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TST Combine results and strategies for passing
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TST Combine results and strategies for passing

  #81 (permalink)
Market Wizard
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Pedro40 View Post
...That's when strategizing comes in. First, you don't go all in at the first trade of the day, but build a little cushion. Or if the first trade with max. account size was a loser, obviously the second trade's size has to be half of that or minimal.
The point (of this thread) is that you have to plan ahead, according to the rules...

Hi @Pedro40

I am totally aware of strategizing.
If you are in a trade where the margin allows you a maximum of ONE car to trade - and two
consecutive SL bring you at the wall - there is no more "strategizing" coming in.
In other words: worn out & basta!
For all lower margined products you may have luck to get "first some cushion". There is no guarantee.
If you don't get a sufficient cushion - you are out too.
Thinking a 5% DD is VERY tight - no matter how your trading approach is - and under what circumstances
it may happen.

GFIs1

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  #82 (permalink)
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Pedro40 View Post
...But more contracts you use, less wiggle room you have for a stop loss. Less contract you use, more time/trades it takes to reach the profit target. So it is a balancing act. It is alright to go big when the gods make the alignment perfect for a particular trade.
In my first Combine I only traded 1 contract and the highest profit I reached was 1200$. Had I traded 2 contracts, I would have made the profit target of 2000$ but I also would have hit the DLL...

Fortunately we speak the same language here right now: the slim DD is a big threat AND the target set is very

very .......... ------- >>> AMBITIOUS

So the first has a high probability being hit and the second a very low probability

Good Trades!
GFIs1

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  #83 (permalink)
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Pedro40 View Post
Good point, but not entirely true. If you want to reach the profit target, you have to use the max. contract size or close to it.

This is obviously dependent on the product being traded, the particular combine amount/parameters, and most importantly, the skill of the trader and his trading strategy, which you seem to not be factoring in at all, using only generalities, when in fact the specifics of the individual trader are what are most important here.


Pedro40 View Post
And there is no point in having a 30K account if the biggest allowed DD is only 1.5K. But anyway...

If you were to go work for a prop firm and they gave you $100K to trade with after you proved yourself in simulation, how much do you think they would let you lose of their money before you got cut off?


Pedro40 View Post
But more contracts you use, less wiggle room you have for a stop loss. Less contract you use, more time/trades it takes to reach the profit target. So it is a balancing act. It is alright to go big when the gods make the alignment perfect for a particular trade.

You are essentially citing the holy grail of trading in general--keeping your losers small, and your winners large. This has nothing to do with TST or anything really beyond what trading is all about. Going big when the gods are with you sounds great, except you don't know if the gods are with you when you take the trade, so "going big" is really another word for "gambling," which is why so many traders blow up, which is why TST and any firm with a brain will put limits on position size/drawdown/etc. There are more intelligent ways to get big on a winning trade from a risk perspective than "going big" and hoping the gods are with you on this one.

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  #84 (permalink)
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GFIs1 View Post
So a responsible trader should think twice to put money, sweat and risk into a 5% max. risk combine where only luck
within a positive period could prevent from frustration.

Your definition of "scalper" seems to be different from mine.

1) What is a typical expectancy per trade from a typical scalper?
2) What win rate does a typical scalper need to maintain in order to break even?
3) How many trades per day does a typical scalper take?

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  #85 (permalink)
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josh View Post
This is obviously dependent on the product being traded, the particular combine amount/parameters, and most importantly, the skill of the trader and his trading strategy,

Sure, but good luck making 16K using only 2-3 contracts....



Quoting 
when in fact the specifics of the individual trader are what are most important here.

It is simple math really. In the 30K Combine you can either make 10 points with 3 contracts, 15 points with 2 contracts or 30 points with 1 contract, trading the ES....


Quoting 
If you were to go work for a prop firm and they gave you $100K to trade with

The point is/was, if you can open an account with 5K, you might as well just trade for yourself, you don't need 30K as the Combine says. (assuming you are trading ES with $500 intraday margin...)


Quoting 
You are essentially citing the holy grail of trading in general--keeping your losers small, and your winners large.

No, I was arguing that the Combine isn't geared towards scalpers.


Quoting 
except you don't know if the gods are with you when you take the trade,

Sure I do. I have a strategy with 90% probability, but it presents itself only 1-2 a month. Waiting for it patiently and going big pays off...

Not every strategy/trade are equal...

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  #86 (permalink)
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TST's #1 criteria for any trader they consider is risk management. I have spoken to many funded traders and two professional traders in the chat room who have confirmed this. One of the professionals trader put it this way: "If you make 5 grand a day but your risk management sucks TST will pass you by."

Any strategy you devise should be built around controlling risk. If you do this and have a solid trading plan then MAX DD and daily loss limit is not really an issue.

A good way to determine if you have risk under control is to take the max number trades you will make in a day and multiply it by the worse case loss scenario. If the number is greater than the daily loss limit then you have too much risk.

For my plan it works out this way: Max trades = 3; Worse Case loss = 15 ticks; position size = 1; daily loss limit: 500

3 x 15 X 1 = 45
$10 per tick * 45 = 450
$5 commission * 3 trades = 15
Total = 465

This is my worse case, however my personal loss limit is 300 so I would have stopped after the second trade. Although 15 ticks is where I have my stop at the beginning of the trade I have yet to have a 15 tick stop out when my rules are followed. This is because I move my stop up as soon as the trade either goes in my favor or against me. My average stop out is around 10 ticks.

