Mistake Made Trading Outside System Rules.

[systematictrader]

Thank you systematictrader,

You are right and after some thought.

It's sooooo easy for an intra day trader to get caught in the daily profit goal. When in fact, your system sets the P/L from the day, not the trader. The trader is just an execution. Trader job is to take trades unemotional.

I belive I had it backwards in my goals, instead of me thinking about a certain profit target per day I want to make, i should revaluation my system to stats to say how average can the system make a day and the predict "with this system based on backtesting , it's projected to make xxx per month or year based of 252 trades per year."

I will back the system for taking allll trades from 8am to 11am and measure the positive expectancy and just trade it if I like the results.

What do you think about my logic?

well its easy to get caught in p/l regardless if ur day trader or swing trader cuz i used to get caught in it tooo,,,

yes trader execute as system dictates, exit as system dictates, whether that is a a profit target or percentage, IF IT IS A PROFIT TARGET, then the profit target must be in points NOT IN DOLLARS, reason being if ur successful and hopefully u are or become so then logically ur contract size is gonna increase

i think i understand what ur saying in the second paragraph iam not sure, if i do then here is the answer

the system should be backtested based on how much it will make based on how much risk or how much total money is invested,,, i always summarize it for myself and hopefully for u by asking if an investor comes to u and says here is 1 million dollar i want u to trade for me whats the ROI? and second question is what the leverage or risk? these two questions can help u see unbiased and it also helps compare systems to each other

a system that makes 2k a month is NOT superior to a system that makes 1k a month but is taking 3 times leverage as the first

u might check with @Overnight or someone more into day trading on how to calculate percentages in terms of day trading cuz i know the notional value of the contract is not as important as it is for me in swing trading

 

[systematictrader]

Thank you systematictrader,

You are right and after some thought.

It's sooooo easy for an intra day trader to get caught in the daily profit goal. When in fact, your system sets the P/L from the day, not the trader. The trader is just an execution. Trader job is to take trades unemotional.

I belive I had it backwards in my goals, instead of me thinking about a certain profit target per day I want to make, i should revaluation my system to stats to say how average can the system make a day and the predict "with this system based on backtesting , it's projected to make xxx per month or year based of 252 trades per year."

I will back the system for taking allll trades from 8am to 11am and measure the positive expectancy and just trade it if I like the results.

What do you think about my logic?

at its most basic form this if someone comes and ask how much money will u make me end of the year? the answer should be in percentage,, i hope this simplifies it when trading systems

 

[systematictrader]

Only if it has one of those little bamboo umbrellas in it. I like those, they are cute.

overnight hates me, proof is he got ultra mad and offended when i called him buddy that he had to come back and explicitly state "iam neither bud, or you buddy"

 

[SimpleMeLike]

well its easy to get caught in p/l regardless if ur day trader or swing trader cuz i used to get caught in it tooo,,,

yes trader execute as system dictates, exit as system dictates, whether that is a a profit target or percentage, IF IT IS A PROFIT TARGET, then the profit target must be in points NOT IN DOLLARS, reason being if ur successful and hopefully u are or become so then logically ur contract size is gonna increase

i think i understand what ur saying in the second paragraph iam not sure, if i do then here is the answer

the system should be backtested based on how much it will make based on how much risk or how much total money is invested,,, i always summarize it for myself and hopefully for u by asking if an investor comes to u and says here is 1 million dollar i want u to trade for me whats the ROI? and second question is what the leverage or risk? these two questions can help u see unbiased and it also helps compare systems to each other

a system that makes 2k a month is NOT superior to a system that makes 1k a month but is taking 3 times leverage as the first

u might check with @Overnight or someone more into day trading on how to calculate percentages in terms of day trading cuz i know the notional value of the contract is not as important as it is for me in swing trading

Thanks systematictrader,

This a good discussion.

So let me make sure I understand you correctly regarding back testing a system and analyzing its performance and determining how much money it can make in the future.

1. Back test a strategy exactly how I plan to mechanically manual trade it.

2. Analyze performance metrics (P/L, positive expectancy, Risk to Reward, profit factor, drawdown, etc) for profitability during the back testing time frame.


Questions:

1. After you back test system and it has good performance, what calculations do you use to apply this to your projected monthly/yearly goals if start running the system live with real money? Would that be ROI?

Thank you

 

[systematictrader]

Thanks systematictrader,

This a good discussion.

So let me make sure I understand you correctly regarding back testing a system and analyzing its performance and determining how much money it can make in the future.

1. Back test a strategy exactly how I plan to mechanically manual trade it.

2. Analyze performance metrics (P/L, positive expectancy, Risk to Reward, profit factor, drawdown, etc) for profitability during the back testing time frame.


