Prudent Risk Management + No Edge = Positive Expectancy??

smacdtrader said:
dude, this is way better than a coin toss and 1:1. be precise man. if you can do that trade as much as possible its worth millions and millions.
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I asked chatGPT and it gave this formula to calculate the sample size:

N= [Z^2*p*(1-p)]/E^2

Where:
N=sample size
Z=Z-score
p=probability of win
E=Margin of error
Assuming R:R=1:1 for simplicity

For win/lose of 54/46
Z=1.96 for a 95% confidence level
p=0.54
1-p=.46
E=1% if I want a margin of error of 0.01

N=9,542, I need about 10,000 trades to be absolutely sure it is real.

That is too much, so I reduce the margin of error to 5%, then

N=382.

PRM could be the edge because I don't think I am doing anything special, basically just trend following, using generic stuff that everyone on ET uses?

I now have over 500 trades, I do notice a gradual degradation of win rate but still hovers around 54%. R:R, as much as I could tell is close to 1:1.

I just have to keep running it for a few more months in small size and see if things will hold.
 
ironchef said:
I have been trading a system for 7 weeks with positive results.

The system is eerily similar to a random coin toss, win rate ~ 50%, R:R ~ 1:1 but both are skewed slightly favoring win and reward. Statistical sample analysis showed these are not statistically significant, i.e., could be due to sample size errors.

Risk Management: Cut losses aggressively, take wins aggressively. Exit trades, call it a day when cum trades produce a profit or total # of trades exceed X, which ever comes first.

75% winning days and 6 consecutive winning weeks are highly unusual for a random coin toss.

Could @Buy1Sell2 be right? Or I am fooled by randomness?

Comments/feedbacks are welcome especially from the math wizards on ET.
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No. You're being fooled by randomness.

Try to build a profitable style. Then, add risk management.
 
longandshort said:
Ok. Focus on research into vol and study structures. Follow @destriero and his journals. Ask @taowave and others where you run into questions. Take it seriously. You’ll find your style.
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Thank you for the coaching. Those names you mentioned are my heroes and I followed them closely.

I have positive expectancy in my option trades, in aggregates (CAGR > CAGR of QQQ since 2013), and I am happy with my style there.

Where I really need help is to develop a profitable day trading system. Can you help?

Thank you in advance.
 
ironchef said:
Thank you for the coaching. Those names you mentioned are my heroes and I followed them closely.

I have positive expectancy in my option trades, in aggregates (CAGR > CAGR of QQQ since 2013), and I am happy with my style there.

Where I really need help is to develop a profitable day trading system. Can you help?

Thank you in advance.
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Start with getting caught up on the literature. Why do you think there's an opportunity intraday and what does current research say about it?
 
longandshort said:
Start with getting caught up on the literature. Why do you think there's an opportunity intraday and what does current research say about it?
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Not a question of opportunity but of redemption.

I failed day trading (intraday) multiple times in the past. I want to give it one more try.
 
ironchef said:
Not a question of opportunity but of redemption.

I failed day trading (intraday) multiple times in the past. I want to give it one more try.
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Don’t try to “day trade”. Be hyper focused on uncovering opportunities regardless of the timeframe. For example, if you understand options, it might be a good idea to explore 0dte and how they interact with the broader market. More specifically, are there “anomalies” you can take advantage of?
 
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