Thanks K-Pia,
I have 84 trades from backtesting. How do I calculate the expectancy from that?
Resistance and Supports are Too Close, what to do?
- Thread starter SimpleMeLike
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Thanks K-Pia,
I have 84 trades from backtesting. How do I calculate the expectancy from that?
Just divide the overall net profit in pips by 84, and that gives you the net average number of pips per trade expectancy. (I'm assuming the trades are all the same kind of set-up and lot-size? If not, you should calculate it separately for each "type of trade" and take the lot-sizes into account, to produce a "per lot"/"per mini-lot"/"per whatever" expectancy.)
84 may or may not be a statistically significant number of trades to be analysing, depending on the win-rate. Briefly, the closer the win-rate is to 50% (on either side of it), the smaller the number of trades you need, to achieve "statistical significance".
You can also work out "profit factor", which is simply "total summated wins divided by total summated losses": in round numbers, and in general, if that comes out at over 1.5 you're doing well, and if it comes out at over 2.0, you're doing very well. As you can see, anything over 1.0 is "profitable", though.
Michael Harris's book Profitability & Systematic Trading will help you enormously, and if you look around online you might find a PDF copy of it to download.
it depend on which support one is buying and on which resistance selling
on the trend up you buy on the support in the time frame in which this trend is defined, but sell on the resistance of the trend down in the higher time frame (if there is one)
on the trend down you sell on the resistance in the time frame in which this trend is defined, but buy on the support of the trend up in the higher time frame (if there is one)
Please let me oversimplify:
Don't marry one instrument, one graph, period or set of beliefs, but question, question, question.
This means sometimes you let go of some knowledge, and later, you may be bringing it back again in some form, always open, ready and flexible.
Expectancy (profit averaging) = ((average win probability * average reward%) - (average loss probability * average damage%))
Damages includes all losses and costs, preferably extensively. Yes, you begin EVERY trade sinking...! That's just the start at how markets are providing negative expectancy by default.
Don't bother with "points", "pips", "currencies" or any such funny absolute measures. Relative percentage growth is always comparable across price-scales, or just convert to any logarithm of your choice. Probability is between 0 (0%) and 1 (100%).
This is core of any sound trading engine (disregarding the entirety of risk management, but this is just a simple post!). Not necessarily when it's already ready for primetime, but provides focus and confirmation on contradictory perspectives and beliefs about how the markets may behave.
- Do more of what tend to work and figure out WHY it works.
- Do less of what tend to don't work, and figure out WHY it won't work.
Don't marry one instrument, one graph, period or set of beliefs, but question, question, question.
This means sometimes you let go of some knowledge, and later, you may be bringing it back again in some form, always open, ready and flexible.
Expectancy (profit averaging) = ((average win probability * average reward%) - (average loss probability * average damage%))
Damages includes all losses and costs, preferably extensively. Yes, you begin EVERY trade sinking...! That's just the start at how markets are providing negative expectancy by default.
Don't bother with "points", "pips", "currencies" or any such funny absolute measures. Relative percentage growth is always comparable across price-scales, or just convert to any logarithm of your choice. Probability is between 0 (0%) and 1 (100%).
This is core of any sound trading engine (disregarding the entirety of risk management, but this is just a simple post!). Not necessarily when it's already ready for primetime, but provides focus and confirmation on contradictory perspectives and beliefs about how the markets may behave.
CHASE BREAKOUTS.
i do that for the better now. Many of us are initially pulled to small float crap , gamed to the hilt, with traps, fake outs, failures . Of course breakouts can reverse quickly but less price sensitive big money dont care about my shekel.
Some may say it is better to sit on ones ass if the first eighth of a breakout is missed. Not me.
Breakout from what? Is another nuance that can change for a person too.
Good advice .....Hell of an avatar....that dog!
