Frosty's trading bot goes live part 2

The work that walter jennings and the others did on managing the potential risk of a trade was actually very fruitful, and most definitely a move in the right direction.

Based on Frosty's description of the bots trading process, and from my own observation I know that part of the process that bot uses when trading is to allow price action to bring it back into a profitable or less of a losing position whenever possible.

In a way, this is a good thing, because the financial markets trend approximately 30% of the time, but they trade back-and-forth 70% of the time.

As you can see, from that stat alone the bot has a good potential to become a profitable enterprise ... the thing is, on those days when it's trending, if the bot is on the wrong side of the market it's going to take a bath.

There are many ways to mitigate this problem, and protective stops is only one of them, but it is a good one when looked at from the perspective of being a FAIL SAFE type of mechanism.

Walter's formula (and the logic and proof behind it) was great, it really was. You might want to review it, make the max loss something like 80% of the largest adverse excursion of price action, and try it on the NQ, ES and YM as well as the ER, you might really have something going there.

But no stop loss on such a highly leveraged product as the ER, has a very low probability of ultimately proving to be successful, for all the reasons that a number of successful traders have mentioned in the last 5 or 10 pages of the thread.

Good trading,

Jimmy Jam
 
About stops...

I don't know what Frosty's system is. But he can place stops to limit the impact of "negative outlier trades".


About trending days...

There are different styles of trading systems, some can be trend-following.... some can be counter-trend... some can be pairs... some can be arbitrage... Basically, sky's the limit when it comes to the strategies you can be trading.

Every model has to be dealt in it's own way. There is no single right approach. An example would be how to place a stop for the system. The way you place stops for a trend-following and counter-trends are different. The way you place VWAP strategies and ORB will be different.

It's pointless to suggest "what to do" as mentioned previously. We know nothing about Frosty's model.


About MA...

Discretionary traders need to step back and realize that they have no idea what is required to develop a trading system/model. Of course, there are similarities, it's both trading... but it's approached differently.

Let's say I tell a discretionary trader, "TEST EVERYTHING." For a system trader, it's a protocol that needs to be followed (even though, most can't and don't). For a pure discretionary traders, it's not necessary.

I've never seen a simple MA system work. Well... I've seen a model with MA inside but the significance of the model usual lies in the strategy surrounding the MA, not the MA itself.


Finally...

When Frosty mentions that there are no stops... it tells me that there is no risk management.

Don't get me wrong, just because you place stops, it doesn't mean you are managing risk. There's more to it. But finding a good and flexible way to limit your risk by using stops would be a good way to start.


PS. And no... this is not a good thread... It's a bunch of people writing about "nothing" without any concrete topic.

Seriously, what's really the point of this thread? Is it an open discussion about how Frosty is a dumb newbie? Or is it a thread where people come in and show how incompetent and out of focus they are...

So why do I write in this thread... Because I'm very bored... :p
 
Quote from TSGannGalt:

About stops...

I don't know what Frosty's system is. But he can place stops to limit the impact of "negative outlier trades".


About trending days...

There are different styles of trading systems, some can be trend-following.... some can be counter-trend... some can be pairs... some can be arbitrage... Basically, sky's the limit when it comes to the strategies you can be trading.

Every model has to be dealt in it's own way. There is no single right approach. An example would be how to place a stop for the system. The way you place stops for a trend-following and counter-trends are different. The way you place VWAP strategies and ORB will be different.

It's pointless to suggest "what to do" as mentioned previously.
More...
Yes, but you do admit that something must be done? The heavy losses have been and continue to be the system's Achilles Heel, once that hole is plugged, Frost can actually start making some progress.

About MA...

Discretionary traders need to step back and realize that they have no idea what is required to develop a trading system/model. Of course, there are similarities, it's both trading... but it's approached differently.

Let's say I tell a discretionary trader, "TEST EVERYTHING." For a system trader, it's a protocol that needs to be followed (even though, most can't and don't). For a pure discretionary traders, it's not necessary.

I've never seen a simple MA system work. Well... I've seen a model with MA inside but the significance of the model usual lies in the strategy surrounding the MA, not the MA itself.


Finally...
More...
Good stuff that.

