40yotrader,
I hope you don't interpret our skeptical questions as reflecting on you personally. You are undoubtedly the most prepared newbie I've ever come across. It is just that many of us have seen a lot of enthusiastic newbies come in here and get their hopes dashed by the cruel realities of the market. You have a lot going for you that many of them did not. You are adequately cap'd, you have a well-tested plan, you seem to be quite knowledgeable about statistics and risk and you have clearly thought a lot about money management.
I second the prior post advising you to start with only a fraction of your funds in the account. You do not need more than $10k or so to start. It is my experience that most newbies run through whatever they fund the account with to start. Then you face the hard decision of do I quit or do I add money? In your case there is no way I would put more than the 40k you are down with losing in the account. What if the broker goes bankrupt, etc? Why put those funds at risk? Of course it's a small risk, but why take it?
About your plan. Did you test it using futures data or cash index data? I have found that cash index data, ie SPX, is not reliable for testing futures systems. Since all stocks do not open at once, the cash data gives you an opening that does not reflect the futures.
I would agree that the 38% win rate you originally generated is reasonable for a vol b/o system. Then the question becomes how did you get it to >50%? At some point, adding filters, etc becomes curve-fitting, in other words, manipulating your system to fit the historical data. Typical red flags for a curve-fitted system are a large number of parameters or odd logic, eg. go short only in october.
You mentioned an $80 average trade. Was that average win or average trade? Was it on the basis of one ES contract? An $80 per ES contract average trade is extraordinary for an daytrade system If your system can reliably do that, you might want to forget about trading and just sell the system.
If you want some additional confirmation of your system, you might get the people at www.futurestruth.com to test and evaluate it for you. Might be money well spent.
I hope you don't interpret our skeptical questions as reflecting on you personally. You are undoubtedly the most prepared newbie I've ever come across. It is just that many of us have seen a lot of enthusiastic newbies come in here and get their hopes dashed by the cruel realities of the market. You have a lot going for you that many of them did not. You are adequately cap'd, you have a well-tested plan, you seem to be quite knowledgeable about statistics and risk and you have clearly thought a lot about money management.
I second the prior post advising you to start with only a fraction of your funds in the account. You do not need more than $10k or so to start. It is my experience that most newbies run through whatever they fund the account with to start. Then you face the hard decision of do I quit or do I add money? In your case there is no way I would put more than the 40k you are down with losing in the account. What if the broker goes bankrupt, etc? Why put those funds at risk? Of course it's a small risk, but why take it?
About your plan. Did you test it using futures data or cash index data? I have found that cash index data, ie SPX, is not reliable for testing futures systems. Since all stocks do not open at once, the cash data gives you an opening that does not reflect the futures.
I would agree that the 38% win rate you originally generated is reasonable for a vol b/o system. Then the question becomes how did you get it to >50%? At some point, adding filters, etc becomes curve-fitting, in other words, manipulating your system to fit the historical data. Typical red flags for a curve-fitted system are a large number of parameters or odd logic, eg. go short only in october.
You mentioned an $80 average trade. Was that average win or average trade? Was it on the basis of one ES contract? An $80 per ES contract average trade is extraordinary for an daytrade system If your system can reliably do that, you might want to forget about trading and just sell the system.
If you want some additional confirmation of your system, you might get the people at www.futurestruth.com to test and evaluate it for you. Might be money well spent.
