Bakwaas Trading

augubhai

Well-Known Member
#21
Ahh ..so ZERODHA making a handsome from transactions...as their clients are all traders ...so massive income to them ....ZT is the only reason many are still with them :)

Dear augubhai,Please post this post in ZERODHA's thread.......also IMO RKSV STARTED NEST TRADER :) MEANS SAME LIKE ZT
i am not sure, but i think RKSV will charge for Nest. Let me check with them.
 

augubhai

Well-Known Member
#26
Why I do not win inspite of winning?

It is easy to find a system with +ve expectancy. When I started out with the ORB in 2008, I had determined that the system had a win % of 25%, and reward:risk ratio of 4:1 (inclusive of costs). So, a positive expectancy.

Now, the numbers may be right or wrong - but let's check if the system will work.

If I have Rs. 1,00,000 and I risk Rs. 1000 (1%) per trade. Win % in 25%, so i hope to win 1 out of every 4 trades.

So, after 20 trades (about 1 month):
I win 5 trade = + Rs. 20000 (+4000 per trade)
I lose 15 trades = - Rs. 15000 (-1000 per trade)
Net = + Rs. 5000 or 5% per month

If I risk Rs.2000 per trade, I will net 10% per month
If I risk Rs.5000 per trade, I will net 25% per month
If I risk Rs.10000 per trade, I will net 50% per month
If I risk Rs.25000 per trade, I will net 125% per month
etc, etc...

And if I risk 100% per trade, then?

This is the way I always trade, and this is why I always need to stop after sometime. This probably the most important thing that I need to take care of.

So what is the problem with this logic? What is missing? What is the optimum risk for this system? If i take the optimum risk, will it be worth trading this system at all?

Hint: http://www.sbrforum.com/betting-tools/streak-calculator/
 

augubhai

Well-Known Member
#27
Why I do not win inspite of winning?

It is easy to find a system with +ve expectancy. When I started out with the ORB in 2008, I had determined that the system had a win % of 25%, and reward:risk ratio of 4:1 (inclusive of costs). So, a positive expectancy.

Now, the numbers may be right or wrong - but let's check if the system will work.

If I have Rs. 1,00,000 and I risk Rs. 1000 (1%) per trade. Win % in 25%, so i hope to win 1 out of every 4 trades.

So, after 20 trades (about 1 month):
I win 5 trade = + Rs. 20000 (+4000 per trade)
I lose 15 trades = - Rs. 15000 (-1000 per trade)
Net = + Rs. 5000 or 5% per month

If I risk Rs.2000 per trade, I will net 10% per month
If I risk Rs.5000 per trade, I will net 25% per month
If I risk Rs.10000 per trade, I will net 50% per month
If I risk Rs.25000 per trade, I will net 125% per month
etc, etc...

And if I risk 100% per trade, then?

This is the way I always trade, and this is why I always need to stop after sometime. This probably the most important thing that I need to take care of.

So what is the problem with this logic? What is missing? What is the optimum risk for this system? If i take the optimum risk, will it be worth trading this system at all?

Hint: http://www.sbrforum.com/betting-tools/streak-calculator/
The streak calculator says that if I traded this system - with a 25% win rate - 1,00,000 times (i hope that is a large number of trades), chance that i will have a losing streak of 26 trades in 100%.

that is;
Series Length: 100,000
Streak Length: 26
Loss Probability: 75.000%
Streak Probability: 100%

If say I am comfortable with a drawdown of 25%, then I should be able to confidently risk 25%/26 - or 0.96% of my capital in each trade.

Using the same 20 trade calculation -
I win 5 trade = + Rs. 19200 (+3840 per trade)
I lose 15 trades = - Rs. 14400 (-960 per trade)
Net = + Rs. 4800 or 4.8% per month

If say I am comfortable with a drawdown of 50%, then I should be able to (less confidently) risk 50%/26 - or 1.92% of my capital in each trade, and net 9.6% per month

Now what are the risks with this logic? or how do i improve this system?
 
#28
Hello AB

Your MM Maths is Solid. Now just add a dash of psychology to it to complete the recipe :D

Create a 2 tier system for MM: Risk less from the capital and more from profits.

Your calculations show that you should risk 0.93% on every trade divide it by 2, use approx 0.5% Risk

Now make use of winning streaks, keep tab of the winning amount separately . . .

Add 5% of the winning amount to the RISK

e.g. you are using risk capital of 1L, Risk only Rs 500 on every trade

Once you have made 10K, start using Rs 500 + 500 as risk amount . . .

So this way the base capital remains safe, and the kida of taking extra risks is also satisfied.
On losing streaks when the equity dips we automatically reduce the size.

.
EDIT: the above is just some additional Maths :)

Now the Mind part:
the above system incentives winning, most of us are into it for the thrills part (though very few will admit)
Wanting to double the leverage is the carrot to make and retain that 10% and
having to use only 1/2 of your mathematically allowed leverage is the stick
 
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augubhai

Well-Known Member
#29
Hello AB

Your MM Maths is Solid. Now just add a dash of psychology to it to complete the recipe :D

Create a 2 tier system for MM: Risk less from the capital and more from profits.

Your calculations show that you should risk 0.93% on every trade divide it by 2, use approx 0.5% Risk

Now make use of winning streaks, keep tab of the winning amount separately . . .

Add 5% of it to the RISK

e.g. you are using risk capital of 1L, Risk only Rs 500 on every trade

Once you have made 10K, start using Rs 500 + 500 as risk amount . . .

So this way the base capital remains safe, and kida of taking extra risks is also satisfied.
On losing streaks when the equity dips we automatically reduce the size.

.
So, here's where the rest of the system parameters come in...

The initial SL for my ORB trades is about 35-40 points from entry. So taking risk as 40 points per trade, risk per lot is 40x50= Rs. 2000.

If I risk 0.5%, my capital should be 2000/(0.5/100) = Rs. 4,00,000 per lot

Even if I risk 1%, I need a capital layout of Rs. 2,00,000 per lot.

Here is where the major component of the system - I (or my psychology) - comes in...

margin requirements are less than Rs. 30000 per lot. And it is just not me to let the remaining Rs.1,70,000 idle per lot. I have the option of letting the remaining amount be in the bank - but if I call it my trading capital, i have a tendency of using it up on some trade of the other. So, per Rs. 2,00,000, I will try to trade 6-7 lots, and panic when the drawdown hits, and keep losing trading a system with positive expectancy!!!

How do i handle this?
 
#30
margin requirements are less than Rs. 30000 per lot. And it is just not me to let the remaining Rs.1,70,000 idle per lot. I have the option of letting the remaining amount be in the bank - but if I call it my trading capital, i have a tendency of using it up on some trade of the other. So, per Rs. 2,00,000, I will try to trade 6-7 lots, and panic when the drawdown hits, and keep losing trading a system with positive expectancy!!!

How do i handle this?
Here You have hit the nail Bang on its Head.

This game is designed so that the "AAM ADAMI" can never win, the leverage allowed is itself a V V V Big Big Big part of the Game Design


How do we handle this?


.
 

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