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Dr Brooks had some good charts in traders MAGazine;
+ most likely got paycheck off those words LOL
50-50% sounds a little suspect, maybe ;
i have to pay a bid \ask myself+ the power bill also........
Keeping it simple + skilled [KIS+S]
Is price movement really random and unpredictable?
- Thread starter schizo
- Start date
Dr Brooks had some good charts in traders MAGazine;
+ most likely got paycheck off those words LOL
50-50% sounds a little suspect, maybe ;
i have to pay a bid \ask myself+ the power bill also........
Keeping it simple + skilled [KIS+S]
That was the typical reaction/question folks asked Taleb and he never provided a real answer. He is a pro, managing OPM, he has to stay in. I am a small time retail, spending my own money, I can choose, whether, if, when, I need to trade.
Like a venture capitalist, I like my losses bounded but my payoffs unbounded. In aggregate, it has a positive expectancy.
This doesn't really answer my question re: drawdowns (not that you are obligated to do so of course). Taleb gets paid 2% to wait for something to happen and a big cut of the occasional huge scores; his real game is marketing, performance is nice but almost incidental.
If (like Taleb) you don't need to eat and pay private school tuition from your trading PnL, then that certainly makes it easier.
ironchef,
While I have Algos with extremely High Winning Percentages - the following is actually my favorite setup with a MUCH Lower Winning Percentage. This might sound kind of weird to some - but for me - Controlling Losses - is more important - especially - Psychologically.
First - I want to apologize for the following - if this is NOT what you are talking about. If it is - maybe this will help you and other traders. Also - since this is "schizo's" thread - he may or may not like me showing that following.
Please take a look at the following snapshots. You mentioned - "losses bounded but my payoffs unbounded" - if so - I think this might be close to what you mean - although you may want longer Winning Runners.
The following charts are for the NQ and MNQ.
On the Charts - you will see many Breakeven trades - with the Side by Side Arrows. Now look at the "Total Trade Analysis" to the Right - for both charts. Please notice the "Average Winning Trade" and "Average Losing Trade" - then look at the "Ratio Ave Win / Ave Loss". This Algo - is all about STRICTLY CONTROLLING LOSSES and letting the Winners RUN - until the Algo gives a New Signal. Also notice the "Largest Winning Trade" and "Largest Losing Trade". With this Algo - the Percent Profitable - can be much Lower - but the Losses are Considerably Lower.
Next - please look at the "Strategy Performance Summary" for both Instruments. Towards the Bottom of each snapshot - notice the "Maximum Strategy Drawdown" and Maximum Strategy Drawdown (%). By controlling the Losses - the Algo is able to have a Very Low - MSD and MSD(%). Now - look at the Net Profit for Both - this is for a 10 Day Period.
Also notice - both Instruments are currently in a Short Runner. See the Current Position - Highlighted in Light Blue. the NQ is up $1708.45 and MNQ is up $171.00. This is on ONE Contract. There is really NO reason for the Average trader - to trade more than ONE Contract - in my opinion.
You are not giving Taleb or his method enough credits.
On the other hand, I could be fooled by randomness and simply be very lucky.
True, it is hard to start out using an approach with low win rate (<30% for me). Every new trader looks for regular "income" with high win rate. I started out writing covered calls and cash secured puts so I know the feeling.
Best wishes.
Your posts and questions deserve a more thoughtful answer.
In general, folks who read Taleb focused on black swan events and thought he waited for a random even to happen while bleeding premium. In reality, in addition to black swans, there are white swans and even grey swans, i.e., special events. The key is assessing if those events are underpriced/overpriced and which one is worth taking on.
Most of the time the market is very efficient and priced events correctly but once in a while they are mispriced. Most mispriced in my experience were underpriced due to the nature of the mechanism of the option market.
I am not an option trader with the skills of @destriero or @taowave, I only use option as a leverage tool to exploit macro events.
No, this is not what I was talking about in my posts on this thread. I was referring to swing trade options with a time frame of weeks or even months. Looks like you are day trading NQ with perhaps 10 min charts.
Yours is similar to the day trading experiment I carried out in 2023 and continuing this year. I trade stocks with 1 min charts. Main focus in that method is tight control of each trade's loss and let winners take care of themselves.
From 7 months of statistics with both sim and live, it has a positive expectancy with about a 0.4% daily profit margin. Does it work? Not really because 7 months & a couple of thousand trades are still not statistically significant.
Question: What you use for entry and exit triggers?
I am not asking for your secret source, just some general principles like trend following, rate of change, momentum, predicting using some indicators, etc...
Don't bother with this guy. If you go to his thread, you see many of us asking for live trading results, and get no reply. His system has no backtesting, and his magical algo almost never losses. Of course this is only possible with what I call "fantasy fills". In a live trading environment, whatever he has wouldn't work. His system can get out at the bid or ask whenever it needs to.
I think it’s the same logic for trading equities, finding the 5% chance consistently and take quick small losses when realizing it’s not the 5% trade.
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