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Trading Plan
- Thread starter 40yotrader
- Start date
Originally posted by harrytrader
http://www.arbtrading.com/expectancy.htm
http://keplerweb.oeh.uni-linz.ac.at/trading/moneyMan.htm
Good stuff!
Lots of different ideas.
I not sure why they're so concerned about Martingale style MMGT. I don't think anybody would try to double up on each loss. I also don't think anybody would double up on each win as in a pure Anti-Martingale strategy. I think they're stuck in the gambler's mode of thinking. The gambler's know the odds are aginst them, so they have to play for a streak to possibly beat the odds. That's why gambler's use the Anti-Martingale strategy. The house has the odds in their favor. From their standpoint, an Anti-Martingale is the way they could lose money. They'd want the bettors to use the Martingale strategy, because sooner or later the odds will catch up and they'll be tapped out.
Likewise, my trading method has the odds in my favor. For me, a form of the Martingale money management makes much more sense. I'm guessing that 90% of traders use a form of the Anti-Martingale strategy.....I wonder if that has something to do with the failure rate.
Originally posted by AAAintheBeltway
40yotrader,
I hope you don't interpret our skeptical questions as reflecting on you personally.
Not at all! It just helps me confirm that I haven't missed something. I've sensed a lot of fear from others, so in spite of my preparation, I'm sure there's something that's casuing so many to be fearful.
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?
We've already funded the account with 200k. 160k of it is in Tbills. The other 40k is cash in the account. I'm sure most of you know Tbills are not held by an FCM or IB, but by the clearinghouse. So my risk in Tradestation Securities is only 40k. We've already decided if we go down the 40k then we're done.
If it works out, we'll be adding other trading systems that aren't highly correlated with ours, so we'll need the other money for margin in the future.
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 used SP intraday futures continuous data from Jan. 94 - June 2001. I see the site has now has the data back to 1989. I know if the volatility drops to pre-1996 levels, then my method won't make the money I need, so that's all I'm concerned with.
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.
There is only one filter. If yesterday's range is not less than the day before's range, then don't trade today. Every year since 1994 has had 50% or better winners on more than 2000 trades. If it was curve fit, I think it would had some large variances. I did a spreadsheet of daily correllations between range and profit. What I found was the profit was directly correllated with the volatility.
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.
The first cut started with $80 per-contract per average trade after all costs and slippage. Since it's less than 2 pts. I didn't think it was any big deal. The finished system has an average trade of $112 per-contract. Still doesn't seem like much to me.
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 bought a couple of systems from vendors on Futures Truth. I bought the R-breaker and R-levels software to help me. Some of the ideas I use are in his code (though not exactly). I also bought a scalping package from ttp://groups.msn.com/DAYTRADINGatHOME. I thought about scalping, but after trying to papertrade for a couple of weeks I gave up on the idea because I don't have the desire to go for two points at a time.
Here's my equity curve for my backtested system from 1994 - June 2001. I don't have the tools to make continuous data, so that's all I can post. I got a realtime feed about a year ago and by using the inidividual contracts, the profit so far this year is $140k. As long as the volatility stays above 1996, I'll be ok.
1994 +31,000
1995 +12,000
1996 +65,000
1997 +150,000
1998 +193,000
1999 +176,000
2000 +212,000
1/2 of 2001 +105,000
The smooth equity curve is caused by the using my variation of the Martingale MMGT.
Attachments
Originally posted by daniel_m
A question for you, what is the "base of the progression" you'll be reverting to? Do you mean that if you begin with X contracts, and a drawdown period requires you to be trading 3X until a new equity high is reached, you'll be reverting back to X? So that this base X will not be changing even while your account equity is growing? (until you reach a couple hundred k, as you've said).
Everytime the equity hits a new high, I check to adjust the base. If it's in a drawdown, the base doesn't change. The base number of ES contracts is based on the average range of the past ten trades versus the previous ten trades. If the range is declining, then the base is increased by 1. If it's increasing then the base is reduced by 1 from whatever it was. In July the base I'm using was 2, now it's 4. This is my guess method to try and keep the profits above 150k per-year.
I didn't finish it over the weekend. I was doing testing and didn't get to it. As soon as I finish it, I''ll convert it to a pdf file and zip it. Hopefully it'll be under the byte count restriction for posting. Should be another day or two at max.
Originally posted by 40yotrader
I've been paper trading for 6 months and now I'm ready to complete a trading plan before putting my money to work. I've got sections for financial goals, measurements, capitalization, methods and tactics, backup strategies, money management, discipline controls, daily ritual, and dealing with emotions. I've also got a Trading Log, Trading Journal, and Trading Notebook. What other elements go into a trading plan? Does anybody have a link where I can see a example of a good trading plan?
... Sounds like you have done a bit of analysis. One caution though: Dont rely too much on your initial plan. In my experience your plan of attack tends to change over time to match changes in the dynamics of the market. A set of rules etc that form the basis of your trading style is IMHO essential but you also need a bit of maturity following the markets on a daily basis. Observation is essential and increases your ability to read markets. The sooner you actually start trading the better since putting on a position and managing it is quite different from paper trading. There is nothing wrong with trading small lots for some time as a second step after paper trading in order to prepare you for taking on larger positions which will make you money .... It sounds like you are ready for this step.
40,
I see you're way ahead of me re FuturesTruth. I wonder if you could expound a bit on the R-Breaker and R-Levels systems, when you get a chance. I know they are ranked among the best daytrade systems by FT. Also I'm interested in the scalping system you mentioned. My hat's off to you if you have improved on these systems.
I think the source of most of the "fear" you've felt here is that a lot of us understnad just how hard trading can be. I'm always a little concerned when I see someone who is trying to support their family at it, simply because most fail. Anyway, I see you have started a journal, and I will certainly be following it with interest. Good luck.
I see you're way ahead of me re FuturesTruth. I wonder if you could expound a bit on the R-Breaker and R-Levels systems, when you get a chance. I know they are ranked among the best daytrade systems by FT. Also I'm interested in the scalping system you mentioned. My hat's off to you if you have improved on these systems.
I think the source of most of the "fear" you've felt here is that a lot of us understnad just how hard trading can be. I'm always a little concerned when I see someone who is trying to support their family at it, simply because most fail. Anyway, I see you have started a journal, and I will certainly be following it with interest. Good luck.
I hate to bring a 4 year old post back up, but can the original author update this thread with their experience when they went live? I believe there was a 6 month window and a maximum 40,000 drawdown allocated.
I'm going through various posts of interest on elitetrader and came across this one. I decided to archive the thread upon starting it, but now that I finished reading the thread, I see that there is no conclusion.
Anyone know what happened?
I'm going through various posts of interest on elitetrader and came across this one. I decided to archive the thread upon starting it, but now that I finished reading the thread, I see that there is no conclusion.
Anyone know what happened?
Quote from johnpinochet:
I hate to bring a 4 year old post back up, but can the original author update this thread with their experience when they went live? I believe there was a 6 month window and a maximum 40,000 drawdown allocated.
I'm going through various posts of interest on elitetrader and came across this one. I decided to archive the thread upon starting it, but now that I finished reading the thread, I see that there is no conclusion.
Anyone know what happened?
the op is now a very experienced trader that has achieved substantial returns over the yrs tradin' futs, apparently with a strategy that relies on stop orders to initiate trades.
search his handle and u'll find his most recent posts breakin' down returns over the yr.