Thoughts on "The A to Z of trading career - musings of a professional trader !!"

[mindgames]

MG - we have...time frame

thanks madan. reason i went into the nos. was that i became curious whether one could really design systems with such low risk but high returns – evidently i was comparing apples with oranges. perhaps such impulsiveness stems from lack of conviction which in turn is owing to lack of experience.

btw, thought i would bring this up. since backtest results/ system triggers are also impacted by rollover of contracts (if holding overnight) - do you use any logic to adjust the futures prices series?

 

[lemondew]

Thanks for the posts.

I have settled something like this
Extended wins: Continue trading: track system performance: Analyse
Small losses: Continue trading: track system performance:Analyse
Extended losses: Stop trading: track system performance: analyse
If system performance improves: resume trading.

However tracking system performance and analyzing is always there for beginers. If system appears good enough one should always try to make money out of it.

@copypasteaee,

1. Thats why I said in my previous post that I dont prefer Averaging, the best we can conclude from the information you have provided is that your system is consistent on average over 8 yrs. It does not tell us the trend whether your system is improving or deteriorating or linearly consistent.

2. Hence I prefer to use the total return:max drawdown over rolling measurement period to analyze the system performance and trend. I use 1 yr measurement period, however one can use any period such as week,month,quarterly etc. This is how I analyse my system performance:
2012: 24.29%:5.4% -> 4.5:1 -> Ok as per system backtesting results
2013: 21.08%:6:2% -> 3.4:1 -> Ok, Acceptable, Mark as Worst Return/Drawdown year.
2014: 202.44%:8.6% -> 23.5:1 -> Very Good, Analysis market favorable for trend following, Mark this as best Year
2015: 51.56%:7.3% -> 7:1 -> Ok Acceptable, continue with same system.
2016: 19.29%:20.2% -> 1:1 -> Red Flag, Analysis: Market was very volatile for trend following. Not much can be done, no change needed continue with the same system. Mark this as the new worst year.
2017: 111.98:6.8% -> 16.5:1 -> Good Result so far. No changes needed in system.

3. The total return:max drawdown values just helps me to analyze how my system is performing over the years, has it lost the edge, if yes does it suggest abandoning the system.

4. As I had already mentioned in my earlier post, Risk:Reward/Money management is dependent on your system, if you need to improve your system then you need to run a backtest on some new ideas on your system with various risk values and check its performance. Since you have been using your system for 8 years, I believe you would have definetely backtested your system and you were comfortable with the risk:reward of your system which is giving you on average 2.5:1 total return to max drawdown.

I am getting a feeling that people are just reading the posts for time pass without analyzing or putting the effort to test and check its validity. Without putting some efforts I am not sure if anyone is actually getting some value from these posts and also there is no point for me putting the efforts to write such length posts..

 

[ncube]

No one is here for time pass, everyone is here for learning. Many times I don't have any idea about the matter on which discussion is going on so I just read quietly and try to grasp.

@copypasteaee , My comment was in general and not directed to you.Sorry if you felt it that way...your question is perfectly valid and based on experience and real concern and thats why I answered it in detail. My intension was to convey that readers should not blindly believe what is being posted here, even my observations could be wrong and hence they should first test and verify the points and then come forward and share their experiences by asking right questions and make the discussions more meaningful and beneficial for all. When one applies the learnings they will start seeing things from new perspectives and help them perform better. However I am not sure if my posts are actually helping anyone as its becoming more of an intrusion and hence I need to take a back seat and let Madan drive the discussions....

 

[lemondew]

Ncube

Like the idea of thinking y system worked. Planning to now check along lines y it works and when it doesn't.

 

[copypasteaee]

@copypasteaee , My comment was in general and not directed to you.Sorry if you felt it that way...your question is perfectly valid and based on experience and real concern and thats why I answered it in detail. My intension was to convey that readers should not blindly believe what is being posted here, even my observations could be wrong and hence they should first test and verify the points and then come forward and share their experiences by asking right questions and make the discussions more meaningful and beneficial for all. When one applies the learnings they will start seeing things from new perspectives and help them perform better. However I am not sure if my posts are actually helping anyone as its becoming more of an intrusion and hence I need to take a back seat and let Madan drive the discussions....

Didn't take your post negatively bhai. Carry on good job. Your posts are very informative.

 

[Nikhil Dogra]

I quantified my scalping trades & i have reduced frequency of scalps to 10-15 trades/day from 45-50 trades/day straight away!

 

[copypasteaee]

What I have learnt so far is we can not grab money from markets. If markets are trending it's giving money else its giving us draw down. So if one month or year is bad returns wise, only thing we can introspect is if we have followed system religiously or not. Starting doubting the well back tested system will throw is out of game.

One more thing I read here in this thread is that if a system is working on a script then it should work on other scripts as well. A slight change what I see here is that the scripts should have same beta value for same system to work on them. A system which is profitable on Bitcoin may not be successful on nifty or vice versa. Their moves are different.

