Systems Trader turned discretionary

Well,

I am new to the dark side lol...But I can see the value with being able to use experience to discern trading decisions while scanning for opportunities.

I am still a systems trader, I just add value with information that the system is telling me. The borders and the reaction the system has, actually helps me to make my discretionary trades.

I am new at this and many things I am saying may be right on...or maybe premature...but my saving grace is that I keep trades in proportion to NAV very small and YTD I have not used more than 4:1 leverage.

As you know I have investigated and exhausted Money Management extensively over the few years here in ET. I attribute the systems success to this, more than anything else. I have tricked my mind, to treat discretionary trading like a bonus to the system. I find peace with this trick, and I hope to graduate to HARD CORE discretionary PRO trader status someday. Jesse Livermore is in my heart, god bless his soul...

Michael B.

P.S. Do you realize that an averaged 0.25% per day on your initial is 91.25% per year if your instrument trades 250 days per year and makes interest to boot 365 days a year...(compounding is a friend in this scenario, as long as the pace of winning, exceeds the losers and nets the above)



Quote from Samson77:

Michael

Congratulations keep up the good work.

I have never liked systems or boxes and have always preferred the flexibility of discretion for the exact reasons you outlined.

Before you know it you will be hooked ... :D
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Today was a 0.17% day, not a 0.25% day. But 0.25% represents a projected average. I have calculated compounding into this picture and will be elated if I can achieve it....

I fell asleep early last night shortly after the London open, is why I am off my mark...I cannot trade when I am tired.

ALSO Caution: Do not trade immediatley after wiping the sleep out of your eyes. I lost 0.5% this AM...because of this.

I am in the (mst) time zone.

Also if your time is limited, just trade your plan and trade well...don't pay attention to these stats in this post...all this will come to pass if you just take your trades and do not push it. It is hard to write in ET and keep all things in perspective...

Michael B.
 
You cannot work a full time job and trade discretionarily.

I work a full-time job and had the biggest commission check in two years...lol...is it because I tried less?

Think about trying and trying less...there is some truth to this in discretion too...

My first love is trading and someday I will get a gig trading full time ( I am still a junior trader and they will not let me trade real money, I am still establishing a track record). Wifey says she does not want the roller coaster ride again, as it was for us the last time I tried to trade full time...I am still paying for that!

Maybe this time it will be different...I will let you folks know, and I hope this thread helps some people and gives them hope and insight. Trading is real and there are opportunities, if you pay the price. Do not jump from one thing to the next, hold your focus and it will come. We trade for money and let money be the motivator. Don't let the greed of the love for the money overwhelm you, keep all in perspective and learn to respect your time and money. Every breathe you take is from the saving grace of the Lord Jesus Christ.

From my heart.
Michael B.
 
Quote from ElectricSavant:

Please do not mis-understand me...I bank 2-5% a month and looking to improve to 3-6% a month and have the possibility to reach 4-7% per month. These goals are based on any amount of initial capital for one year and include compounding.

These superstars that bank triple digits must have huge DD...

Michael B.
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Not all of them. Obviously if you do a few hundred pips a month based on the 1 hour chart that could equate to 3%~ a month.

Now, lets say you trade the SAME system on the 1 minute where you essentially trade 60x more. You would obviously tone down your leverage to the point where you expect the same drawdown you would on the 1 hour, but you effectively trade SO much more that while keeping your original drawdown, your returns add up much faster.

I'm not saying it works like this. It's all hypothetical, but do know that there are systems that do return very high triple digits annually and keep very low drawdowns.

I've never heard of a system that traded > 15 minute with returns similar, though.

Best
 
Thanks for the input bottomline...this is a new world for me indeed...


Quote from bottomline:

Not all of them. Obviously if you do a few hundred pips a month based on the 1 hour chart that could equate to 3%~ a month.

Now, lets say you trade the SAME system on the 1 minute where you essentially trade 60x more. You would obviously tone down your leverage to the point where you expect the same drawdown you would on the 1 hour, but you effectively trade SO much more that while keeping your original drawdown, your returns add up much faster.

I'm not saying it works like this. It's all hypothetical, but do know that there are systems that do return very high triple digits annually and keep very low drawdowns.

I've never heard of a system that traded > 15 minute with returns similar, though.

