Increasing Size During Drawdown

[Epic]

Quote from TheMagican:

RT,means opened/closed

Yes, but you said "trades" not RT. Just wanted to clarify.

Also, I just read through my previous posts really quick and realized that I typed them so fast, there is a confusing error.

I think I suggested that your expectancy per risk was 13.38% and that isn't true. Your expectancy per trade is 0.1338%.

Expected Annual ROR = 0.1338 * 111 * 12 = 178%

Now you should get some other basic measures as compared to the most appropriate benchmark, S&P 500 if you are trading stocks.

Beta
R-squared

This will give you some sort of idea whether your returns rely too heavily on market correlation.

Then if you trade both long and short, you need to separate your trades into two categories and determine the beta, r-squared, expectancy, etc. for both groups.

 

[TheMagican]

Quote from Epic:

Yes, but you said "trades" not RT. Just wanted to clarify.

Also, I just read through my previous posts really quick and realized that I typed them so fast, there is a confusing error.

I think I suggested that your expectancy per risk was 13.38% and that isn't true. Your expectancy per trade is 0.1338%.

Expected Annual ROR = 0.1338 * 111 * 12 = 178%

Now you should get some other basic measures as compared to the most appropriate benchmark, S&P 500 if you are trading stocks.

Beta
R-squared

This will give you some sort of idea whether your returns rely too heavily on market correlation.

Then if you trade both long and short, you need to separate your trades into two categories and determine the beta, r-squared, expectancy, etc. for both groups.

What expectancy per trade of 0.1338% means?Is it good?

My conclusion so far:

I should cease # of trades and increase percentage of the winners.That is where the capitalization steps in.

 

[ammo]

if averaging,you havent closed so thsoe arent round turns,they are open at an avg price

 

[TheMagican]

Quote from ammo:

if averaging,you havent closed so thsoe arent round turns,they are open at an avg price

Everything is closed by the margin change time.Trading on margin is a real pain in the ass.

 

[Epic]

Quote from TheMagican:

What expectancy per trade of 0.1338% means?Is it good?

My conclusion so far:

I should cease # of trades and increase percentage of the winners.That is where the capitalization steps in.

Your expectancy is very good, and your % winners isn't a problem. The whole point is that none of those factors can be viewed independently.

You now need to determine whether a change in market conditions is likely to mess you up. That's why I was asking for beta and r-squared. If the bulk of your trades were long stock over the past couple years, there is a really good chance that your beta is VERY high. You really want a beta as close to zero as possible for long term profit. High beta systems tend to only work during bull markets.

Also, you need to try to determine the function that compares trade opportunities with expectancy that I was suggesting before. It could be that you could take 1/2 as many trades and actually be more profitable. But it could also turn out that you should be taking twice as many trades. You are just guessing at all of that right now. I'm trying to show you how to figure it out without guessing.

 

[Epic]

Quote from ammo:

if averaging,you havent closed so thsoe arent round turns,they are open at an avg price

Yes, but they are also closed at an average price. Or you can use LIFO or FIFO. Really depends on what fits the system best. My system is actually very difficult to split up due to pair trades and combos, and it took a lot of work, but was well worth the effort. His sounds like it would be much easier.

You make a good point though. And averaged trade in his system only counts as 1 unit. He said that he averages once. The original open and the addition together only count as 1 unit.

 

[Epic]

Quote from TheMagican:

Everything is closed by the margin change time.Trading on margin is a real pain in the ass.

You're confusing me. Are we talking about you actually closing the trades, or them simply being marked to market?

 

[TheMagican]

Quote from Epic:

You're confusing me. Are we talking about you actually closing the trades, or them simply being marked to market?

Marked to market only possible if you trade without margin.As i said i feel uncomfartable trading on margin.

 

[Epic]

Quote from TheMagican:

Marked to market only possible if you trade without margin.As i said i feel uncomfartable trading on margin.

Ok. But Ammo is right. When you calculate your expectancy, an averaged trade only counts as one trade. Example, you bought 100 XYZ @ $10 and then bought 100 again at $9. Then you sold all of it for $10.

The entire thing only counts as 1 RT.
Average opening price $9.50
Average closing price $10

 

[ammo]

Quote from TheMagican:

Marked to market only possible if you trade without margin.As i said i feel uncomfartable trading on margin.

so you are averaging intraday and going home flat?