Good1's Brooks Breaker Swing Calls on ESZ

[Good1]

Is that an optimized backtest (only) ? Or Out-of-sample performance ? Or live track record ?
Because when it is only optimized on past data, I highly doubt you can achieve near that performance in the past over the next future, for sure with this Price Action strategy. Let me know what is that behind the posted equity curve...

Ok, what we are looking at here is right where the blue line starts diverging from the orange line, that's where I started making calls. The calls I've made follow the blue line (from the divergence forward). The orange line represents my rules applied perfectly to this time frame.

Prior to the divergence this shows curated historical results applied to chart data according to the rules. I've included this to show that the prior three months or so has been very good, reaching 14%. But we are only expecting about 3.45% per month on average. So we were due for another drawdown.

The discrepancy between the orange, rules based line, and the blue execution line (starting from the point of divergence) is due mainly to my first two executions, and the last execution mistake has cost 1.23% if calculating up to the current price of 4607. The first two cost 70%. Then there were two small, other differences.

In evaluating why these execution mistakes, I've concluded it is due to the problems I'm having with one of my checkpoints being at 3AM in the morning (5AM Chicago). I've been setting stops before I go to bed, and the last time I forgot to set stops (move my stops) completely. The way this works best is to set stops right when the timed checkpoints strike.

By going to a shorter time frame, I could move that checkpoint to 7AM (9AM Chicago). If I'm not already awake, I could easily respond to an alarm. Problem with a shorter time frame is it increases my workload by increasing the number of transactions as much as 30% more.

I think I would be willing to do this (increase the workload) because that timeframe will ultimately be the one I use to qualify for prop firm capital. So it's something I need to do anyway. The first reason is because of the 7AM checkpoint, and the other is this will also have the effect of reducing drawdown, in theory. I would increase workload even more except I still have to multitask with two other projects I have going on right now.

Ill decide this weekend. Probably Monday I will increase the workload.

 

[Good1]

Ok I'm switching over to a 35% heavier workload which will correspond with what I'll be using for prop firm qualifications and daily habits. Within a week or so I'll post another manually curated equity curve for the past two years to give a better idea what stats we will be working with versus the prior time frame.

Here I've done three new things:

A) I removed the two columns dedicated to when closing a trade. This was redundant because I'm always reversing, so every exit is also the next entry.

B) I removed the initial risk column since that is mainly for statistics analysis, and not needed to make these calls.

C) I've added another call, farther out past the next call. The next call is to go short at 4581. It has not hit yet. But now, I'm adding the next long, if the next short gets hit and is activated. This is to prevent the market from getting past me if for some reason I'm not responding to my alerts.

Hopefully there will be no more botched executions.

 

[Good1]

Move short call up to 4599. 9:05 Chicago timestamp.

 

[Good1]

 

[Good1]

 

[schizo]

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This ain't good. I've added up all your gains and losses and you're down -178 points. Do you exactly know how much that is in terms of $? It's a loss of $8,900 per contract. Maybe you should consider downgrading to traiding the MES until your skill improves. Just a thought. But then again, I forgot this ain't real money. You're on a sim.

 

[schizo]

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Also why would you sell short at 4622 with a profit target of 4629? That would be considered a loss. Or did I miss something?

 

[Good1]

Also why would you sell short at 4622 with a profit target of 4629? That would be considered a loss. Or did I miss something?

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That's not a profit target. That's the next stop loss and reversal point. I'm making two calls ahead of time because of the narrowness of the range I'm working with, like only 9 points. I'm not tending to this every minute, not even every hour and the market could move that much within that range in a couple hours. So I'm just trying to stay one step ahead until the next time I check my position.

In the sample you posted it shows I am long from 4603. I would reverse short at 4622 (price is currently above that so I am in profit). If that hits and price reversed back up through 4629, then I would stop out the short with a small loss and go long again. Thinking two steps ahead. That's something I've just recently added since that was a problem before.

I am testing a target variation of this basic method and might add it to the demonstration in the future. But for now all my calls are for stop loss slash reversals being always in the market.

