Successful Trading and Compounding
- Thread starter gmst
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The question I have is why in the world are you developing strategies while live trading? Common sense says you should be trading on a simulated account, developing your strategies and checking out your trading stats on paper. Then after a minimum of 6 months, start using tiny position sizes and go live and see if you can replicate those results. Then start to increase position size if you are successful. I don't know why you feel it necessary to live trade right away with no validated strategies. You are throwing money away.
Good points. My response:
1. I have few fully validated and forward tested strategies, which are rainmakers.
2. I have 3 years of experience following and trading FX in a discretionary way, and have a medium level understanding of what drives prices. Also the back-testing I have done for developing my systematic strategies has helped me learn a lot of factors that determine the success/failure of a trading system e.g. keeping profits 2-3 times larger compared to losses.
3. There are a lot of trading ideas which are hard to backtest, because it is hard to write code for them.
4. Given all above, I am pretty confident that I can make money trading discretionarily (if I am sufficient choosy in my trades and my position size is small).
5. Now let us say, I think I can make money trading 19 different setups. If in actual trading it turns out that I can potentially make money only trading 8 setups and lose money trading 11 setups, I won't lose a lot. Meanwhile, my proven systematic strategies will continue to make money for me.
6. Finally, to answer your question why not papertrade it, if some thing can be written in code easily, I would like to ideally test it for 8 years back before putting money on it. However, if setups are hard to put in code form, then fwdtesting them with little position size is much better in my opinion, as I find it very hard to display same level of seriousness in papertrading as my actual trading.
Update for week 11 ending Oct 15, 2011 :
+2300$ for the week. 5th positive week out of 11 weeks. Largest dollar positive week and Largest percentage positive week till now. Also, largest single day percentage growth in account equity.
I left around 1200$ on the table more, but I can only blame fear of loss and managing some risk for it. So, I am not too unhappy with it.
On two separate occasions, I outperformed my strategy by closing a bit before my profit target was hit, the strategy eventually would have ended up with a loss - My market read and overall picture helped me do this. On one occasion, I under-performed my strategy. I won't be generally tinkering with my strategy, albeit special occasions.
Discretionary read on the market has been good this week. I have been able to lock the direction mostly correctly.
Weekly Stats:
1. Week PL: +2300$
2. Start Equity: 3.0k
3. End Equity: 5.2k
4. Maximum equity run-up: 5.2k
5. Max Win day as % of that day's start equity: 50%
6. Max Loss day as % of that day's start equity: -10%
Below stats are from Journal start day:
1. Total PL: -2.2k
2. PF: 0.86
3. RoI: -29%
4. Max. DD: 82%
5. Current DD: 35%
6. # of winning days 51%, # of losing days 49%
7. Av. win day: 15%
8. Av. Loss day: -14%
+2300$ for the week. 5th positive week out of 11 weeks. Largest dollar positive week and Largest percentage positive week till now. Also, largest single day percentage growth in account equity.
I left around 1200$ on the table more, but I can only blame fear of loss and managing some risk for it. So, I am not too unhappy with it.
On two separate occasions, I outperformed my strategy by closing a bit before my profit target was hit, the strategy eventually would have ended up with a loss - My market read and overall picture helped me do this. On one occasion, I under-performed my strategy. I won't be generally tinkering with my strategy, albeit special occasions.
Discretionary read on the market has been good this week. I have been able to lock the direction mostly correctly.
Weekly Stats:
1. Week PL: +2300$
2. Start Equity: 3.0k
3. End Equity: 5.2k
4. Maximum equity run-up: 5.2k
5. Max Win day as % of that day's start equity: 50%
6. Max Loss day as % of that day's start equity: -10%
Below stats are from Journal start day:
1. Total PL: -2.2k
2. PF: 0.86
3. RoI: -29%
4. Max. DD: 82%
5. Current DD: 35%
6. # of winning days 51%, # of losing days 49%
7. Av. win day: 15%
8. Av. Loss day: -14%
About ES: Till end of Week10, I was down 1900$ trading ES. I don't have any edge to trade ES, and trading something without edge and with a 'small' account, leads to such losses.
I made 600$ trading ES this week. I am modifying the rule to trade ES per 5k account equity.
What I need to realize and understand is that successfully trading forex is a different skill from successfully trading ES. In some aspects, trading ES might be easier as there are many more tools that can be used to analyse ES. Cash equivalent of ES is composed of 500 names - so tracking things like advance-decline, tick, trin (possibly), different sectors (how they lead), looking at Nasdaq and Dow in addition to ES, volatility - might give useful clues to trade ES. Most such clues are not available while analyzing and trading Forex.
As of today, I do not track any of above possible things, and I am a complete newbie as far as trading ES is concerned. My skills as applicable to ES are 1. basic price action reading (acquired from trading forex for 3 yrs) and 2. basic feel for riskon-riskoff days.
So, net net till the time I can develop some specific skills and edges for trading ES, I am setting following rules that should help me not lose a lot of money (and hopefully make some money) while trading ES:
1. Max Stop Loss: 4 points per trade, Most often I will set the stop between 2 and 3 points. So, with 5k in equity and losing 4 points (200$) means losing a max of 4% per trade. My targets will typically be between 0.5 to 20 points (a very wide range indeed)!
2. Max Daily Loss trading ES: 300$; if I hit this number, I will stop trading ES for the day.
3. Max Daily Drawdown allowed trading ES: 500$. So, if I go up to 400$ trading ES and then come back to -100$, I will stop trading ES for the day.