JJ
 
Quote from JimmyJam:

Yes, but you do admit that something must be done? The heavy losses have been and continue to be the system's Achilles Heel, once that hole is plugged, Frost can actually start making some progress.

JJ
More...

What's Frosty achieving by posting his trades in here?

I doubt that he's looking for advice because it's been mentioned by many that he needs to provide more information for anyone to give advice. But he doesn't.

Maybe he's trying to sell himself and his system if it makes money. Frosty can be trying to make a open track record and hopefully try to get his foot inside the OPM industry.

Who knows... if the latter is true, then he's not doing a good job showing himself as a professional system trader.
 
Quote from TSGannGalt:

What's Frosty achieving by posting his trades in here?

I doubt that he's looking for advice because it's been mentioned by many that he needs to provide more information for anyone to give advice. But he doesn't.
More...
Giving away system information is a two-edged sword, it would be very easy for him to reveal the basic concept(s) of his system design and trading logic and have a more experienced trader/programmer adopt it for their own ends ... heck they wouldn't even have to post a "thanks".

Maybe he's trying to sell himself and his system if it makes money. Frosty can be trying to make a open track record and hopefully try to get his foot inside the OPM industry.
More...
Could be, but if so it's going to have to do much better than this. He's a pretty active blogger (not just at ET), so he is trying to make some headway somewhere, and I personally think that's a good thing. It shows a lot of personal initiative and entrepreneurship, anything that helps you get out of the 9-5 is a good thing in my opinion. Way too much politics and BS in that life for me.

Who knows... if the latter is true, then he's not doing a good job showing himself as a professional system trader.
More...
He's still in the learning stage. Eventually with enough experience, some insight, some knowledge, he'll figure his way.

At least that's the hope.

Jimmy Jam
 
I agree with everybody saying that stops in trading systems do not really add to the model. Most of the time, the bot is designed to revert when the conditions are not here anymore.Something that can be done is to set a really wide stop for extremely unusual events.

In this case, it seems( tell me if I'm wrong ), that big loss days are due to 3-4 trades at the wrong time instead of one big market move in the other direction, which is what stops are made to prevent. The bot is just not in concordance with the market in these days.

However, if you are still confident in your edge( that's the most important part, backtests means nothing most of the times. Everybody can find equity curve like yours ) then continue to trade. You didn't really had a big drawdown, was just unlucky to start like that and you are recovering.
 
Quote from TraDaToR:

I agree with everybody saying that stops in trading systems do not really add to the model. Most of the time, the bot is designed to revert when the conditions are not here anymore.Something that can be done is to set a really wide stop for extremely unusual events.

In this case, it seems( tell me if I'm wrong ), that big loss days are due to 3-4 trades at the wrong time instead of one big market move in the other direction, which is what stops are made to prevent. The bot is just not in concordance with the market in these days.

However, if you are still confident in your edge( that's the most important part, backtests means nothing most of the times. Everybody can find equity curve like yours ) then continue to trade. You didn't really had a big drawdown, was just unlucky to start like that and you are recovering.
More...

This is incorrect.

You had the huge losses either because you didn't have a stop in place, other protective measures, the bot cannot determine trend correctly, or you rely on market action to bring you back into profit when you have a drawdown.

This needs to be corrected.

If you really think you are lucky or unlucky in the markets and rely on that, you are totally cluess.

Good luck with that. :D

Jimmy Jam
 
In the case of a good system based on a true edge that will put the odds in your favor on the long term, it is true. I know a guy that has released his system just the way Frosty did( DD at first ) in Fall 2005 and his system is still working and making money to date. Sometimes, series of losses occurs in system trading as if the system is totally unable to predict anything. All of a sudden, it begins to make money back. I believe good discretionnary trading is more stable. That's perhaps why you don't understand frosty's behaviour if you're one.

Considering luck in trading, your skills and edge ... decide if you will be profitable or not and luck decide if you will make 30 or 50 % in the year, if you will have a DD at first... Even Jim Simmons said he has been a "lucky" guy to have such performances over his career.
 
Nothing going as plan.. this is after being up 400 today.... Discouraging to say the least

Today -$864
Week to Date: +$864
Since going live: -$3749
Total days: 18
Avg per day: -$208.27

Up Days: 9
Down Days: 9
 
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