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Hi Tonkadad, I use a volatility-based stop-loss that is determined by how big the price bars have been recently at the time that I put the trade on. I guess there's different ways to do it, but the one I settled on is to use a fraction of the average true range at the time that the signal bar...

What you've described reminds me of the "80-20 rule", which seems to have been applied to lots of different things, including the economics of nations and profits earned from business customer purchases as well as profits earned in trading, i.e., 80% come from only 20% of the trades. It doesn't...

Game, I'm only in trades for a relatively short time, typically less than 10 price bars, and I haven't figured out how to tell which ones are likely to work better than others, so I just take every entry signal using the same amount of risk each time. I really like the idea of putting on...

Hi Game, Sorry for the late response...it's final exams week here at the university where I teach and that makes life hectic, and then I had to have Time-Warner send someone out to fix the cable internet at home (something had chewed up the wires, apparently). One of the best things I've...

Hi Game, I've attached the last chart with a couple of notes on it. If one had placed the initial stop-loss just beyond the end of the entry bar for each of the 5 trades (e.g., below the low of the bar for a long trade), it looks like 4 of them would have gone around 6 pts, 7 pts, 7 pts, and...

Test: uploading a modification of Game's chart...

Hi Bob, I believe that this can always be worked out by backtesting. For example, you can analyze charts covering every trading day during the past few weeks and identify each entry signal that appears during the hours that you normally trade. Record how far prices move in your favor...

Dom, Thank you. Very interesting approach.

[Originally Posted by niko "I am puzzled by your first short. What happened?" The sharp fall after the Failure up top, along with the long term position at the upper limit of the Daily TC led me to give the short position as much room as possible. I did not want to be shaken out at this...

Hi Dom, How much do you focus on the magnitude of the Profit Factor when you analyze your backtest results? Have you drawn conclusions about what minimum PF value a system should have in order to work well in live trading? The method I'm currently using repeatedly gave PFs from...

Hi Pisco, I don't trade trend-following systems because they tend to have winning percentages of 40% or less while I prefer to have > 50%, but this approach has sure worked for some well-known traders (and not worked recently for at least one famous trader, John Henry, though I don't know...

"When Genius Failed: The Rise and Fall of Long-Term Capital Management" Very interesting book. http://www.amazon.com/When-Genius-Failed-Long-Term-Management/dp/0375758259/ref=sr_1_1?s=books&ie=UTF8&qid=1389492845&sr=1-1&keywords=when+genius+failed

- Start backtesting your trading ideas quantitatively right now, using specific entry and exit rules each time, and carefully analyze the output from each test (net profit, profit factor, max DD, max consec losing trades, net profit/max DD, etc.). Do it rigorously and do it correctly. -...

I've been trading futures with ThinkOrSwim for several years. I think their charting capabilities are unusually good. They're a good choice for people who swing trade off of daily charts or who trade options. They're not as good for intraday traders because commissions are higher than at...

Hi Nemesis, Michael Patak had a question-and-answer thread here on ET at the site below: http://www.elitetrader.com/vb/showthread.php?s=&threadid=248456 Also, several traders on this board and at other popular forums have taken the combine and a few have passed it. Some of them kept...

One day around the year 2000, I got a pamphlet in the mail from a guy pictured wearing a cowboy hat who was named Ken Roberts. The pages boasted how one could make money trading commodities using 1-2-3 patterns and narrow channel breakouts, etc. and showed some nice charts. I’d never heard...

Hi Rashid, See the response to TJ above. You're right, I should have said "fractions" as well as "multiples" of the ATR. I've found that in several markets I can set the initial stop-loss at 70-80% of the current 10 period ATR and it only gets hit ~ 10-20% of the time for a full stop out...

Hi TJ, I mostly trade off of daily charts, trying to catch short-term trends that last a few days to a few weeks. I note the current 10-period ATR when I get an entry signal and place a stop entry order, an initial stop-loss order and a limit target order to exit half the position all at...

This was also one of my breakthroughs during the past year. Taking partial profits at multiples of the ATR (measured at the time the trade is entered) led to an increase in win % and also smoothed out the equity curve. _

I definitely get your point about longer backtests giving one more confidence in the results, and working with a computer science professor was an ingenious idea. Even though it's a bit time-consuming, I'm going to keep performing manual backtesting because it's been working pretty well. I've...