20% per month trading half of the time with a 75% winrate and under 1% drawdown with leverage. How long can this last? Should I get excited? ES
If you do not have tail risk protection, your expected value is zero. Edit: actually negative expected value. https://www.bloomberg.com/news/videos/2016-05-12/nassim-taleb-on-the-importance-of-probability
I wrote this system using finance.yahoo.com delayed charts. My broker is Tradovate. Their commission is $1.12RT "all in". I trade about 20RT's per month (no holds into the next session). This is keeping it simple enough and allows me to work full time. I do not have any aspirations to quit working and will probably work until I die. This system trades the Micro Nasdaq Futures (MNQ) using a daily loss limit of 7.5% (not local, but server based). I trade the Nasdaq as it seems to give the best bang for the buck. This directional timing model uses a snapshot of three technical indicators at the open of the day-session (8:30cst) to develop the bias for the day (long or short). The three indicators calculate 24hr. data. The system trades the Nasdaq Micro Futures (MNQ) daily with two pre-entered time released orders (8:30cst & 15:00cst). These times are the open and close of the Nasdaq Cash Index. In the AM before work I take a look at the position of the three indies. There can be no trade unless the three indies agree strongly. At the time of the writing I have a 75% winrate and I trade about half of the trading days possible. I make 20% per month with under a 1% Drawdown.
Now that I’ve read your strategy, it entails tail risk. How do you manage this? Edit: It also assumes continuous time trading, yielding gap risk.
Haven't you been posting here and experimenting with different trading systems for like 15-20 years? If so, what makes you think it's different this time?
I am not sure what you mean. I do not hold into the next session and I do not trade every day. It is not necessary to trade all the time. I have not curve fitted this thing either...I just simply wait for the right day to trade. Es
Your assuming that gap risk only happens in overnight sessions. Market can gap down mid day, towards the beginning or end of session. Just because your data doesn’t take this into account doesn’t mean it will not happen to you in the near future or distant future or never. But it’s there.. the longer your exposed, the more likely this will come and take you out of a lot of gains you made up to that point. And if you ignore such a risk maybe due to its unlikelihood, just know that your statistical expectation is zero and that law of large numbers will take you out.