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Creating hard trading rules around a discretionary trading system


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Creating hard trading rules around a discretionary trading system

  #1 (permalink)
 lrud1314 
new york city
 
Experience: Beginner
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Hey y'all!

At kind of an intellectual crossroads with respect to my method of trading I've been back testing in SIM for about 5 months now. October has been my worst month to date with a simulated drawdown of about 15%.

I am trading a system based on Mack's PATS where I am using 21 EMA on a 2000 TICK chart and trying to catch with trend entries for 8 ticks (down from 10 ticks I had been trading in November). I'm also using some of his entry criteria called Second Entries to enter with trend.

My expectancy over time is low, I'm at a 50% win rate, 48% lost over the last 5 months and am at a point where something has to change with respect to my R:R. I am aware that price action reading is a process that takes time, and also that pullbacks are a reliable trading pattern highlighting imbalances between buying and selling so I have no intention of jumping ship to a different secret strategy

I think - similarly to other posts I've seen on the forum - that scalping may also just not work for me. My entry logic also needs to be improved significantly as I am trading complex pullbacks to try to get with trend entries.

MY question is as follows: how does one create a robust and STRICT trading system with an absolute set of rules on a discretionary trading system like the one Mack and Al Brooks teach? OR is it not possible to have a hard set of rules for a discretionary system (such is the nature of the system being discretionary)?

There's more good news than bad news during this drawdown of mine, as i have the backtest to show that at the very least this system the way I am trading it is not working. And knowing that my win rate is at least 50% I think I can begin to try to go for a fixed 2R, where hopefully I can break even considering my win rate is so low, or even profit a little bit with a more favorable R:R

Any who - apologies for the long-winded rant, any and all help is appreciated. Thank you!

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  #2 (permalink)
 
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 syswizard 
Philadelphia PA
 
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lrud1314 View Post
I've been back testing in SIM for about 5 months now.

Did you write a system to do this back testing ?
If the rules are "hard and fast", you should write a system that incorporates all of the rules including stop loss, profit taking, and daily stop loss limits.
Then back test the system and see if it is profitable.

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  #3 (permalink)
 lrud1314 
new york city
 
Experience: Beginner
Platform: NinjaTrader
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syswizard View Post
Did you write a system to do this back testing ?
If the rules are "hard and fast", you should write a system that incorporates all of the rules including stop loss, profit taking, and daily stop loss limits.
Then back test the system and see if it is profitable.

Absolutely. Per Mack and Al Brooks they utilize the concept of a signal bar and using that as your max risk on a position. So, I won't enter trades on signal bars larger than 4 points. So, the max risk I will take on a trade is 4 points and I am always going for 2 point scalps on one contract and the second contract as a runner.

Daily stop limit is 2 losers a day. Based on these parameters and my subjective ability to trade this system, no it is not profitable with the amount of backtest that i have done.

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  #4 (permalink)
 
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 syswizard 
Philadelphia PA
 
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lrud1314 View Post
my subjective ability to trade this system

What does that mean ?

lrud1314 View Post
Based on these parameters

Sounds like the parameters need to be changed. Have you tried to optimize them ?

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  #5 (permalink)
 lrud1314 
new york city
 
Experience: Beginner
Platform: NinjaTrader
Trading: Futures
Posts: 15 since Jun 2022
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syswizard View Post
What does that mean ?

Sounds like the parameters need to be changed. Have you tried to optimize them ?

Re: "my subjective ability to trade this system" - just trying to be thoughtful with respect to those who can scalp for points and leave a runner on successfully. My subjective experience has led me to believe that this system is not one that works for me and my trading style and current ability.

and yes - such is the nature of this post. My current optimization tactic is as follows:
  • Go for fixed 2R trades
  • Don't scalp out a contract
  • Close both contract upon the profit target being hit
  • Trail the SL once 1R trade has been reached

The purpose of the post was to see if i was missing anything regarding trading rules of a discretionary system.

Thanks again for your feedback. Cheers.

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  #6 (permalink)
 
syswizard's Avatar
 syswizard 
Philadelphia PA
 
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lrud1314 View Post
and leave a runner on successfully.

You seem to be obsessed with these "runners". What % are profitable ?
Where are the stats ?

lrud1314 View Post
My current optimization tactic is as follows:
  • Go for fixed 2R trades
  • Don't scalp out a contract
  • Close both contract upon the profit target being hit
  • Trail the SL once 1R trade has been reached

You have been able to code these rules into your system ?


lrud1314 View Post
The purpose of the post was to see if i was missing anything regarding trading rules of a discretionary system.

duh...where are the stats ?

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  #7 (permalink)
 kougaiga 
japan siga
 
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I am also trading with Al Brooks' method, but my win rate is hovering around 50%.
I doubt that this method is working as the losses are small but the profits in my account are not building up.
After all, I feel like I'm gambling 50/50 on S/R because I don't know when to make a detailed entry in one tick increments


I also use a translation website.

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  #8 (permalink)
 
syswizard's Avatar
 syswizard 
Philadelphia PA
 
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kougaiga View Post
I feel like I'm gambling 50/50 on S/R because I don't know when to make a detailed entry in one tick increments

Do you have any trading stats ? Win Rate, Avg Win $, Avg loss $, time-in-trade, etc.
These are vital if you are to be helped improving your approach.

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  #9 (permalink)
 lrud1314 
new york city
 
Experience: Beginner
Platform: NinjaTrader
Trading: Futures
Posts: 15 since Jun 2022
Thanks Given: 8
Thanks Received: 6


kougaiga View Post
I am also trading with Al Brooks' method, but my win rate is hovering around 50%.
I doubt that this method is working as the losses are small but the profits in my account are not building up.
After all, I feel like I'm gambling 50/50 on S/R because I don't know when to make a detailed entry in one tick increments


I also use a translation website.

I dont think thats its useful to "doubt" al brooks or mack pats method and it very obviously works well for them and several of their students.

What I have gathered from my back test is that my implementation of it, is not working for me. Could be from a series of factor that are preventing me from being profitable with their method.
Personality type, risk tolerance, proficiency at chart reading, etc.

I am having success using some of their chart reading principles, market profile, and taking 2R trades rather than a fixed 2 point scalp. So i will be looking for these intraday swing trades exclusively and no longer look for small 2 point moves.

Just this morning I caught a 9.5 point move on 2 contracts.
MES 12-22 (2000 Tick) 2022_10_27 (10_32_36 AM)


I don't doubt mack or al brooks method at all. I am just of the mind personally, and with my backtesting that it does not work for me and my trading style.

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  #10 (permalink)
 lrud1314 
new york city
 
Experience: Beginner
Platform: NinjaTrader
Trading: Futures
Posts: 15 since Jun 2022
Thanks Given: 8
Thanks Received: 6



syswizard View Post
You seem to be obsessed with these "runners". What % are profitable ?
Where are the stats ?

You have been able to code these rules into your system ?


duh...where are the stats ?

I'm not "obsessed" with anything. Just trying to get a feel for what has/ hasn't worked for other people. No I do not have a win % on those runners. Tradervue (the journaling platform I use) aggregates all the trades into one so it's hard to filter between the scalp and the runner.

Offhand I get the feeling that most of the runners are stopped out as price likes to come back after the scalp and take out those break even stops.

Stats generally are here:

And yes - i have been able to code these updated rules into my system. See my most recent reply before this reply on this same post. Having a good week so far.

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