Risk $1000 to make Millions

I've decided to trade with this system a little bit even though I haven't backtested it or optimized it. For this trade I'm using a 13.50 increment level. I'm also adding lots in the the pattern 1,0,1,1,2,3,5,8. I'm adjusting the stops on the first 3 levels a bit (my psyche can handle a $25 gain better than $0)

Qty to Buy, Price for this lot, Position after this trade, avg price, stop level, profit or (loss)

1, 1413.00, 1, 1413.00, 1400.25, ($638)
0, 1426,50, 1, 1413.00, 1413.50, $25
1, 1440.00, 2, 1426.50, 1426.75, $25
1, 1453.50, 3, 1440.00, 1440.00, $675

So right now, I'm long one ES at 1413 and working 2 orders an order to sell 1 at 1413.50 stop and an order to buy 1 at 1440.00 stop. I'll update as needed.
 
Quote from maxpi:

I was averaging down as price fell and setting a bigger profit target for each new tier. It makes it's gains on the reversion move, the bigger the initial move the bigger the reverting move. I won't get back to testing that anytime soon, it is a toy really because it is absolutely certain to blow out the account at some point and you never how often that is going to happen.
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Voodoo, you need to read maxpi's post more carefully. You are living in a dream world. You cannot clever your way through this.

You likely may wind up owing a huge sum and declaring bankruptcy. When it comes, it is in spite of your cleverest design.
 
Quote from TraderZones:

Voodoo, you need to read maxpi's post more carefully. You are living in a dream world. You cannot clever your way through this.

You likely may wind up owing a huge sum and declaring bankruptcy. When it comes, it is in spite of your cleverest design.
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I appreciate your concern. I reread maxpi's 2 posts and his system was a Martingale type system that adds to a position which is going AGAINST you. My system is the opposite, an Anti-Martigale system to add to your position if it going FOR you.

A martingale system will have many small winners and few huge losers. An Anti-martigale system would have many small losers and few huge winners. The question is what are the probabilities, payoffs, and how much money do you need in your account to sustain drawdowns.

An Anti-Martingale system, I surmise would have smaller drawdowns and thus need less capital than a Martigale system.

On a more general level, I'm interested how and when other traders add to their position. In there any method to when they add to their position or is it just when it "feels" right.

FYI, On a more micro-level, I got stopped out at 1413.50, so I made $25 before commission on this trade, $20.70 after commissions. I envision a system that swings between being long and short, now that I got out of my long position, maybe I should have shorted 1 at the same level, 1413.50 and work both sides. Obviously, backtesting this is the way to go. But there are other demands on my time (job, wife, etc). I only have Microsoft Excel and end of day .SPX data to work with right now.

Why do traders spend so much time trading? 1) they think they can make more money that a passive investment such as a mutual fund 2) more leverage through trading (i.e. options, futures, FX, equities on margin) 3) they like the action 4) other reasons

I appreciate all of the replies.
 
Quote from TraderZones:

Voodoo, you need to read maxpi's post more carefully. You are living in a dream world. You cannot clever your way through this.

You likely may wind up owing a huge sum and declaring bankruptcy. When it comes, it is in spite of your cleverest design.
More...
What type of trading approach do you espouse? Do you add to your initial positions? If so, how?
 
Quote from VoodooMMI:

What type of trading approach do you espouse? Do you add to your initial positions? If so, how?
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There are a few position sizing methods bouncing around. Kelly, optimal f, bob spear(s)?, fixed ratio, fixed fractional, etc.

The best I have seen under studies, is fixed fractional (one example here): [http://www.adaptrade.com/Articles/article-ffps.htm

A further adaptation to that, would be to start drastically reducing the risk % during drawdowns, to cut them off somewhat.
 
Quote from VoodooMMI:

A martingale system will have many small winners and few huge losers. An Anti-martigale system would have many small losers and few huge winners. The question is what are the probabilities, payoffs, and how much money do you need in your account to sustain drawdowns.

