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Yes I will keep back testing on the MES and MCL and go from there. There is no quit in me and I will continue trying to solve the markets.
I am only trading with like $150 in my futures account so I was going to blow up again if not today then very soon. Even trading the micros I would probably need at least $1000 in my account to survive the drawdowns.
Can you help answer these questions from other members on NexusFi?
This event does not change my opinion on hard stops. I know using a hard stop order is the right thing to do, but the question is "will I use a stop"? The answer is probably no. Today was a prime example of action speaking louder that words. I'm going to stop fighting myself and just trade how I want.
Planning my trading day simply does not work for me. I talk a lot in this journal about the importance of stop orders and exiting losses but I do not follow my own advice or anyone else's advice for that matter. I make rules for trading and two hours into the day I usually abandon the rules I have made. Maybe I am just a degenerate gambler that likes to trade which is fine with me.
Sept 5 was my last time I traded. Still feeling great about trading. I am saving my chicken so one bad day doesn't knock me out of the game. Ever since I started this journal I have tried several strategies all involving the DOM for entries. Going to continue using the DOM for entries because I enjoy watching the liquidity move up and down the price ladder. The other side of my strategy is bankroll management. I will keep working to reduce my losses and let my winners ride.
During this downtime while I save up I am backtesting an old but different strategy:
Entry using orderbook and mean reversion(identified using trends in the DOM)
Exit 9 tick take profit/80 tick stop loss (these will be implemented using a hard stop/take profit if I take this live)
Time during the trading day to backtest will test 8am to close.
It is pretty hard to backtest my entries properly without a replay of the DOM. Therefore I will base my entries on sell the rips and buy the dips and will continue to refine my entries guidelines for later back tests.
Will post the results of the 6 weeks of data that will be back tested. I am accounting for fees in the back test as well. Market is MES. I am back testing using 1 minute data on a chart(since I do not have access to a DOM replay) and writing results by hand in a notebook.
Back testing the strategy above took me about 6 hours, analyzing 1 minute charts manually.
Strategy: 9 tick take profit, 80 tick stop loss, Entries were sell the rips/buy the dips(I can not perfectly define what rips and dips are so this was basically random entry)
Results:
Days tested was 28
Winning trades 185(at $10.05 profit per winner this is about +$1,849.00)
Losses 24 (at $101 per loss this is about -$2,424.00)
Total loss was about -$575.00
Note: All losses were not tabulated because I did not include unrealized loss at the end of the day. There the total loss was greater than above
I realize a 28 days of back testing is a small sample. Is 28 days of results enough to say that I should not trade a system having a risk/reward ratio of 10? And can I expand the assumption that all random entry, risk/reward ratio >1 strategies will result in a cumulative loss over a large sample? For now I will not trade a system with a risk/reward >1 with random entry.
That being said I am now focused on back testing a system with a risk:reward ratio of <0.5 and with random entry.
Yes, 28 days is enough to say that. You have mentioned previously in your journal that you believe all entries have a 50/50 chance of success. If that is your belief, then anything worse than a 1:1 ratio will lead to loss.
The grid below shows risk and reward in ticks, and the percentage of winners you need to have to BREAK EVEN before fees and commissions at each level of risk ticks vs reward ticks. Anything in red on this grid requires better than 50% winners to be break even.
I got the idea of this grid from a trader I knew years ago...not my own work.
