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I might Win a Tablet but I might just get rich trying
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I might Win a Tablet but I might just get rich trying

  #21 (permalink)
Trading for Profit
Launceston, Tasmania, Australi
 
Futures Experience: Intermediate
Platform: IG, ETrade, Commsec
Favorite Futures: EUR/USD, Aussie, ASX200
 
Posts: 78 since Nov 2010
Thanks: 25 given, 63 received

Capital Management

Captains Log Star date March 14th

Itís a non-trading day and life is schmoozy. Letís talk about capital management.

I said last week that I donít do much back testing. You can also see by now that I donít do a lot of trades so - what am I thinking and how can I make any money doing this?

Thatís a good question and itís one I ask myself on a regular basis. In my mind the math works like this Ė Imagine I do 12 trades a month and have approximately a 60% win rate. I also expect (hope?) to make about 1.5 times my losses (yeah yeah I know that hasnít happened so far)

Rather than back testing, I allocate $2,000 of capital to a given system then use a 5% percent of that capital as my R. Now Iím trading in real time with real money and real emotions.

If you paid attention to my wins in a row post last week you can see that I can expect to lose 11 in a row if I have a 60% win rate so I should be able to risk 5% and still be in the game. Itís also true that I could lose 11 in a row then 1 win then another 11 losses. I would say that if my $2,000 runs out I have given that system a fair try and move on.

Obviously, if I start with $2,000 and risk $100 per trade I canít expect to live off the proceeds even though I do live like a hippy in rural Tasmania. This is where the power of compounding kicks in. I will be increasing my R using a modified version of the fixed fractional model. At this end of the spectrum I am risking a relatively high percentage of a small account. As the account builds I will risk a smaller percentage of a larger account and be making larger trades. Something like the table included in this post. Eventually I would go to risking 1% of capital and ultimately to a fixed risk as even in the FX markets over a certain size gets too much.

I will be running this same style of money management over any systems I use. Some will die and some will kick on. Itís survival of the fittest and ultimately forces me to devote my time and money on what is successful

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  #22 (permalink)
Trading for Profit
Launceston, Tasmania, Australi
 
Futures Experience: Intermediate
Platform: IG, ETrade, Commsec
Favorite Futures: EUR/USD, Aussie, ASX200
 
Posts: 78 since Nov 2010
Thanks: 25 given, 63 received

Captains Log Star date March 15th

Today was another ranging day. There was a gap open and a short down trend into the range that held until Euro open when we say another instance of it testing both sides of the range with fake-outs. No trend developed while I was in the seat so no trade.

I am finding myself increasingly intrigued by these range crossovers. There seems to be a trading opportunity and I will keep watching out for them

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  #23 (permalink)
Trading for Profit
West Coast of Florida
 
Futures Experience: Intermediate
Platform: TradeStation, Danials Trading
Favorite Futures: TF, CL, & HO HOs
 
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Posts: 505 since Jul 2010
Thanks: 56 given, 2,283 received

Win a Tablet while getting rich.......



Nickemp View Post
Captains Log Star date March 15th

Today was another ranging day. There was a gap open and a short down trend into the range that held until Euro open when we say another instance of it testing both sides of the range with fake-outs. No trend developed while I was in the seat so no trade.

I am finding myself increasingly intrigued by these range crossovers. There seems to be a trading opportunity and I will keep watching out for them


I thought you might like to see the way I look at the same time frame on the 5 min chart. Maybe you will see the same trades I do and more quickly get rich in the process of winning the Tablet.....good luck.
Let me know if this helps.

WK

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  #24 (permalink)
Trading for Profit
Launceston, Tasmania, Australi
 
Futures Experience: Intermediate
Platform: IG, ETrade, Commsec
Favorite Futures: EUR/USD, Aussie, ASX200
 
Posts: 78 since Nov 2010
Thanks: 25 given, 63 received

Thanks WK

That is a very interesting way of looking at the action. I can't believe I haven't stumbled on your posts here before given that one of them is about the specific instrument I trade

I will give them all a very good read

Thanks again

Nick

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  #25 (permalink)
Trading for Profit
Launceston, Tasmania, Australi
 
Futures Experience: Intermediate
Platform: IG, ETrade, Commsec
Favorite Futures: EUR/USD, Aussie, ASX200
 
Posts: 78 since Nov 2010
Thanks: 25 given, 63 received

Moo!

Captains Log Star date March 16th

Another day with no trades. I didnít do any in the first part of my session as price kept chopping through the two MAs I use to define trend. As the evening wore on my wife informed me that our steer was in the wrong side of a fence so we had to go and sort that out before it got dark. That was the end of my trading day.