I think it's important to prove that one can always be in the market, and always expect a profit given x number of trades. In this case that's about 35 trades over about three months. That time will be shortened now that I've increased the pace by about 35%. But it should still be about 35 trades to always be in profit.

The whole purpose of a target variation is to smooth out the equity curve, ideally to reduce drawdowns.

 

[Good1]

This ain't good. I've added up all your gains and losses and you're down -178 points. Do you exactly know how much that is in terms of $? It's a loss of $8,900 per contract. Maybe you should consider downgrading to traiding the MES until your skill improves. Just a thought. But then again, I forgot this ain't real money. You're on a sim.

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Well yah I've explained in a prior post (see below) that these percentages apply to accounts with capital equalling price of underlying x 50 . ($50 per point for the E-Mini). That's over $230,000 right now if using ESZ.

This is not about dollars or even points. I am all about percentages.

If this was applied to the MES it would be basically the same percentages if spreads were similar.

Prop firms, like The 5%ers use percentages. Whatever amount of capital they give you to work with you have to keep your drawdowns within a percentage specification, like 5%. The5%ers doesnt allow Indices in one of their three programs because they are not as scalable as, say, forex. Sure they could allow MES but spreads might be an issue, and that is only a scale of 1Ox. Maybe the scale needs to be more granular, with the same spreads. Forex is much better for that.

Capital allocation, or position sizing is not what I'm demonstrating here. Before you can even apply capital you have to know what your percentage expectations are...and whether your method even works. Before applying leverage, one must be very sure about max drawdowns.

This method should require not much more than half hour per day. Meanwhile Brooks likes to sit in front of screen and look at 96 five-minutes bars per day looking for numerous hard to explain patterns. Only people with small accounts need to do that, people who need to be in profit almost every day because they have bills to pay.

I would like to point out that the percentages I am using in this demonstration are based on the ability to hold one whole unit of the emini S&P 500.

So, if price is 5554, as it is now, then :

5554 x 50 = $227,700.

That's how much capital you would need for these percentages to apply to you. If you have that much capital allocated to just this method, then 6% is approximately the expected max drawdown, looking at the last 336 calls.

But 6% of $227,700 is $13,662.

If trading futures, that's about how much you would need to have in your account, at all times, at a minimum, just to trade ("maintenance"). Thus, to give yourself enough cushion to handle a 10% move in the underlying, you would need :

$13, 662 + $22,700 = $36,332

If that's how much capital you have to allocate, then a 6% drawdown in the underlying represents 37% of your overall capital, or 60% of your margin of flexibility. If you can tolerate a 37% drawdown then that's that. But if you can't, then you have to figure out a way to select, out of all these trades, a "set up" which gives you better odds. Either that or use options. Or maybe get into a prop firm. But even then you have to work your way up to a $227,700 account size.

However, if you can get established in a prop firm that allows you a 10% drawdown, and pays out every time you reach a 10% target, and you can get your usable capital up to $227,700, then you are golden. You'ld be looking at a $22,000 payout about every three months, or about $7,000 a month . But then you have to consider the profit split with the house.

 

[Good1]

Also why would you sell short at 4622 with a profit target of 4629? That would be considered a loss. Or did I miss something?

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So to reiterate, I don't use any targets at all. This is quintessentially "cut your losses short, let your profits run". All my profits run until hitting a stop loss (if the trade is a loss) or a trail stop (if the trade is in profit). Every stop loss, or every trail stop is also a reversal point.

"Cut your losses short" however, is vague. Short of what? Stops have to be short enough, on average, to control drawdowns, to keep drawdowns within specifications. The shorter the time frame, the shorter the average stop loss or trail stop. All orders are stops converted to market orders when a price is touched. When stats are looked at, the average win will be a multiple of the average loss, such as 2x. That's how the system can be profitable when it loses more trades than it wins. Win% currently expected to be about 44%. Once the multiple is known (ie 2x) then maybe a target system with a risk-to-reward ratio of 1:2 might produce similar results. You'ld have to test that. I have not