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neke
Registered: Nov 2006
Posts: 1008 |
01-17-12 09:38 PM
It has been a little over two years since my cumulative equity peak. Two consecutive down years have taken a toll on my psyche. However, I am determined to right the wrongs and come back to a new equity peak. Towards the end of last year, I started a change in the parameters by which success is to be measured in my discretionary trades. Going forward I am going to watch the profit factor (PF) on my discretionary trades like a hawk. The minimum ongoing level I expect is 1.20.
Discretionary trades will be sized (higher risk for higher conviction trades) based on expected PF. High conviction (Hc) trades are those that I expect a PF of more than 2.00 (over a large sample of such trades). Medium conviction (MC) trades will have an expected PF of between 1.20 and 2.00. Low conviction (LC) trades will have expected PF of less than 1.20. If wishes were horses, I would like to see the distribution of discretionary trades below for 2012.
code:
Conviction NumberOfTrades
HC 20
MC 80
LC 320
PRIOR THREADS
2011: Rebuilding My Battered Account
Taking 410K to 4million by Year End 2010
Taking 320K to 3.5million by Year End 2009
Taking 103K to 1.2million by Year End 2008
Taking 76K to 500K by Year End (2007)
QUICK RECAP
Here is a quite recap of my past trading. Opened an account and placed my first trade with Datek Online in Dec 1999 at the height of the dotcom bubble, starting with 16K (basically my whole savings) and within 2 weeks I lost 50% of that. Through the years till Nov 2004 I lost a cummulative of 54K (account goes down, let the account idle for sometime until I can save
some more money, and then replenish, get the next drawdown, and so on). At that low point, the balance in my account was 5.3K. Every thing in the account now sprung from that balance with some additional deposits, and lots of withdrawals as follows (The figures here are for full year, and not just period covered by thread):
code:
From To StartingBalance Net P&L Return% Net Cash Movement Closing Balance
=========== =========== =============== =============== ======= ================= ==============
Nov 2004 Dec 2004 5,300 8,700 164 1,000 15,000
Jan 2005 Dec 2005 15,000 132,000 880 (12,000) 135,000
Jan 2006 Feb 28 2007 135,000 115,000 85 (174,000) 76,000
Feb 28 2007 Jan 12 2008 76,000 138,000 182 (111,000) 103,000
Jan 12 2008 Jan 11 2009 103,000 377,000 366 (160,000) 320,000
Jan 11 2009 Jan 10 2010 320,000 210,000 65 (120,000) 410,000
Jan 10 2010 Jan 9 2011 410,000 (44,000) (11) (30,000) 336,000
Jan 10 2011 Jan 17 2012 336,000 (121,271) (36) (11,000) 203,729
Notes
* Closing Balance = StartingBalance + Net P &L - Net Cash Movement
* Net Cash Movement is total of deposits less withdrawals. From Jan 2006 up, there has never been a deposit (just cash withdrawals).
* Return% is percentage based on P/L over the starting balance, with no regard to the timing of deposits or withdrawals.
* The periods listed here for 2007 onwards is from start of thread to start of next thread for completeness, including the 2 or 3 weeks before the next thread. So may differ a bit from the figures at the end of the 50-weeks of each yearly thread.
 2012start.png
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gmst
Registered: Jul 2011
Posts: 3696 |
01-17-12 09:53 PM
Good Luck! Why not eliminate LC completely ?? Have you thought about this - to somehow eliminate 320 trades of LC and in there place just increase 20 trades in MC and 5 trades in HC.
Your DD will improve dramatically and overall PF will be solid.
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d08
Registered: Aug 2008
Posts: 1369 |
01-17-12 10:07 PM
Quote from gmst:
Good Luck! Why not eliminate LC completely ?? Have you thought about this - to somehow eliminate 320 trades of LC and in there place just increase 20 trades in MC and 5 trades in HC.
Your DD will improve dramatically and overall PF will be solid.
What makes you think eliminating LC would lower the DD?
If the LC trades are not correlated with the rest, it makes absolute sense to take them.
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gmst
Registered: Jul 2011
Posts: 3696 |
01-17-12 10:13 PM
Quote from d08:
What makes you think eliminating LC would lower the DD?
If the LC trades are not correlated with the rest, it makes absolute sense to take them.
I have seen your PL in the PL thread and I think you are a systematic trader. Yes, in your world it makes sense, as the law of large numbers and uncorrelated well designed strategies will result into peaked return distributions with small 2nd, 3rd and higher moments.
However, the way Neke does discretionary trading - based on earnings news, stock intraday momentum, news driven price movement, he doesn't have well calibrated strategies with low 3rd and 4th order moments. Almost all his trades are based on his market experience, his news read and ofcourse the research he has done over the years.
What I am saying is that he doesn't trade in Lescor's way.
Given above information, the conclusion I draw is that correlation of his LC trades with MC and HC trades are random. and doing more LC trades will just lead to higher # of consecutive losing trades and thus larger DD.
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doublet83
Registered: Feb 2011
Posts: 231 |
01-17-12 10:34 PM
I commend you for keeping this journal going despite the difficult years. I also find that most of my profits come from a smaller number of high conviction trades. However, I still like doing low conviction trades because it keeps me in the game and thinking. Also because as a whole my low conviction trades are still profitable.
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Hope this year will be positive for you. Good luck !
