Professional Analysis of an MCX Gold Trading System with Positive Expectancy.

[kiran_thiru]

dear GG sir, great analysis from you about how to trade with sl by following trend.

previously i made losses from option trading. now currently i build my own systems (2 sys) with set of rules. to get confidence on my system now i trade with little capital in live on equity and silver.

i uses a mt4 indicator (kauffman) for trade signal and 54dma for trend in 5 min time frame. i took trades only on trend. if signal give against trend i ignore that. and sl was as indicator and dma what was near and close of candle .
and target divide as 3 parts-- 1st @ 0.35%, 2nd @ 0.80%. rest as tsl. i never took trade if sl and trigger price difference more than 0.35 %.

now from past 2 trading days i am also testing price breakout trading in 15 min chart with out following trend. when price break any candle Hi/Low i placed trade order above 0.05%, and put sl order as previous candle Low/Hi with difference of 0.05%. if trade was going i change my tsl according to following candle. in this there is no target but i continue to change tsl. after close of trade. i will wait next candle close for trade.

both sys giving fine results (losses and profits), but i can't confirm which i want to follow.

these are my rules currently following. can you give any suggestions or changes to me.

 

[Happy_Singh]

For Amibroker users AFL to get R-Multiple in the custom back test report.

//Code for R Multiple
SetCustomBacktestProc(""); 
if( Status("action") == actionPortfolio ) 
{ 
	bo = GetBacktesterObject(); 
	bo.Backtest(1); 
	st  = bo.GetPerformanceStats(0); 
	Risk= st.GetValue("LosersAvgLoss"); 
	for( trade = bo.GetFirstTrade(); trade; trade = bo.GetNextTrade() ) 
	{ 
		RMultiple = -trade.GetProfit()/Risk; 
		trade.AddCustomMetric("Avg_Risk", -Risk); 
		trade.AddCustomMetric("R-Multiple", RMultiple ); 
	} 
	bo.ListTrades(); 
} 
// your trading system here

Happy

 

[augubhai]

So, it seems this system has no fixed 'R' value compared to the previous hypothetical one.

What will you do in this kind of system where you don't know your risk, your 'R' value? How do you determine at the first trade, how much to risk from your capital?

This is exactly what I was trying to point out. The results of a trend based system usually have a fat tailed distribution. Applying classical (Gaussian) statistics to this distribution may not be correct. Taleb's Black Swan book is mostly about this fallacy. While most extreme results in a trend following system might be positive, there is a good chance of getting a negative extreme result. (By good chance, I mean a probability much greater than what could be expected for a normal or Gaussian distribution).

The minimum sample size of 30 is recommended for normal (Gaussian) distribution, and is not applicable in this case.

Just trying to point this out because I thought u might be a technical person with interest in statistics...

The most generalized method to determine your 'R' is the average of all losses over many samples of trades. Statistically at least 30 trades as bare minimum. The more the better. A good value is 100 trades. So, in such cases, before you put real money, either you have to back-test or do some real market demo-test to gather at least 30 trade data.

So let's do a little calculation for the MCX GOLD Trading System. We have 65 trades at hand.

 

[cloudTrader]

Hi,

Reason for giving a home-task is that people should have willingness to study something seriously.

You can send your home-task to

Gold.is.Future (at) gmail. com

May God Bless all of us.

Thanks , this is good .

Regards.

 

[GuluGulu]

and sl was as indicator and dma what was near and close of candle .
and target divide as 3 parts-- 1st @ 0.35%, 2nd @ 0.80%. rest as tsl.

Good method but have you measured your winning percentage? You take profits at 3 parts, say with 1-lot at each level. What would you do if all your 3-lots hits SL several times? This kind of profit booking is not healthy in the long run. I shall explain this in detail later. Although most of the people and professionals does this without knowing the danger in it.

Instead, backtest which level has better chance of winning each time and take profit and SL with those two levels with fixed-lot.

Later you will calculate and understand yourself which method to choose from your two-methods.

 

[GuluGulu]

While most extreme results in a trend following system might be positive, there is a good chance of getting a negative extreme result.

Thank you for raising this point and I am very much aware of this. I shall explain this point with details later in this thread. This is very important in successful of any such trading system.

 

[GuluGulu]

For Amibroker users AFL to get R-Multiple in the custom back test report.

//Code for R Multiple
SetCustomBacktestProc(""); 
if( Status("action") == actionPortfolio ) 
{ 
	bo = GetBacktesterObject(); 
	bo.Backtest(1); 
	st  = bo.GetPerformanceStats(0); 
	Risk= st.GetValue("LosersAvgLoss"); 
	for( trade = bo.GetFirstTrade(); trade; trade = bo.GetNextTrade() ) 
	{ 
		RMultiple = -trade.GetProfit()/Risk; 
		trade.AddCustomMetric("Avg_Risk", -Risk); 
		trade.AddCustomMetric("R-Multiple", RMultiple ); 
	} 
	bo.ListTrades(); 
} 
// your trading system here

Happy

Happy - Thank you very much for providing this snippet of code.

 

[Happy_Singh]

Hello

No Updates???


Happy

 

[GuluGulu]

Hello

No Updates???


Happy

I needed at least 10 people to do the homework and send to me. Only 2 people done it including you.

People like to get easy money so most of them don't try to understand in deep how things work; instead they want some kind of spoon feeding.

I shall be waiting for 8 more people to complete the 'R-Multiple' calculation. You know Happy, this is very easy to do with an excel sheet. Still people don't want to do.

So why should I waste my time and energy - you tell me.

 

[Happy_Singh]

I needed at least 10 people to do the homework and send to me. Only 2 people done it including you.

People like to get easy money so most of them don't try to understand in deep how things work; instead they want some kind of spoon feeding.

I shall be waiting for 8 more people to complete the 'R-Multiple' calculation. You know Happy, this is very easy to do with an excel sheet. Still people don't want to do.

So why should I waste my time and energy - you tell me.

Hello Gulu

I am no one to tell anyone anything, knowing this is what keeps me Happy But if you seriously want to wait for 8 more people, we might be just waiting for ever. Anyway, thanks for letting us know that you need minimum 10 people to actively participate before things can move forward.


Happy