Trading the way I currently do I didnít miss anything anyway.

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  #26 (permalink)
Trading for Profit
Launceston, Tasmania, Australi
 
Futures Experience: Intermediate
Platform: IG, ETrade, Commsec
Favorite Futures: EUR/USD, Aussie, ASX200
 
Posts: 78 since Nov 2010
Thanks: 25 given, 63 received

Captains Log Star date March 17th

No trades again today. There was arguably an entry in the circled area but at that stage we were really still in consolidation. For a while it looked as though we may get an up trend but the BOE speech seemed to put an end to that. Maybe the speech was sending the traders to sleep

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  #27 (permalink)
Trading for Profit
Launceston, Tasmania, Australi
 
Futures Experience: Intermediate
Platform: IG, ETrade, Commsec
Favorite Futures: EUR/USD, Aussie, ASX200
 
Posts: 78 since Nov 2010
Thanks: 25 given, 63 received

Captains Log Star date March 18th

I was out all afternoon combining a beach trip with gathering hardware. I was home late and very tired so I didnít bother turning on the PC. There was some action during my normal hours of trading but Cíest la vie

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  #28 (permalink)
Trading for Profit
Launceston, Tasmania, Australi
 
Futures Experience: Intermediate
Platform: IG, ETrade, Commsec
Favorite Futures: EUR/USD, Aussie, ASX200
 
Posts: 78 since Nov 2010
Thanks: 25 given, 63 received

Captains Log Stardate March 19th

Well that was a pretty flat week - I made no FX trades and most of my stocks hit their stops so I'm almost running totally on cash at the moment. Like all trading you just have to take each day as it comes

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  #29 (permalink)
Trading for Profit
Launceston, Tasmania, Australi
 
Futures Experience: Intermediate
Platform: IG, ETrade, Commsec
Favorite Futures: EUR/USD, Aussie, ASX200
 
Posts: 78 since Nov 2010
Thanks: 25 given, 63 received

Captains Log Star date March 20th

This being a non-trading day itís time to write about Expectancy.

Any trader worth his salt understands expectancy (if not, please look it up) and itís a very useful way of measuring results. The problems come when it is used as an absolute measurement of trading quality, which can hide a multitude of problems. Here are some of the things I watch out for when I use expectancy.

  • Expectancy skewed by one result Ė 50 trades in the range of + or - $1,000 but one trade with $20,000. Unless this is a system specifically designed to capture extreme fat tails take out the $20,000 and see what the expectancy is then (maybe take it out any way to see how you might handle trading the system while waiting for the fat tails)
  • Expectancy un-accompanied by a position-sizing model. If you are the kind of trader who takes positions of varying sizes depending on how you feel on the day then expectancy is useless. We all know traders who have a good run then decide they are some kind of trading god and trade 10 times their normal size, A couple of losses later and they have wiped out their account. The Expectancy of their system was good but the money management messed it up. One way round this is to measure results as a multiple of the risk ( R ) in the trade and take the expectancy of that. Look at the difference between the R expectancy and the P&L expectancy.
  • Too many trades Ė you might have been trading a plan very well for 10 years and it has a good expectancy, unfortunately the last 3 months you have been trading badly but the volume of good trades swamps out the current bad trading giving a false sense of comfort. Measuring expectancy by time periods as well as overall will reveal these problems
  • Fixed fractional bias Ė say you have done 100 trades and you have been compounding your profits but now you are having a string of losers. Your position size might now be 3 times larger that in the beginning so 1 loss now is wiping out 3 profitable trades. Everything might be fine but your expectancy may plummet causing you to change an otherwise fine system. Using the R based method above will fix this.
  • Discretionary trading Ė If you buy or sell ďjust becauseí then expectancy is pretty meaningless. You might as well judge your trading by your bank account.
  • Currency conversion Ė this one is for FX traders who are based outside the USA or who trade exotic pairs. A year ago I may have made USD100 profit on a trade and ended up with A$130 (quite a while ago it may have been nearly A$200!) now it would be A$99. So your trading might be successful but the results might be better or worse depended on the exchange rate when you convert the results. The solution to this is to measure you expectancy in R or in pips rather than in monetary terms

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  #30 (permalink)
Trading for Profit
Launceston, Tasmania, Australi
 
Futures Experience: Intermediate
Platform: IG, ETrade, Commsec
Favorite Futures: EUR/USD, Aussie, ASX200
 
Posts: 78 since Nov 2010
Thanks: 25 given, 63 received


Captains Log Star date March 21st

Yet another non-trending session. As usual this means no trades for me

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