Successful Trading and Compounding - On Steroids

[gmst]

Quote from macrotrader:

"and have had many blow-ups since then."


there goes 5 minutes of my life I will never get back...

Oh, I thought I wrote it pretty clear in my earlier journal. I also had a table somewhere showing for how many weeks my account lasted. That was learning phase. Not sure if you know but even great traders had blow ups when they were learning the craft. Do you know even PTJ had 3 blowups in 1970s ? Do you know seriously ?

Edit: Anyways this discussion is meaningless. We don't have to talk and argue about it, time will prove one of us wrong. If you can, wish me luck

 

[macrotrader]

"Not sure if you know but even great traders had blow ups when they were learning the craft."

How comforting. Losing money is the worst way to make money. Should be obvious.

You have a gambling problem. better to realise it sooner than later. The fact that you say discussion is pointless, means you need somebody to get you back to real life. Goodbye.

 

[leonarda]

Quote from gmst:

Alright Leonarda, I will give you a more specific answer. If everything goes as planned and with some margin of error (since I would miss few trades because I might be sleeping or might be on road), the account starting from 2.5k should reach 500k within 2yrs.

The following parameter:

1. How many strategy trades did I miss ?

will be the primary criterion for me to measure my performance. Actually, I will report this on a weekly basis. Total PL, drawdown, PF, win% etc. will all be secondary measures of performance. The reason is I am doing systematic trading - where everything is well tested and already planned. So I want to give my highest priority on real world execution vis-a-vis strategy trades. Traditional performance parameters will take care of themselves if execution is ok.

Btw thanks for your question. Thinking about it and answering it led me to the idea of reporting number of strategy trades I miss. This would prove to be an extremely important statistic.

glad i am of some help...however 2years?! That is doubling yout account, 100%, every month with fail!!

 

[gmst]

Quote from leonarda:

glad i am of some help...however 2years?! That is doubling yout account, 100%, every month with fail!!

I mentioned it in an earlier post, its going to be 25% per month, not 100% pm. Yes it is a steep goal, and even if I reach there in 4 yrs instead of 2, it will be fantastic!

 

[PHOENIX TRADING]

Quote from gmst:

I mentioned it in an earlier post, its going to be 25% per month, not 100% pm. Yes it is a steep goal, and even if I reach there in 4 yrs instead of 2, it will be fantastic!

My aim is to run the risk relatively close to Kelly.

Pardon me, I'm only able to use seventh grade math but taking 2,500$ to 1/2 million in 2 years is 1414.2%/year or 24.7% per month.

Sorry ,I don't really understand all the math used in the Kelly criterion but IMHO if you think it's telling you to run risk this high there is something wrong with your assumptions or your risk of ruin is 100%.

Is it possible you have miscalculated your optimum bet size?

 

[Wide Tailz]

There is no point calculating how much money you will make, IMO. You should calculate the odds of making it and size your bets accordingly. with 24X leverage on $2500 you will need tight stops, which kill profitability.

The OP has stats on his past trading. Things like win rate, longest losing streak, profit factor and typical risk exit % would be very useful information.

 

[gmst]

Quote from Wide Tailz:

There is no point calculating how much money you will make, IMO. You should calculate the odds of making it and size your bets accordingly. with 24X leverage on $2500 you will need tight stops, which kill profitability.

The OP has stats on his past trading. Things like win rate, longest losing streak, profit factor and typical risk exit % would be very useful information.

Good question. I would be trading multiple strategies/setups and the highest leverage for FX is around 30. The lowest leverage is close to 5 (for multi day trades). Stop points against leverage numbers typically are like following:

5 Lev Stop(in pips) 100 (often add as trade goes against me)
8 Lev Stop(in pips) 40-60 pips (rarely add size as trade goes against me)
12 Lev Stop(in pips) 30-40 pips (no add)
20 Lev Stop(in pips) <30 pips (no add)
25+ Lev Stop(in pips) < 20 pips (no add)

So roundabout willing to lose 3%-5% per trade. Doing roughly 5-15 trades per day. There is a category of trades that happen only rarely (like 8-10 times in a year), in which I am willing to lose upto 10%. For this particular setup winrate is high like 50% and win:loss is 6:1.

For most other trades win% is around 40% with win:loss 1.5:1 or better upto 2.5:1.

For ES, win % is 50% with R:R 1.6:1.


I would be concerned if overall profit factor is <1.5. I would be happy if it turns out to be 1.75 or higher. There will be multiple DD of > 20% (maybe once every month) and max DD would be upto 80% (I am hoping I won't see such DD in next 2 yrs). I plan to reduce the risk once I build up capital, then DD would go down considerably. Time for new equity high should be < 2month.

 

[Shanb]

Quote from PHOENIX TRADING:

Pardon me, I'm only able to use seventh grade math but taking 2,500$ to 1/2 million in 2 years is 1414.2%/year or 24.7% per month.

Sorry ,I don't really understand all the math used in the Kelly criterion but IMHO if you think it's telling you to run risk this high there is something wrong with your assumptions or your risk of ruin is 100%.

Is it possible you have miscalculated your optimum bet size?

Well, he is using leverage. I think think he mentioned somewhere from 5 to 30-1. If you average it out at 20 to 1, thats 500k buying power. You would want to look at the actual return on the buying power to measure performance and not the 2500.

In that case 50% a year or ~4% a month seems more reasonable.

 

[PHOENIX TRADING]

Quote from Shanb:

Well, he is using leverage. I think think he mentioned somewhere from 5 to 30-1. If you average it out at 20 to 1, thats 500k buying power. You would want to look at the actual return on the buying power to measure performance and not the 2500.

In that case 50% a year or ~4% a month seems more reasonable.

your math sucks.
30x leverage is only $75,000 buying power. You only over estimated by 566%.

A loss of .84% at that leverage leaves him out of the game (<$2000) , saving up for another gamble.

 

[Shanb]

Quote from PHOENIX TRADING:

your math sucks.
30x leverage is only $75,000 buying power. You only over estimated by 566%.

A loss of .84% at that leverage leaves him out of the game (<$2000) , saving up for another gamble.

You are right I mistakenly did my math with 25k instead of the 2500. Long day, get that stick out of your ass.

Regardless the purpose of the post is to look at the returns on buying power and not initial capital. It's a lofty goal, but we will see in the first month what he can do.