've referenced working on letting your winners run a little more. Have you experimented with tighter stops or getting more efficient entries? I came across an exercise by Mike Reed / Lance Beggs talking about training themselves to both enter at better points and limit risk by trading on demo, setting a stop of -3-5 ticks and manually exiting at -1-2 as soon as ideas weren't going their way. It's not meant to change one's system, just learn to get better entries and pull the trigger quicker (both on entries and defensive covers).
That may not necessarily fit you, but I can see your numbers improve dramatically with a slightly better W/L ratio (I'm really looking at July's expectancy). As you mention in a different post, there's a lot of variability across your months....but a few tweaks to your risk, especially defensively, might help.
Really enjoyed reading your journal and looking forward to more. It's great to see your numbers improving pretty steadily.
Looking back at this week my initial reaction is a lot of frustration. I have some issues with my "edge" (entries, entry areas are not as well hammered out as I'd like) but the much much larger issue is psychological. A large part of it is protecting small losses. I get up, get some 'credit' on the day....then become more risk averse. The big problem this produces over time is what maybe should be a 'relatively normal' down day ends up being a bigger step back....because my profitable days are not profitable enough. I have dealt with this issue in the past to some degree.
As well, I tend to become risk seeking after a loss. This isn't new, throughout my career I became more aggressive after a loss and it often served me well. But thats kinda the problem....as a pro circa 2009, taking a loser and getting more aggressive was good because I was very seasoned at that edge and that market, executing on quality setups was completely intuitive. Now, barely 7 months into a completely different market and strategy, if I am compelled to get more aggressive it often seems to result in my numbers getting more random.
I traded four days this past week, probably should have only traded three tops, and the numbers are splendidly unimpressive, but I do believe I made progress in my system of creating a plan, and in journaling. I also began the eye opening process of journaling trading errors which I will add here soon. So I will find some time this weekend to do a little review and flush out what I really need to concentrate on next week.
For what is worth I thought the 6E was a pretty unforgiving trade all week. I was expecting the break this AM and did manage to get on board, but did not take out of it nearly what I should have. As per a new rule....I'm ending the day early on NFP so I wasn't around for the pullback but hopefully some of you sold the retouch of 1.1600 for me.
Thanks man. I've totally come to appreciate that the style I'm trading now has no need for a supersonic connection. I'm not trying to hit orders on the turn or anything...really just get my charts to print right!