 

[madank]

This gives an impression that our system is deteriorating instead its quite the opposite our system is not only performing but also very consistent. Hence if we need to get a realistic picture then we need to take Average Returns: Average Max Drawdown. i.e in the above example, 816:116 --> Ratio 7:1. However this ratio will not remain same once the account size reaches its limit.

Yes - average returns: average max DD can also be a way to measure. I just gave an idea to quantify a system based on two parameters and the ease with which a trader can compound his account. I see that you got the kernel of my post ncube = Great job J I wanted the readers to think in that bearing and you went one step further to come up with a better recipe

btw, thought i would bring this up. since backtest results/ system triggers are also impacted by rollover of contracts (if holding overnight) - do you use any logic to adjust the futures prices series?

MG - I always want to backtest like the way we trade our live account. When trading for real, I goto the next contract 1 day before expiry. As a result, while backtesting, I backtest only the specific contract, close out the position and open a new position in the new contract (at the same time) one day before expiry. By doing this way, I mimic the real world scenario to the best of our awareness (same number of trades) but still there will be a loss/gain couple of points due to the closing/opening position time difference(like 60 seconds difference as I had to do that manually). This will also take care of the premium points difference between current and next contract.

If system appears good enough one should always try to make money out of it.

That’s the bottom line right? The intention of the post was to empower readers to think in the direction of stopping the urge to ‘improve’ the system. This incessant urge to 'better' the system has to stop !!

@copypasteaee , My comment was in general and not directed to you.Sorry if you felt it that way...your question is perfectly valid and based on experience and real concern and thats why I answered it in detail. My intension was to convey that readers should not blindly believe what is being posted here, even my observations could be wrong and hence they should first test and verify the points and then come forward and share their experiences by asking right questions and make the discussions more meaningful and beneficial for all. When one applies the learnings they will start seeing things from new perspectives and help them perform better. However I am not sure if my posts are actually helping anyone as its becoming more of an intrusion and hence I need to take a back seat and let Madan drive the discussions...

.

@ncube – please continue posting your views and I see that you have fondness for mathematical thinking (which can be a huge positive in trading). These are the kind of deliberations I wanted to see in this thread. Otherwise, it will be like the members only thread (boring monologue) Trust me - am no more proficient in trading than you guys It’s actually the other way around – I have no skills in programming/coding systems, don’t follow fundamentals and abhor stock market news/channels and do the same boring stuff (entry/exit) everyday. Rather, my objective here is to kindle thought processes and am totally enjoying/learning from these discussions.

I quantified my scalping trades & i have reduced frequency of scalps to 10-15 trades/day from 45-50 trades/day straight away!

Awesome Nikhil – way to go. Happy to read this

What I have learnt so far is we can not grab money from markets. If markets are trending it's giving money else its giving us draw down. So if one month or year is bad returns wise, only thing we can introspect is if we have followed system religiously or not. Starting doubting the well back tested system will throw is out of game.

One more thing I read here in this thread is that if a system is working on a script then it should work on other scripts as well. A slight change what I see here is that the scripts should have same beta value for same system to work on them. A system which is profitable on Bitcoin may not be successful on nifty or vice versa. Their moves are different.

Yes – market will give what it wants. It does not have any obligation to give what we want or goto our target. Another contentious topic is in the list – fixed target vs trailing stoploss. My belief lies with the latter but fixed targets work for many.

I enunciated the second point to talk about the robustness of a trading system. You are absolutely right – high beta instrument system will not go well with low beta instrument but nevertheless, it should not make our account go belly up. A good sailor (trader) and a decent boat(system) can take the passengers ashore ashore (maybe not with desired speed) safely irrespective of the oar(instrument) used (as his boat was constructed on sound floating principles). Of course, much of the safe return depends on the sailor(trader) too

Question to all - It has been 6 weeks since i started posting these series of posts and guess its time to ask these questions -

1. Does the members only thread posts adding any value to your trading thought process? Any feedback about it?

2. Anything to change/add in the way it is being written there (elaborate with reasons pls)?

3. Any feedback about this thread?

Happy trading !!

 

[XRAY27]

Question to all - It has been 6 weeks since i started posting these series of posts and guess its time to ask these questions -

1. Does the members only thread posts adding any value to your trading thought process? Any feedback about it?

2. Anything to change/add in the way it is being written there (elaborate with reasons pls)?

3. Any feedback about this thread?

Happy trading !!

1. Yes !!! adding great value to me ,preparing notes on important points which are relevant to my trading !!

2. Nothing in particular !!!

3. Best for people who are in full time trading !!! keep it up !! sir !!!
Special thanks to ncube for his valuable contributions !!!

 

[Vipul_84]

I am planning OTM options (trend following buy CE or PE) for swing trade. Tradeoff I see here is max DD is well in control but theta is introduced. Have any one of you seen professional profitable traders using OTM options for swing trades? Or it's just a fancy thought?