You need an edge with a defined positive expectancy, PERIOD. No ifs, ands, and buts. Both sides of expectancy need to be measured accurately. Trade win percentage and R/R are the basis for a successful daytrader. 99% of traders have no clue how to accurately define either.
If you are not a quant you have next to zero chance of making it as a daytrader. Drawdown is your enemy, and only quants have a grasp on calculating maximimum drawdown, and controlling trade size to maintain acceptable levels of drawdown. Also, optimal profit targets cannot be assessed by stroking your pole in front of a chart. Most daytraders are lazy morons. Gather your stats, or watch the well-issupermodels suck the money out of your pocket.
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"Nomad, Your trading accessment for success is the ismost accurate that I have ever read!"
I am in my 20th year of trading and everything you said above is dead on:
1: Quote: "Need an Edge with a positive expectancy."
I will add that "Edge" needs to be tested and actually traded over a long period of time (years). The personality of the Market constantly changes: Trends changes...Up..Dn..Sideways,
Volatility Ranges vary with the different Trends.
Even with programmed mathematically created "Edges," it may require re-formulation to conform to the New Market Personality.
2: Quote: "Trade win percentage and R/R are the basis for a successful daytrader."
I will add these two items ( trade win percentage and R/R) are directly tied together.
If you use a Reward/Risk Ratio of 1/1 (which I use to do, but not anymore), you have must have an Edge with a minimum W/L ratio of 70%.
Its more effective to have Reward/ Risk Ratio of 2 to 1 because profitability is possible all the way down to a Win/Loss ratio of 50%.
3: Quote: "Drawdown is your enemy, and only quants have a grasp on calculating maximimum drawdown, and controlling trade size to maintain acceptable levels of drawdown."
I will add that I rarely have more than 10% of my account in any one trade with a
Stop of -2.5%.
In the last 19-20 years I am always learning and adjusting to the current market conditions.
Never stop learning! Here are some changes I have made about 4-5 years ago:
Example 1:
My Reward/Risk ratio is completely different than it is now (1/1 than versus
2/1 and sometimes 2.5/1 now).
Example 2:
I also use to average a trade down with a 2nd buy, but that made semi-automated Bracket Orders (I.B.) impossible and required me to watch the markets. Also losses on 2 buys were too Big. No More!
Now I just use one Buy Limit, one Sell Limit and one Stop in a Bracket Order (I.B.).
If the order fills on Day 1, I don't even look at the trade station until after the close.
If the bracket filled and sold, or stopped, that computer generated signal is complete.
If the bracket buy Limit filled but is still open, I use the same Sell Limit and Stop in a One Cancels All Configuration (OCA-I.B.). At the end of Day 2 but just before the close of that trade day, if the OCA didn't execute, I close it.
Jeff