4. Max Weekly Stop Loss: 600$
5. Max Weekly Drawdown allowed: $800
6. Sometimes in the beginning, I will move stop to b/e, even though over the long term - I am sure it will lead to lower profitability. I am going to do this probably for next month or 2 or 3, till the time I can develop some edge. This will allow me to bleed less slowly, and gain more experience with ES.
7. I am going to trade overnight if the opportunity is there same stop rules will apply overnight also.
8. As a start, I will be trading following patterns:
a. Momentum continuation
b. Trying to pick intraday reversal points
c. Trying to fade with 1 point stop at previous support resistances.
d. Possibly fading over-reaction after 10am economic reports
9. I will try to be very choosy in my trades. Because I know very well that if I am not choosy enough, I will lose money.
Criticisms to my approach are most welcome indeed !
I made 600$ trading ES this week. I am modifying the rule to trade ES per 5k account equity.
What I need to realize and understand is that successfully trading forex is a different skill from successfully trading ES. In some aspects, trading ES might be easier as there are many more tools that can be used to analyse ES. Cash equivalent of ES is composed of 500 names - so tracking things like advance-decline, tick, trin (possibly), different sectors (how they lead), looking at Nasdaq and Dow in addition to ES, volatility - might give useful clues to trade ES. Most such clues are not available while analyzing and trading Forex.
As of today, I do not track any of above possible things, and I am a complete newbie as far as trading ES is concerned. My skills as applicable to ES are 1. basic price action reading (acquired from trading forex for 3 yrs) and 2. basic feel for riskon-riskoff days.
So, net net till the time I can develop some specific skills and edges for trading ES, I am setting following rules that should help me not lose a lot of money (and hopefully make some money) while trading ES:
1. Max Stop Loss: 4 points per trade, Most often I will set the stop between 2 and 3 points. So, with 5k in equity and losing 4 points (200$) means losing a max of 4% per trade. My targets will typically be between 0.5 to 20 points (a very wide range indeed)!
2. Max Daily Loss trading ES: 300$; if I hit this number, I will stop trading ES for the day.
3. Max Daily Drawdown allowed trading ES: 500$. So, if I go up to 400$ trading ES and then come back to -100$, I will stop trading ES for the day.
4. Max Weekly Stop Loss: 600$
5. Max Weekly Drawdown allowed: $800
6. Sometimes in the beginning, I will move stop to b/e, even though over the long term - I am sure it will lead to lower profitability. I am going to do this probably for next month or 2 or 3, till the time I can develop some edge. This will allow me to bleed less slowly, and gain more experience with ES.
7. I am going to trade overnight if the opportunity is there same stop rules will apply overnight also.
8. As a start, I will be trading following patterns:
a. Momentum continuation
b. Trying to pick intraday reversal points
c. Trying to fade with 1 point stop at previous support resistances.
d. Possibly fading over-reaction after 10am economic reports
9. I will try to be very choosy in my trades. Because I know very well that if I am not choosy enough, I will lose money.
Criticisms to my approach are most welcome indeed !
So to summarize...you have YET to even prove that you can trade system that you have "developed" and in the market that you "developed" it for. You have now added another market and system that has rules of risking 4% per trade (double what most consider max risk/trade) for a market that you know nothing about and a system that you are developing on the fly. Is that correct?
Sounds like a winner to me...... :thumbs up:
Maybe you should read your first post and decide if you have really learned from your past mistakes.
Haven't posted for last 3 weeks, so going to post for 3 weeks....large PL up/down swings.
Update for week 12 ending Oct 22, 2011 :
-2800$ for the week. 2nd Largest dollar negative week and 2nd Largest percentage negative week till now. Two days > -15% loss, both due to ES trading
Lost 2400$ from trading ES. Probably I should have listened to people's comments. So, my fx trading this week was down only 400$. Not bad at all (if i eliminate ES trading). Well if only....
Weekly Stats:
1. Week PL: -2800$
2. Start Equity: 5.2k
3. End Equity: 2.5k
4. Maximum equity run-up: 6.3k
5. Max Win day as % of that day's start equity: 21%
6. Max Loss day as % of that day's start equity: -36%
Below stats are from Journal start day:
1. Total PL: -5.2k
2. PF: 0.75
3. RoI: -67%
4. Max. DD: 82%
5. Current DD: 69%
6. # of winning days 48%, # of losing days 52%
7. Av. win day: 15%
8. Av. Loss day: -14%
Update for week 12 ending Oct 22, 2011 :
-2800$ for the week. 2nd Largest dollar negative week and 2nd Largest percentage negative week till now. Two days > -15% loss, both due to ES trading
Lost 2400$ from trading ES. Probably I should have listened to people's comments. So, my fx trading this week was down only 400$. Not bad at all (if i eliminate ES trading). Well if only....
Weekly Stats:
1. Week PL: -2800$
2. Start Equity: 5.2k
3. End Equity: 2.5k
4. Maximum equity run-up: 6.3k
5. Max Win day as % of that day's start equity: 21%
6. Max Loss day as % of that day's start equity: -36%
Below stats are from Journal start day:
1. Total PL: -5.2k
2. PF: 0.75
3. RoI: -67%
4. Max. DD: 82%
5. Current DD: 69%
6. # of winning days 48%, # of losing days 52%
7. Av. win day: 15%
8. Av. Loss day: -14%
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