An Anti-Martingale system, I surmise would have smaller drawdowns and thus need less capital than a Martigale system.
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(Anti) Martingale Definition:

"In a classic martingale betting style, gamblers will increase their bets after each loss in hopes that an eventual win will recover all previous losses. The anti-martingale approach instead increases bets after wins, while reducing them after a loss. The perception is that in this manner the gambler will benefit from a winning streak or a "hot hand", while reducing losses while "cold" or otherwise having a losing streak. This general idea of increasing bets when conditions are believed to be favorable can improve the odds in games with a memory by using a strategy like card counting. But in a true random memoryless game there is no such thing as a winning streak or losing streak (these notions are gambler's fallacy) so this strategy can't improve the expected winnings in such situations."
 
Quote from VoodooMMI:

Since my strategy only losses $1,000 per trade (and less if you use a step size less than 20 points) it seems like it would take a while to blow out a decent sized account with my system.
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That is "loses $1,000 per trade" PER CONTRACT

At this level:
1597, 1720, 1687.72, 1700, $2,566,000

You are risking 1597*1000 = $1.6 million.

Your progression also depends on the market to keep advancing. Instead, the market chops and jumps and has sudden rises/drops that will blow you into the next county.

And if there is a terrorist attack while you are holding this ungodly number, you might find yourself owing millions.

There is a large gap between your wide eyed experiment, and reality. And then you will learn about psychology of holding a 1000 positions. Very experienced traders would likely stay away from such large positions. You? will become a basket case very quickly. And there are govt limits to how many contracts an individual is allowed to hold.

The difference between your plan and reality is, in a few months, you likely will over 99% be declaring bankruptcy.

I know you will weave more what-if's, but you have no clue about the 100 scenarios/conditions you didn't even think of, that any one of put your plan in a pine box. And yes, many of us have already considered exactly what you propose at some point in our career. And after pondering the realities, know a disaster when we see one. Your problem is, you would rather become a splattered bug on the windshield, than listen to the people who already have told you to stop gunning the engine while you head for the cliff.

BTW, I am not interested in further dialogue on this. I know you will come back with more gee-whiz what-ifs, but I do not care to spend more time while you happily load bullets into the weapon of your suicide.
 
Hi Voodoo,

Interresting post.
I think i've got the point with the anti-martingal principle, but I don't see what the fibonacci sequence brings to you.
Why did you choose Fibo instead of, for example, openning with one contract, then adding adding 2 then 3 then 4, ... up to a given limit ?

What is the specific bonus of the Fibonacci sequence ?

Olivier.
 
Quote from VoodooMMI:



A martingale system will have many small winners and few huge losers. An Anti-martigale system would have many small losers and few huge winners. The question is what are the probabilities, payoffs, and how much money do you need in your account to sustain drawdowns.

An Anti-Martingale system, I surmise would have smaller drawdowns and thus need less capital than a Martigale system.
More...

What you are assuming is by reversing the system results will reverse by 100%.

Surprise yourself by reversing a simple system, something like MA crossover.

What you'll find out that by reversing system signal or doing the opposite of the loosing system it doesn't give you the opposite results.

Keep it simple. Buy support, Sell resistance. Keep your stop loss.
 
Quote from maxpi:

I worked on something similar that was based on standard deviations from a moving average, buying more as price moved away. It tested out as a good strategy with the caveat that every so often you would blow out your account and have to start over. It became an odd thing to think about really, overall profitability was very much affected by how often and how badly it blew up the account.. I never completed the work but it was a fun thing to play with for awhile... Possibly a lot of these blown up hedge funds had similar ideas and simply traded it with other people's money and collected big fees until it blew out, seems likely...
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Using acct balance as a stop loss is a 'great' idea, lol

http://www.elitetrader.com/vb/showthread.php?s=&threadid=126815
 
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