Hi Dunedin,
Great to know you are starting to trade the system. It has been paying great to me in the US. Not sure about EU markets.
With respect to your stop loss question, I believe it is the problem of stop losses. As you know their system propose a stop loss that is of the same level of the target gain.
The advantages are that it gives room to the market to move, but if you are on a high volatile day, and your target gain was big, and some news impact the market that can make the prediction use less you can have a drawdown.
I've read in other places that 1/3 of the target gain is a reasonable stop loss, but I have not back tested it with this system so I can not tell.
So far, hard numbers trading this system as is, with the target gain stop loss, have made money as expected.
If you change the stop loss management strategy you might achieve better or worst results, and you will be trading out of the statistics published by the system vendor.
I would suggest you download to an excel spread sheet the trade details, and analyze other stop loss management strategies.
You might also consider how much risk you might want to take in each trade. Generraly this could be 2% of your funds. So this will limit your stop loss, or how many contracts are you trading.
Other strategies I've seen would be to enter with multiple contracts, take some profits and leaving runners. (again not back tested it).
My trading style is to mimic the system. In this way I know what to expect.
Exit time. I respect it as is. You are right, you might get better exits in some cases and worst in other but what matters is the long term results. right?
When I first started I tried to add my own oppinion to the system, and burned it some times. My final conclusion was that to be able to be sure what I was doing, I only follow the system that I know was back tested.
The only discretionay decision I make is do not trade when there are BIG news comming. EG. Tomorrow FOMC.
Hope this helps. I would suggest you wait to start real trading late this week or the following as FOMC effect on the system might impact on the prediction.
Take care!
Dan
Quote from dunedin:
Hello Dan, after monitoring the system for the last few days I will start trading it during the course of this week. However I have a couple of queries you may be able to help me with (or anyone else on here who is actively using the premium service).
It is recommended to use the target gain as the stop loss distance. Do you find this works OK? Sometimes it can result in a pretty serious loss but on other occasions (with a smaller target gain) the trade gets stopped out early.
The system gives an EXIT TIME. Should this be strictly adhered to? Sometimes the trade can accumulate further gains (after the Exit time) so is it not better to run profitable trades with a trailing stop where this is practical?
On those occasions where a trade is reversed I have noticed in some instances (where the market is moving against the new trade) that if the new trade is opened AND the previous one is also left open it negates the initial loss on the new one. Is one likely to get one's fingers burnt with such a strategy?
Being in the UK I'll be trading the european indices and keeping a close eye on the US markets too. I will be using Spread Bets with a guaranteed stop loss which involves a slightly higher than normal spread.
Any other helpful info will be greatly appreciated.
regards, dunedin.
