Quote from caementarius:
Thanks for your post. This kind of insight is very useful!
My thoughts on this are likely not as useful but I'd like to share my beginning inklings of 'turning the corner' in trading. I can see similar stages in my trading except it is over a longer time period, probably fewer trades per day, and with smaller size, and not as consistent.
For consistent weekly gains, how many trades are your traders making per day?
My average hold time is 31 minutes, max is up to 4-5 hours - all intraday. Annualized sharpe ratio of 2.08 - nothing to write home about yet. But, there is a point in time when a few things changed for me for the better about 6 months ago.
I went back and forth between algo and discretionary in fits and starts. Like waffling between trying to be a garage rocket scientist or to just try and be a natural through sheer will. Several mini-blowups. I decided to do the following:
Trade 1 contract of ES per $10,000 in equity
Not risk more than 2-3% of equity on any one trade
At that point I started being more confident and it became easier to both exit with a loss and to enter another trade later - even after a drawdown that lasts weeks.
As you indicated you experienced, there are parts of it I am not sure how I'd automate. This is in one sense uncomfortable, but in another way it is comforting..
If I had to describe the _strategy_, all I can come up with is some general ideas or principles. I try to enter at value areas (looking at volume profile) and feel that helps me not get whipped out as often. I put stops outside of value, because I figure at that point the trade is a bust. I like to be in the direction of either a gap that price can zip through to another value area, or at a week or multi-week high/low where there is open air price can move through. I like to be with the sentiment/trend -but the definition of what that is has become a bit fuzzy. I can see an intraday downtrend as price getting sucked back to a value area and perhaps a buying opportunity. My P&L seems to follow a similar pattern to trend following: more small to medium losses and some larger wins that make the money.
Much I need to improve but at least I feel like I'm in the game in a more sustainable way and my equity curve is roughly slanted in the right direction. Any suggestions on how to approach this continual improvement or insight on my style would be welcome.
Continual improvement is an interesting problem, because it's not clear that you are screwing up when you are making some money.