SML
Sitting here watching the Olympics..., came across your thread..., figured I'd submit my random thoughts for possibly something to mull over
Ignore em if it makes more sense
Diagonally..., horizontally..., or both
When fixin to enter a trade - make damn sure you know / identify which one you are trading with "this" entry
One is a range (horizontal).., the other a move (diagonal)
(recall I do not use the term "trend" - but feel free to assume "trend" for the word move)
If you're trading move - is this move with..., or counter to the overall bias..., to the day's bias..., to the current bias (and this exactly why I do not use trend - show me a "trend"..., I'll change the TF and show you another "trend") - really the only time I'll use the term trend.., is to describe the overall
Nuff said here
=========================
Not really - if ample RR not existent - sit on yer hands -> save your money / emotional capital
===============
Always - to not figure in what you're risking to make a decision - to take a trade / sit on yer hands - is utter stupidity.., and a quick way to the poor house
Anyone telling you otherwise is FOS
=======================
Depends
Horizontal or Diagonal
Trading a range..., a move..., a B/O..., a PB..., or what
You must know / be very clear on..., what it is -> you're trading in..., what you're actually trading..., and of course the signal you're waiting for
=====================================
Make up your damn mind
======================
Never..., no matter what stage a trader is at -> it also a really quick way to blow up
Anyone telling you otherwise is FOS
We are risk managers first..., profit takers second
We take trades on how much must be risked
To see if the trade will work
To capture the potential profit move that currently exists (take note I said "potential" - because till it happens..., it ain't happened..., and there are never any guarantees it will)
$ risked must always be at a bare minimum.., equal to..., and preferably a fraction of - the current existing potential profit
Stated the other way - existing potential profit - must be equal to..., or a multiple of..., the amount risked for each trade
And the $ risked must always be acceptable - to see if this trade will work
Successful Journey Sir
RN
Sitting here watching the Olympics..., came across your thread..., figured I'd submit my random thoughts for possibly something to mull over
Ignore em if it makes more sense
Diagonally..., horizontally..., or both
When fixin to enter a trade - make damn sure you know / identify which one you are trading with "this" entry
One is a range (horizontal).., the other a move (diagonal)
(recall I do not use the term "trend" - but feel free to assume "trend" for the word move)
If you're trading move - is this move with..., or counter to the overall bias..., to the day's bias..., to the current bias (and this exactly why I do not use trend - show me a "trend"..., I'll change the TF and show you another "trend") - really the only time I'll use the term trend.., is to describe the overall
Nuff said here
=========================
Not really - if ample RR not existent - sit on yer hands -> save your money / emotional capital
===============
Always - to not figure in what you're risking to make a decision - to take a trade / sit on yer hands - is utter stupidity.., and a quick way to the poor house
Anyone telling you otherwise is FOS
=======================
Depends
Horizontal or Diagonal
Trading a range..., a move..., a B/O..., a PB..., or what
You must know / be very clear on..., what it is -> you're trading in..., what you're actually trading..., and of course the signal you're waiting for
=====================================
Make up your damn mind
======================
Never..., no matter what stage a trader is at -> it also a really quick way to blow up
Anyone telling you otherwise is FOS
We are risk managers first..., profit takers second
We take trades on how much must be risked
To see if the trade will work
To capture the potential profit move that currently exists (take note I said "potential" - because till it happens..., it ain't happened..., and there are never any guarantees it will)
$ risked must always be at a bare minimum.., equal to..., and preferably a fraction of - the current existing potential profit
Stated the other way - existing potential profit - must be equal to..., or a multiple of..., the amount risked for each trade
And the $ risked must always be acceptable - to see if this trade will work
Successful Journey Sir
RN
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Although true, I'm a risk taker before that, or even before that a trading analyst. Without enough anticipated rewards to justify the risk, there's no reason to take on any risks. In trading, one cannot/shouldn't exist without the other.
Not that a risk manager cannot do these things, but traditional risk management conjurs up images of irregular but stern talks about performance and potential pitfalls, regardless of other factors about the trades. In the corporate world, it can be as one-sided as the leadership who only care about costs and CYA, not opportunities and quantum leaps, which usually have risks and costs associated with them.
Part of what makes trading complex is that everything you do and don't do, tie in with everything and everyone, at some level. On the retail level it's mostly about yourself, your perspectives/beliefs/limitations, your execution and your own access to infrastructure.
What tripped me up at first, and probably many others, is that I thought wide stop losses meant higher risk, when it's actually the exact opposite when combined with proper position sizing. Now getting almost comfortable with the idea that I may not even need stop losses, although it probably wouldn't make too much difference one way or the other at this stage, and catastrophe-prevention probably a good thing to keep as you never know.
Really, I think language is perhaps the biggest barrier to learning trading, as everyone's explanations are messed up or missing pieces in more than one way. The various arguments in the community is, frankly, not coherent enough to be independently repeatable, and certainly not in any way pedagogic. So if I don't succeed, maybe I should try teaching then?
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