Questions:

1. After you back test system and it has good performance, what calculations do you use to apply this to your projected monthly/yearly goals if start running the system live with real money? Would that be ROI?

Thank you

1. yes, how u plan to trade it auto or manual is irrelevant as long as its traded the same way as the system

2. yes however check which ratios are applicaple to u the most, and once again back to the simple question, if almighty came to u and said here is X amount invest for me, whats the approximate return ill get end of year? the answer should be percentage


the rate of return should be annualized

as far as ur question for me its easy cuz iam a swing trader and some of my traders take 2 months so i can easily calculate it annually, i think its different for u cuz ur day trading and iam not sure if the system would run all year, thats what i was saying check with someone better in day trading on how to calculate percentages for day trading

also its different for futures,,, i simply take notional value

for example right now i have a contract on in YI mini silver futures, its 1000 ounce, the margin is only like 1500, but i never look at margin or its req, i look at the 1000 ounce times todays price, (about 17.10) and the value of my investment is 17100 and from there i carry on, for example if my system tells me silver is expected to move 10% per signal then i should expect 1710 profit or loss.

how u measure futures for day trading on the ES is beyond me,,, but as always imagine if ur simply talking with someone whos KNOWS 0 on trading and simply asks, how much money would i expect out the X amount iam giving u,,, there are many more questions but this is the most simple and empirical one

 

[Xela]

setting Yearly Monthly Weekly profit seems very challenging and complex when trying to match that with your system expecatations.

I rather just trade all trades for my 8 to 11am window following the rules and forget the whole profit target thing in a simplicity approach.

I love simplicity. I will just let the system set my profit target goals on whatever amount money it wants to give me per day, week, month, and year. I just want to trade.

I agree completely with your approach: that's what suits me, too.

 

[SimpleMeLike]

I agree completely with your approach: that's what suits me, too.

Morning Xela and thanks,

I am happy someone agrees with me. I will let the system back testing results provide me statistical evidence of what my profit targets can provide. Rather then me telling the system what I want in profits that may not be achievable.

This thinking may seem simple to most experienced traders, but for me its not so intuitive. I am glad I ask the questions.

 

[pauljherrera]

Why 150$ is your daily target? It's impossible to win all the 252 days of the year.
On the other hand, you got it right, never trade something you didn't backtest.
Remember that real results are always worse than the backtested ones. Every trading system tends to decay.

 

[SimpleMeLike]

Why 150$ is your daily target? It's impossible to win all the 252 days of the year.
On the other hand, you got it right, never trade something you didn't backtest.
Remember that real results are always worse than the backtested ones. Every trading system tends to decay.

Thanks pauljherrera,

You are correct, it is impossible.

I was incorrect by projecting a daily target of $150 because I have no evidence to show that this is possible because I have not back test my system to determine if $150 per day is even possible 80%, 70%, 60% of the time. I have no idea.

And to keep things simple, i will remove the thought of daily target because its really to confusing and I don't want to think of P/L while trading, and I like to keep things as simple as possible.

It will keep it simple by: If the back test shows a positive expectancy for how I want to trade and that's suitable for my goals (or even a third of my goals), i will forward live trade it just like back tested.

Thanks for your comment.

 

[murray t turtle]

Clearly. Absolutely. And/or backtest it exactly how you know you're going to be able to trade it, anyway.

I have never really understood the "stop when you're 'x-amount' in front for the day" mentality. It seems completely illogical, to me. You have your proven edge and you should seek to apply it to the market as often as you can (is my perspective).

I accept, of course, that this isn't fully relevant to your current circumstances, in that you work from 12.00 to 8.00. And I accept that there may be some methods which only work at specific times of day (e.g. opening-range breakouts, etc.), but these are all issues you deal with by backtesting exactly what you're going to trade.

(I'll be honest and admit that I've never believed in "daily profit goals" at all, anyway: it's not my style of trading - I see myself more as taking what the market will offer me. Over a period of time, of course, that does tend to average out, but not over a day - even when you trade about 7 times per day as I sometimes do. So I kind of have a "monthly profit aim" in mind, admittedly, but that's only my average monthly profit over the last 6 months, which I work out on a monthly basis just like you'd calculate a moving average ... and I don't really care whether or not I achieve it. If I have a bigger drawdown than I've recently had, now, that is a big issue for me, because I look at everything in terms of risk-management, really, not in terms of profit.)

Anyway, I certainly agree with what you've said above.

%%
Its not really logical[ daily profit] goals; even more so, since markets change-range-trend.Of course it is proven, not enough sleep will goof anyone up.So, SimpleMeLike, if you are in Central Standard Time......... an entry/exit the next morning would not make much difference to me[most of the time LOL]

However a daily or monthly loss goal make make$ much more $ense.WHY; because a 50% draw down requires about 100% gain to break even??