Questions for experienced ES daytraders?
- Thread starter wtfauoa
- Start date
I find it very interesting that your average win is half your average loss. Most would say that it should be the opposite. Your high win rate certainly is part of the reason why this is a profitable strategy.
The figure for "average time in the market" being 2.43 days means you're swing trading mostly? (ie. not in an out in the same day?) The fact that you have 3.32 trades per day would have me assume you're trading either more than one instrument... or it takes you a few trades to get into a move that works? Not sure how to rationalize that the average trade last sover 2 days, and yet you have more than 3 trades per day, with an 80% win rate.
The summary screen of NT is such a generalization that it is not a reflection of how trades go on average. Some positions were day, some swing over a couple days, and some a week or two. I guess it just uses a very basic formula to calculate everything, such as # of trades / summary date range (~180 days in this case) / # of hours positions are open/24, or something like that. Scaling-in and then out also messes up the average trades per day. A 10-lot position that is scaled into over a couple of days and then dumped out at once, say, 6 trading days later from original entry would not show an average time in market of 6 days, but less. In my mind, even if 5 contracts were entered on day 1 and the other 5 contracts entered on day 6 and then all closed on day 6, the average time in market would be 6 days, not 3. And even in that scenario, what about that weekend? Should we count non-trading days as "time in market", even though the market is basically frozen on weekends?
And yes, it was multiple instruments.
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For the heck of it I just ran an average count. It's getting 3.32 trades per day from 601 trades / 181 days. If I'm in a position for a week, how many trades per day is it? Heh, I guess it's really zero (or 1?)
Scaling in and all that jazz would certainly distort these percentages, so your explanations and questions make total sense, and as you say, the formula must be very crude. As for the weekends, I assume that Ninja would not count Saturdays and Sundays, but perhaps include those holiday half days since some trading does occur.
I am still perplexed by the win rate though, especially in relation to the MAE. Since your MAE and MFE is so similar, how is it that your average loss is twice your average win? It certainly doesn't matter, and all of this must be because of the crude calculations an scaling in, but it still is interesting.
Can I assume that part of your strategy would be to not take a loss but perhaps average down as part of your scaling in? I've seen this a few times by some trades, and even though the conventional wisdom is to never average down, I think most people see that when keeping a tight stop, their exits are usually at the worst place, and buying more, as opposed to exiting, would lead to profitable results, perhaps over 90% of the time.
Well, based on the math above, it is including every calendar day. I am not sure that is a bad thing to be honest, but more a curio in the calculation.
I really need to explore what the MAE/MFE/ETD stuff means. I never bothered researching it because it never mattered to me...Only the cold-hard facts of the end-of-day statements mattered, and not something that projects outward, if that is what those figures do. So until then, I cannot comment upon your query about MAE etc.
Averaging-down was certainly a part of it. The huge drawdown you see was actually a decision to get out of some massive losers manually, and not with a stop. That was back in June if I recall. So I purposefully took those huge losses to keep them from getting worse. Needless to say, those positions would have won if I had enough money in the account to cover the potential of further dropping, but I was at margin call limits there and HAD to dump them.
So there are two trains of though on this...
You could average-down to try to recover from a big loss as the position sinks further in value, or you could just take a whole shitload of tiny losses as the position sinks further in value. It seems to all come out in the wash equally.
Making sense of this given the multiple instruments and scaling in I think almost makes this pointless. But given just one contract lets say, with all in and all out, then MAE and MFE can often show how to extract more money. If you see that your average trade goes against you 4 points, hence an MAE (max adverse excursion) of $200 (for ES), then it would help someone place stops perhaps. At the same time, if they see that their MFE, max favorable excursion is 6 points, then going for a target of 8 points maybe isn't the best target to shoot for.
Just pulling all these numbers out of a hat, but given enough data, its interesting to see how the stats of large numbers can help or hurt a strategy. Something as simple as moving a stop an extra point, or moving a target an extra point, can often make quite a bit of difference, so I think knowing these numbers can really help some traders. I do believe that trading is part art and part science. The science is the stats, and I've seen that often letting stats do their thing is best.
Fully agree. I come across posts every now and then where people say how their trading friends who were very profitable for years get wiped out, be it in 2000 or 2008. So as you say, you're either wiped out fully, but only once in a while, or you're wiped out slowly, trade by trade. It seems to me that the sweet spot is in the middle, which is more than likely where you are operating.
Indeed. As to what you say about wiping out once in a single shot or slowly over time...
I decided to accept the fact that I will get wiped out, because that is what every trader ever does according to all the armchair quarterbacks of this industry. But I chose the slower fashion, because while I am getting wiped out slowly, I can mitigate the effects by making money slowly. Get wiped out all at once, there is no chance to recover. Get wiped out slowly? Well, there is still a gasp of profitable air.
Thus the reason why I have many more smaller winners over a couple of huge losers.
I think its a good strategy, and insurance companies operate the same way I think! LOL... They cannot pay all those people they insure, but they know that for the most part, having to pay out even 10% of policies in the same year is highly unlikely.
Heck.. same thing with banks. They don't actually have all the money available on deposits they hold. If everyone tried to cash in at once.. even half or a quarter, they would be finished, couldn't pay out the money that you think you actually have in a bank. The fractional reserve system does after all allow them to lend out 9 times as much as they have on deposit I believe.
So with trading, I do think in some ways that a strategy like this can work. And if it doesn't, there are probably much bigger problems in the world anyway.