Is There Such a Thing as a CONSISTENTLY Profitable Trading System?
- Thread starter catmango
- Start date
Yes, 7 years trading, I pulled out my data since everyone is about dumb founded by the statement .....I had a handful and a half of losing days....8 total.
It does seem impossible, but I assure you it is simply a function of extremely tight risk managament & large size spread out through many areas --52% long 48% short....net trading portfolio has a resulting beta of .17 ----this means my chances for huge gains or losses is nil. The 8 losing days are a function of rare & extreme
events in the areas I trade.
The road to stable profits is slow methodical.
It does seem impossible, but I assure you it is simply a function of extremely tight risk managament & large size spread out through many areas --52% long 48% short....net trading portfolio has a resulting beta of .17 ----this means my chances for huge gains or losses is nil. The 8 losing days are a function of rare & extreme
events in the areas I trade.
The road to stable profits is slow methodical.
Yeah the results of my poll http://www.elitetrader.com/vb/showthread.php?s=&threadid=16985 are also 2 good 2 B true. There're no documented results available to the public regarding consistency of returns for traders with small capital.
Just my observation.
To trade with small capital, you need leverage.
Can't get that in stocks with the current day trader rule.
Most mechanical systems I have seen designed for small capital daytrades a lot to avoid the bigger draw downs. Then, the winning % is so low (< 50%) that most beginners cannot handle them psychologically
Those few who surpassed the beginner level and small captial issues after trading their beginner systems always move on to redesign their systems to trade in more relaxed pace because capturing the trend becomes the issue, capital protection is still needed but not as straight as a beginner system.
The idea is you trade a vol b/o system on several non-correlated commodities and a couple of times a year, you'll catch a huge winner that makes up for all the losses. Very tough way to trade unless you have iron will. It's very unlikely you'll find one market that produces steady profits month after month with this type of system.
In the past when I did a lot of testing, I had the best results on the currencies and interest rate products, particularly ED. Stock market and energies not so good. I think a lot of people have been misled by the stock market over the past several years in that we've had decent trending markets, so people think simple breakout systems are the way to go. Historically, the stock market has not trended very well, and the back and fill nature has chopped up breakout players.
There is no magic combination of parameters. Just make sure you don't cut off winners prematurely. I would think wealthlab has plenty of examples. There was one in the last issue of Active Trader that bought pullbacks in a trend that had very good results on commodities.
Quote from Lawrence Chan:
Just my observation.
To trade with small capital, you need leverage.
Can't get that in stocks with the current day trader rule.
Most mechanical systems I have seen designed for small capital daytrades a lot to avoid the bigger draw downs. Then, the winning % is so low (< 50%) that most beginners cannot handle them psychologically
Very true, but by using good filters one can lower number of trades, reduce exposure,increase win/loss ratio . Basically one can make average system into money maker by using unrelated filters. Any profitable system can be brought up into 80% win category.
Walter
So tell me, if your trading style is so market neutral how do you make money? It sounds to me like your even though you have only had 8 losing days you probably only made money on 8 days as well. Granted, I have no idea what you trade or how so indulge me and this thread and shine the light on us. I am profitable so I know it can be done, Just straight directional trades. I am very interested to hear from a trader who is as quant as yourself.
yes, there are consistently profitable trading systems, even though there are so many "crap" systems available to the public and unsuspecting traders/investors. however, you must re-tool your thinking to determine what "consistent" really means. it may mean that you have 9 out of 12 months of profitability, rather than the expected 11? unfortunately, most traders forget the basic rules involved when setting up the parameters to run the system so they get great backtested results which fail in real-time (real-time trading is a must to evaluate how well the system works with execution). the one thing that most "newly developed" systems don't take into consideration is trailing stops and initial stop orders. they're willing to take a backtested trade that is risky - but worked out well - and assume that it is ok to keep that trade as part of a program that will work well in the future. what they should really do is calculate how volatile the equity curve will get if those "risky" trades continue to occur. find a system that has tighter stops and concrete rules - you will get a smaller profitable percentage, but avoid large losses on trades that should never been taken as part of a quality system. check my profile of PM me for more info.
Over what timeframe are you judging consistency? I have many systems that are consistently profitable on a yearly basis. On a monthly basis I have some that have done well. On a daily basis, I haven't found anything that suits me and makes money day in and day out.
Here's the monthly report on my best system since 1/1/96 for the SP market. It's made money in 83 of 89 months and the worst month is less than the average profitable month. For my purposes, it's very consistent.
Here's the monthly report on my best system since 1/1/96 for the SP market. It's made money in 83 of 89 months and the worst month is less than the average profitable month. For my purposes, it's very consistent.