Conclusion: There is very little chance of hitting my daily loss limit with this type of risk management. With my personal loss limit of 300 it would take 5 days to hit the MAX DD of 1500. This gives me plenty of time to figure out what I am doing wrong and correct it.

Robert

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You make your own opportunities in life.
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  #87 (permalink)
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GFIs1 View Post
Thinking a 5% DD is VERY tight - no matter how your trading approach is - and under what circumstances it may happen.

From the Hedge Funds Market Wizards book, some of the fund managers have these stats, and all of these are funds that have been in business for somewhere around a decade or longer (and most of the average annualized returns are in the 20% or so range):

Colm O'Shea: -10.2% max DD, worst month -3.7%
Larry Benedict: -5% max DD, worst month -3.5%
Scott Ramsey: -11% max DD
Edward Thorp: 3 losing months in 19 years, all less than -1%
Michael Platt: -5% max DD

From Platt's chapter (p274):
"The deal is that if a trader loses 3 percent, he has to give me back half of his trading line. If he loses another 3 percent of the remaining half, that's it. His book is auctioned. ... We want people to scale down if they are getting it wrong and scale up if they are getting it right. If a guy has a $100 million allocation and makes $20 million, he then has $23 million to his stop point." [he then explains that this 3 percent stop is reset every Jan. 1]

Now, we are talking very different scenarios here, don't get me wrong. One is a few contracts allowed, another is a $100 million account (or many billions for some of the funds above) that has a lot of different options for diversification and risk management, so I'm not trying to say the two are comparable in size.

What I'm trying to say is that good traders (and in this case fund managers) put a lot of emphasis on risk control. For TST's smallest $30K account, I really don't see why 5% is viewed as so tight, particularly when the profit objective is 5%. Just as you said only "luck within a positive period" could account for successfully completing a combine, your view that a 5% max DD is "VERY tight" regardless of the approach is simply based on your limited paradigm. I'm not saying anything is right or wrong, but consider that something that seems out of the realm of reasonable probability in your view may very well be very reasonable and achievable for others.

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  #88 (permalink)
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Pedro40 View Post
The point is/was, if you can open an account with 5K, you might as well just trade for yourself, you don't need 30K as the Combine says. (assuming you are trading ES with $500 intraday margin...)

It the trader has established that he can trade well, then he likely will already have an account in place and be doing just fine. If the trader needs to open a $5K account, it's quite possible that he will do so, and lose far more than the $170 refundable deposit that it would cost with TST to work on his trading and have the option to be funded with no monetary risk to the trader. Maybe not, but I'm looking at what is likely, based on what happens more often.

In the above statement, you demonstrate the tendency to focus on the profit instead of risk. It sounds kind of like "Why give up 40% of your potential profits, and have to pass a 'test' first in order to do so?" The other way of thinking is, "Why risk losing $5000 of my own money, when I could limit my risk to a few hundred dollars, and instead risk losing someone else's money?"

What would your max ES position size be on a $5000 account, out of curiosity?

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  #89 (permalink)
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josh View Post
For TST's smallest $30K account, I really don't see why 5% is viewed as so tight, particularly when the profit objective is 5%.

Well, again, this whole account size is rather imaginative when we are talking about %s. If we look at the highest intraday margined instruments you wouldn't need more than 10K to trade 3 contracts with 1.5K loss. And in the case of ES, it can be as low as 5K.

So if we look at our account as 5K not 30K, the 1.5K allowed loss suddenly becomes way less tight. That is almost 30%, not 5%.
But you are right in a way of looking at it profit target vs. max. DD.

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  #90 (permalink)
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josh View Post
It the trader has established that he can trade well, then he likely will already have an account in place and be doing just fine.

A well established (meaning decent account size) profitable trader doesn't need the Combine, because there is little to gain. Definiately not the 30K or 50K. According to Mr. Patak, the 50K is the most passed, most popular, so it is safe to assume, most Combiners are not well established....


Quoting 
If the trader needs to open a $5K account,

They don't need to, but that is the alternative, not a 30K account. Sure, there is more risk trading your own money, but there is a better payoff too with better tax treatment.


Quoting 
"Why risk losing $5000 of my own money, when I could limit my risk to a few hundred dollars, and instead risk losing someone else's money?"

If the trader actually has a choice (they could open a small account), then it is a judgement call. There are good arguments for both. I assume some of the Combiners don't even have the choice (for example a teenager trying from Russia), or they are not good at trading their own money.


Quoting 
What would your max ES position size be on a $5000 account, out of curiosity?

Depends on what the account is for. If it is generating income for a living, I would be TST strict, if it is just a play account I could go the max. what the brokerage allows...

I see 2 types of traders using the Combine:

1. Traders with small or no account.
2. Testing new strategies. (it is cheaper to lose a $200 fee than let's say 1-2000 bucks real money to find out your new strategy doesn't work)

What I don't see is well funded, profitable traders adding to their account. If you are already swinging 30-40 cars, there is little to gain with an additional 10 contracts what comes with profitshare and bad tax treatment...


Last edited by Pedro40; March 30th, 2013 at 10:30 PM.
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