Trading Plan

Originally posted by 40yotrader


Thanks, I noticed some of this too. One of the things I noticed during papertrading was lots of losses during the Fall Jewish holidays. I went through my nine years of data and ranked the 20 smallest range days of the year. I found the days before and after Thanksgiving, the day before Christmas, the week between Christmas and New Year, and the Jewish holidays were all consistently low volatility. I've made a note to avoid taking any trades on these days to improve the performance a little bit.



My wife and I figured there's only three ways this won't work:

1). Our 9 year tested method is flawed and we've created a pipedream.

2). We don't follow the system 100% and screw up because of our emotions.

3). The volatility in the market drops to below where it was in the early 90's.

If we lose 5k or 40k between Nov. and Mar., it makes little difference to us. In either case we have to move on to Plan B. There isn't enough time to come up with a new idea and properly test it, so this is our one and only shot at the world of daytrading. If it doesn't work out, we'll have to just move on. My 17 years as a Marketing Strategist was full of risk and in the end it didn't provide for a nice retirement, either.
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I agree with you trading is much better than any other job you will have BUT and there is a BUT 5 or 6 months is not enough to know if you can really make it in trading and paper trading worth nothing....

I know many people including myself that started day trading on paper and that had great performances but when it comes to the reality you are burned and the 40k you were talking about could be lost in a day if you don't have a solid contingency plan..

You may be 40 years old, MBA grad with 200 k you are still a newbie.. It's a new venture for you a great opportunity but a new job where you will need to learn the gard way...

All what I am saying now may be insignificant but after one or 2 months you will really understand what I meant..

Another important point is to open your account only with a fraction of your capital for instance (25k), and lose it.. But learn a lot from all your mistakes and refine your theoretical system..

Then take a month off and work hard and read everything you can find on the subject look at the charts everyday and try to understand why you lost so much money so quickly..

Then come back and lose some more.. again stop trading and study even harder and then come back with always the confidence that you will make it...

Only then will you be able to make it... Of course you can make it very quickly but this is the worst thing that can happen to you.. you will become overconfident and you will lose a lot of money..

A learning curve is a a learning curve so you will receive big hits and your aim is to stay in the ring for 12 consecutive rounds and also hit your opponent if you can...

But First stay alive and then hit...

Good luck anyway
 
Originally posted by 40yotrader
I backtested the idea on 9 years of intraday data.
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9 years of trending market: major bull and then major bear.
In all likelyhood, the market of the coming years will be very different, i mean a range, choppy market...
You probably thought about that... just checking...

i wish you good luck.
 
Originally posted by 40yotrader

All trade sizing falls into either a martingale or anti-martingale strategy. The loss progression is a form of martingale gambling system. A system where you risk a certain percent of capital on each trade would be a anti-martingale system. Each has benefits and drawbacks. Both methods will add money to a account that has a positive expectency. I chose to use a form of martingale because I'm interested in creating a steady source of income. If everything works out, then after I'm up a couple of hundred thousand, I'll switch to a anti-martingale strategy.
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How many successful traders on ET use an "anti-martingale" system? I'm just curious because the almost everytime I read about losing streaks, the advice that is given is to trade smaller. Isn't an anti-martingale system prone to more blowouts?

40yotrader - I guess you have researched the pros/cons of using this type of system. Good luck and hopefully you have no losing streaks!

Carl

PS - How much did a 10-count losing streak put you in the hole on paper with this anti-martingale system? Can you handle that psychologically when it is real money?
 
Carl,

I can't quite tell from your question(s), but:

Anti-martingale reduces bet size when you're in a drawdown (percent of equity to risk).

Martingale is increasing bet size on the way down - the old "double up till I win again".

Martingale is risky and will not work at the blackjack table (table limits will cap you off), but in a thoroughly tested trading system it might stand a chance. Personally - "I'm not that good".

I think you need to ask who increases positions during a losing streak (martingale). Most traders I know use anti-martingale (that is if you get more than a blank stare if you ask them about their money management).
 
Originally posted by AmbushHillbilly
I can't quite tell from your question(s), but:

Anti-martingale reduces bet size when you're in a drawdown (percent of equity to risk).

Martingale is increasing bet size on the way down - the old "double up till I win again".
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I'm sorry - it is the first time I've heard of martingale/anti-martingale and I mixed up their definitions in my reply. Please go back and replace "anti-martingale" with "martingale" in my previous post. Do people use "martingale" systems successfully without blowing up?

Carl
 
Originally posted by Instant Karma


In all likelyhood, the market of the coming years will be very different, i mean a range, choppy market...
You probably thought about that... just checking...
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I did think about it. Of all the possibilities I think the intraday trading range on the ES going back to 5-6 points everyday is highly unlikely. If it does and stays there, then my method will lose money consistently.

They don't call this speculation for nothing. Thanks for wishing me luck, that's the best possible element of a trading plan. I haven't found a way to add it in.
 
FWIW, I would never trade using Martingale bet-sizing. I want to be around to trade tomorrow. I tried doubling-down in my early years, and it really affected my trading psychology. There are plenty of ways run up an acct. without using Martingale betting techniques.

Do you have a plan for:

What if the electricity goes out? What if you lose your internet/phone connection? What if your computer crashes? What will you do if you get a phone call that someone close to you died? What if there's another type of emergency?

I'd strongly recommend rehearsing all of these scenarios.

Good luck.
 
Chisel,

Excellent insight. I have thought about all those.

First of all I have my laptop and everything is up to date. TWS , E Signal. Copy of all trades in MS Money updated every night. Laptop will last for about an hour. Then I have a DC to AC inverter made by Linksys "Power to GO" It will power my laptop from the cigarette lighter in my car. I also have two backup telephone dialup ISP's.

Yep that's me. Plan ahead.

Bert:D :D :D
 
Originally posted by CarlErikson


I'm sorry - it is the first time I've heard of martingale/anti-martingale and I mixed up their definitions in my reply. Please go back and replace "anti-martingale" with "martingale" in my previous post. Do people use "martingale" systems successfully without blowing up?

Carl
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In a random game the odds of a streak happening are the % chance of the event raised to the power of the number of events in the streak.

So, for independent trades where 50% are winners, the chances of 11 losing trades in a row is less than 1 in 2000. If you know the chances and have enough capital to ride out the big losing streaks, then psychologically a martingale strategy is easier to trade. Most of the time you'll be making new equity highs.

Most traders use the anti-martingale because if you have a good system, it will grow the account faster over time. The negative side is the drawdowns are more frequent than a martingale system and tend to take much longer to get out of the hole.
The positive is that you don't have to worry about the big losing streak that could wipe you out.
 
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