Making an almost profitable system profitable

Quote from 1a2b3cppp:

Futures trading doesn't always involve taking profit in percentage.

Half the time you lose 5 points. Half the time you gain 5 points. You're back where you started from (not including commissions).
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You've pretty much just repeated what I already said.

If you have a breakeven system, using a fixed bet size gets you nowhere on average and using a fractional bet size actually loses you ground in the long run.

So the system has to be tweaked or replaced to get a new system with positive expectation for a fixed bet size, then you can apply Kelly sizing for optimal geometric growth, or some other sizing strategy if you have another utility function in mind.
 
Quote from satchel:

1a2: After I dig into the thread mentioned earlier for the original criteria, I can run it through a couple optimizations. Currently I am testing snowball momentum plays but using some heavier MAs as the ignition (specifically two crossovers, one being the 250-300). By looking at the speed of the move first, what clues are there to the strength of this trend that is forming. That is the filter. Don't want chopping or early trends, but the moment a trend is signaling a bigger bet. Ever had that thought on the day's chart: is this day going to trend or revert to mean? Usually that question comes up because you are seeing signs of an early established trend. If momentum stalls it is going to rollover big. If it keeps going you've got a nice break and your entry. (This n-o-t about gathering data from something like the RSI momo indicator.)

Maybe none of this is helpful, I don't do a lot of strat testing on daily charts. Only mid (1H) to smaller frames.
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I believe in the original thread IronFist was using 5 minute charts.

I would imagine 1 hour or smaller (but not too small) would work just fine for this.

Drift of two MAs and back to the mean is another one of the list to explore.
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What do you mean by "drift"?

Last week was Kirshenbaum :) It only takes a week or less of hacking away to figure out if you have something worthwhile or not.
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What does Kirshenbaum mean? The alphabet?
 
Quote from Pekelo:

Now the pattern I see here is that seldom there are 4 losers in a row. So if the OP has a similar system, after 3 losers in a row, I would go heavier...
It might not be the best solution, but that is my best answer how to make a breakeven system profitable...
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I remember reading about a system on a Forex forum years ago called "Lucky 7" or something like that where he basically had a trend following system and would increase the position size each time he opened a trade until he had a profitable trade. I think eventually he revamped he system to go up to 21 attempts or something.

Not that I would do that, but what you said reminded me of that.

If you could demonstrate conclusively that you won't have more than x losses, this would work. If price is random, then eventually you would blow your account.

Here's an illustration from one of the threads:

sequence_example.jpg


The right type of choppy environment could run through the trades really quick, though. Same thing if your broker widened their spread (since the original context of this was forex).
 
Here's an illustration of when this type of system fails.

This isn't a 60 period MA like IronFist was talking about, but this type of thing happens with MAs of all lengths from time to time.

The circled area is where you get chopped to death and give back all your gains and then some.

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I coded this fast this afternoon - hopefully no system gotchas in the code, that are skewing results.

EURO FX April'12 to present: $110K profit on 5 contracts (76K for '12 and 33K for '13 so far). I flipped through a range of MAs: The best MA level was using the 800 ema. NQ/ES didn't come close to those results, YM better. This was super fast down and dirty: 5 min 24 hr continuous contract, with filters I typically switch on for my own strats: Exit on Friday or Exit after 3:45pm EST, or Exit on trade equity > 1.0. Strong believer in time of day exits and day of week exits and didn't realize had these filters/functions in "on mode" as I borrowed the code from an existing strat meant for US hrs, not EUR. However, after removing those filters the results were dismal.

max dd -21K (Feb 7 '12)
W/L 4.6
P/F 1.5 (too low for me)
(however, beautiful equity curve.)

Threw in 1/2011 to present: market characteristics change so even though the W/L remains high, have PF dropping to 1.1, during that period you are gross P/L +685K and -605K with a crazy EQ curve. Gotta know when to break this baby out and when to put it in the dummy corner.
 
Quote from IronFist:

... Regarding the 60 EMA system, I'm open to discussion about how to make it work. It does produce huge wins in certain cases so maybe minimizing/preventing losses is the way to go. ...
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You can try to use it on 3 different time scale charts, trading the middle one when all 3 agree on the direction.
 
Quote from 1a2b3cppp:

What does that mean?
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That would be a typo, it represents the point value currently open on the trade. Values started to even out after .061 on up to .1, that statement should read

Exit Trade if Trade Equity for current trade > .1
 
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