Best
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Bagged 0.15% today....(I made two execution errors this am)

The weekend gives a bonus without trading of daily interest of 0.02%. There are 165 days of these bonuses on top of the 260 trading days.

Michael B.
 
I have been thinking about this all day...and will continue to contemplate this over the weekend...

Michael B.


You would obviously tone down your leverage to the point where you expect the same drawdown you would on the 1 hour, but you effectively trade SO much more that while keeping your original drawdown, your returns add up much faster.
 
Compound interest, like high leverage, is a double-edged sword. It can help you, then again, it can hurt you.

When you mentioned compound interest, I already know you are putting principal and profits (some if not all) back on the table. If your success rate is high, and you have excellent stop loss methods, then you can get away with it. But if it is low and your stop loss methods are ineffective, then, every time you lose on a trade, you lose most of the profits and principal. Some can say that this is bad money management. You can have an excellent system or trading technique, but if your risk and money management are ineffective, you will eventually lose.

So, your main concern should not revolve around compound interst. You should pay more attention to effective risk and money management to complement your trading technique. It also concerns me because you are not trading a system. YOu are a discretionary trader who are trading too aggressively. Be careful, my 2cents.
 
Thanks bvam,

This is actually the exact advise I need, from an experienced discretionary trader...

I collect positive interest on the pairs that I hold. The exposure that I use is based on the balance (not NAV).

The system I trade is utilizing two time frames and is using my system that I wrote and discretionary scalp trades that I have developed. The long term carry trades derive their yield from interest and is system trading, and the scalp trades that I do intraday are done discretionarily.

The dealer I use pays interest directly to the account balance (not a prise quote adjustment at rollover), thus the size of my trades increase. As I take profit from the scalps the size of my trades also increase. But the initial start capital has remained the same and thus my calculations of yield are always increasing, but not relying upon compounding. If I were to use the new balance each month and then report yield, it would be much less.

I have a very high win rate with my scalps and three out of 30 of them simply have been converted over to the interest carry side of the system. The interest carry side of the system is ALL SYSTEM and not any discretion. Those three trades were carried for less than 24 hours and both of them achieved their goals, while paying a little extra bonus from interest. I view my scalping trades as possible longer term entries into my system...but I can't get any of the scalp trades to fail....so I put on longer term carry trades besides the scalping that I do...

The compounding point simply is that the initial balance is fixed and the increase in balance causes the slight increase in trade size (my marketmaker has one unit trade size incremental trade tickets) My failed scalp trades when I get them simply are never exited as I look forward to the interest earning capacity that they offer. I only scan positive interest differential pairs and can hold them as long as 82 days...so far.

If I have not mentioned I am not afraid to take losses, and I occasionally will adjust exposures with offsetting winners...or simply just take the loss if my fund is meeting its goals. Again Drawdown is my main concern, and I do not bat an eyelash, if I must removes some losing units to protect an increasing drawdown. Yield is secondary to me.

Michael B.

Quote from bvam1:

Compound interest, like high leverage, is a double-edged sword. It can help you, then again, it can hurt you.

When you mentioned compound interest, I already know you are putting principal and profits (some if not all) back on the table. If your success rate is high, and you have excellent stop loss methods, then you can get away with it. But if it is low and your stop loss methods are ineffective, then, every time you lose on a trade, you lose most of the profits and principal. Some can say that this is bad money management. You can have an excellent system or trading technique, but if your risk and money management are ineffective, you will eventually lose.

So, your main concern should not revolve around compound interst. You should pay more attention to effective risk and money management to complement your trading technique. It also concerns me because you are not trading a system. YOu are a discretionary trader who are trading too aggressively. Be careful, my 2cents.
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This is very good advice. I double checked my spreadsheet and it calculates all my entries which are scalps to begin with.

My leverage does not increase.....

I also divide my drawdown into my leverage to come up with a sort of a factor that I use....When it falls too low, I watch my trade size...

But it has only been 82 days and I have not seen all the market conditions....however I have traded other systems in Forex since July 2004 and I no longer consider myself new to Forex Trading. I was a futures trader previously. BUT I am new to discretionarily scanning and scalping pairs...I actually do not like report/news days...

Michael B.



So, your main concern should not revolve around compound interst. You should pay more attention to effective risk and money management to complement your trading technique. It also concerns me because you are not trading a system. YOu are a discretionary trader who are trading too aggressively. Be careful, my 2cents.
 
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