Is There Such a Thing as a CONSISTENTLY Profitable Trading System?
- Thread starter catmango
- Start date
In my experience to develop a profitable daytrading system is actually pretty easy. I have developed a couple of them and they are designed to utilize intraday trends. It also means it is simple to make a profit when there is an intraday trend and to make 40-50% return a day on ES is nothing unusual. The problem are flat days. During these days these systems have a tendency to take many fake outs and then they are stopped out so profitability of the daytrading system as I see it is in the ratio of trending and flat days and your ability to prevent the system to trade during a flat day. I believe this will be applicable to all daytrading trend based systems. Sure, you have to make compromises when designing parameters of the system but at the end probably the best way to deal with it is just to turn computers off for a couple of days when you see that markets are in a consolidation. This would be really hard to simulate in backtesting but itâs not that difficult to do and it makes a big difference in profit. Another alternative would be to have a market breadth monitoring system in a higher (daily) time frame that would disallow daytrading systems to trade at those flat periods. That would be eventually possible to backtest.
K.C.
K.C.
no offense to KC, but isn't that part of the challenge - determining whether you're in a trend or consolidating? if it was that simple, every system in the world would have your idea as a filter. it's almost as if you're saying "well, the market is going to move up today, i know it already, and it is an absolute fact" - before the market even opens?
i think that you are correct in saying that good trend systems ARE highly profitable in trends, but i think that is rather obvious already...tell us how your system does OVERALL, month after month, year after year, in real-time...
i develop systems too, but don't try to profess that everything that we do is as simple as you make it out to be...
i think that you are correct in saying that good trend systems ARE highly profitable in trends, but i think that is rather obvious already...tell us how your system does OVERALL, month after month, year after year, in real-time...
i develop systems too, but don't try to profess that everything that we do is as simple as you make it out to be...
Yes, a tortise does win the marathon though the mine field.
-Commissions eat up 30-45% of total gains, losses take another 15%. I get to keep about 50% of gains BEFORE taxes when the dust settles. --A steep hill to climb. Net Net it still comes out very very nice.
-I can take legs off early or in anticipation of reversal & do when price action dictates. This is a luxury I would only recommend, though, if you know your symbol better than the market maker or specialist.
- Yes, my fingers hurt & yes, my head does buzz.....but when you've scaled up over years at least you've had time to get used to it.
-Commissions eat up 30-45% of total gains, losses take another 15%. I get to keep about 50% of gains BEFORE taxes when the dust settles. --A steep hill to climb. Net Net it still comes out very very nice.
-I can take legs off early or in anticipation of reversal & do when price action dictates. This is a luxury I would only recommend, though, if you know your symbol better than the market maker or specialist.
- Yes, my fingers hurt & yes, my head does buzz.....but when you've scaled up over years at least you've had time to get used to it.
Quote from candletrader:
NBBO,
Many tiny gains add up to a handsome sum... what % cut of your gains do commissions eat up on average? We are talking very small discrete gains here, so commissions can be a real killer... And as for discretion, are you not ever tempted to take off a leg of a given pair, if price action so dictates? In practical terms, can u do so, with so many little bits of profit to monitor and manage? Do your fingers hurt and does your head buzz with exhaustion at the end of the trading day?
I think I will content myself with the larger drawdown, larger average gain (per discrete trade), primarily directional route...
Anyways, hats off to you for clarifying what you do...
Candle
In the end there's probably no single system out there that's infinitely scalable.
But who cares? Based on my calculations MRNBBO is pulling in close to $1M/yr pre-tax, which would probably put him in the elite of elites, assuming he trades on his own account. And if he's transacting 200k shares RT each day, and doing it manually to boot, all the power to 'em.
What I meant was that when you get into a period when markets are consolidating, and I am talking about periods from days to weeks, you can make a decision that you will not daytrade or you can maybe use a daytrading arbitrage system instead of a trend based systems for the period. Only when markets start to move again then you turn on your daytrading systems that are based on intraday trends. How do you want to backtest something like this? I canât tell you how the system is doing OVERALL because I trade only when I think itâs worth it and I use different systems on different days for different securities.
K.C.
If the "optimization" has some actual market logic to it and works relatively consistently with the same settings over various trading vehicles.. then it should be fine.
If you are constantly having to change your indicator period numbers, moving averages, or something like blindly setting your stop at -3.5, take profits at +5.5 (because it worked best over your backtest period).. then you may be curve fitting. Nevertheless, your best answer would be to try to forward test it on paper .. if it was curve fit, it should fail miserably.
Quote from MR.NBBO:
Yes, a tortise does win the marathon though the mine field.
-Commissions eat up 30-45% of total gains, losses take another 15%. I get to keep about 50% of gains BEFORE taxes when the dust settles. --A steep hill to climb. Net Net it still comes out very very nice.
-I can take legs off early or in anticipation of reversal & do when price action dictates. This is a luxury I would only recommend, though, if you know your symbol better than the market maker or specialist.
- Yes, my fingers hurt & yes, my head does buzz.....but when you've scaled up over years at least you've had time to get used to it.
I am in total agreement vis-a-vis your tortoise analogy... but I will contend that there are many varieties of tortoise, with both directional and non-directional slants, who continue to chip away a great living at navigating the minefield... your kind of non-directional tortoise has evolved to have a thinner shell, since he is highly adept at avoiding the mines... my kind of directional tortoise has evolved to have a thicker shell, since he is less risk averse and tends to bump into more mines (larger drawdowns)... but, when all is said and done, it is perfectly feasible that both varieties of tortoise emerge fundamentally intact from the minefield at the same time, with their mission successfully accomplished... but in the wake of these two breeds of tortoise, there exists a third breed of tortoise, rapidly on the path to extinction, a breed that has decided to remove the gene for its shell, in the belief that the shell is an overly cumbersome impediment to quickly navigating the minefield... this breed of tortoise will occasionally be outstandingly rapid at navigating the minefield (leaving the directional and non-directional shelled varieties literally standing still), but the fatality of this faster, unshelled tortoise on some future mission is an inevitability...
Without being too philosophic, let me try this analogy to make a point about "systems." Remember, I have been accused of being a "great marketer" of how lucrative trading can be. My foes expect a rosy outlook in my never ending search to "suck in" new traders. Those of you who know me, understand that I am quick to "scare away" those who I feel simply won't "pass muster"...but, at the same time, must be an "equal opportunity" trading firm.
Back to the analogy: The market is the game, the "pitcher"...the traders are the "batters" - the "players"... and much like those who "play the game" must respond to "whatever is thrown at them"...we, as "batters" must be versatile...not only with our own "swinging" but with our approach to the overal game (stock market) / business.
IMHO, those who continue the search for the "winning strategy" will waste so much time looking for the "shrine they'll never find"... that they may miss the opportunities that avail themselves day in and day out.
I would be happy to expand a bit further on this, but right now I have a few "envelopes" are getting hit.....back to you...
Don
Back to the analogy: The market is the game, the "pitcher"...the traders are the "batters" - the "players"... and much like those who "play the game" must respond to "whatever is thrown at them"...we, as "batters" must be versatile...not only with our own "swinging" but with our approach to the overal game (stock market) / business.
IMHO, those who continue the search for the "winning strategy" will waste so much time looking for the "shrine they'll never find"... that they may miss the opportunities that avail themselves day in and day out.
I would be happy to expand a bit further on this, but right now I have a few "envelopes" are getting hit.....back to you...
Don