500 points, is possible this past week. -- This was a rather unique, historic week in the market. It all depends on your account size and/or risk level you're willing to take and/or your timing capabilities and acct management and etc etc; 1,000 points, and more -- it's crazy what you can make if you're an ace who possesses the variables above,
Week Feb 12th – Feb 16th One step forward, one step back again. The last six weeks have alternated between positive and negative, so P & L curve is spinning its wheels right now. 1 wining day, 4 losing days. 14 winning trades, 23 losing trades with 15 full stop losses. 3 trades not taken, I put the NQ trade on hold Wed – Fri. I halted the NQ trade as the volatility increase requires a different trade than what I have developed. I have analyzed a couple different options, but not sure whether I’ll put on a different trade or not next week. I also am not satisfied with the results trading HE and LE using the 8:35 AM entry time, so I’ll look to try a different approach to reduce opening volatility in those instruments while trying to maintain the models expected P & L at the 8:30 AM opening trade. NAV: -$3,513.95 Adherence to outlined trading strategy: 100% as I considered taking off the NQ trades as a conscience decision.
When did you make your last equity High Water Mark (HWM)? On the weekly data you provide it looks like it was made back in the middle of January. But the daily data maybe different. And the equity curve has have been grinding every week since then trying to recover. How does this drawdown compare to those in the backtest? Dec 18-22 2017 -3501.27 Dec 26-29 2017 12428.24 Jan 02-05 2018 6226.05 Jan 08-12 2018 +148.25 <- Weekly HWM made here Jan 15-19 2018 -4623.45 Jan 22-26 2018 3690.35 Jan 29-F2 2018 -2556.49 Feb 05-09 2018 3127.65 Feb 12-16 2018 -3,513.95
The HWM was made on Jan. 11th. Backtest shows an average of three long term equity curve "grinds" per year each one lasting 4 to 6 weeks. With backtest being optimal results I expect actual trading grinds will be a little deeper and possibly longer.
Midwestern Trader, From your postings you seem very systematic in your approach to trading, may I ask why the allowance for a "$25K drawdown bust out event". Is it some sort of 2.5 times previous historic drawdown number? Is it just a random amount you are willing to lose for entertainment purposes? I am asking because your style of trading a basket of systems is the way I have always traded and it strikes me as odd that you wouldn't be removing individual systems from the basket if they reach some predetermined drawdown amount allowing the basket to continue trading. The removed individual component can always be placed in monitor mode to see if it continues its death spiral or recovers quickly from a newly acceptable total drawdown number. As per one of your last posts I notice you have done this with the NQ component of your basket calling it a 'conscience decision'. Did it break its previous historic DD amounts by 2.5 times or did it have more losing trades in a row than historically noted? I very much appreciate you taking the time to post your trading journal and look forward to your answers. They
Yes, the $25K figure is about 2.5 the historic, maximum drawdown, so I chose that as it would be a negative number clearly invalidating my approach. I have done some thinking along these lines to pull individual instruments or replace them, but not yet put anything into practice. For instance I would like to include on Soft (KC, SB, CC) or Grain (ZW, ZS) in the diversified futures basket. I'm sure there are times when it may be more advantageous to trade one of these products over another in terms of having greater trend velocity potential, etc. KC right now is languishing near what looks like multi year low levels, so my guess it has limited downside potential. Whereas CC might have more two way potential based on its chart. My strategy signals don't care which way a trend occurs, but it typically requires some velocity up or down to maximize profitability. The decision to halt NQ was partially due to the number of consecutive losers, but probably more with the realization that this equity volatility event is rather unique given the market's behavior the past five years. My strategy signals were not designed for this type of volatility, so I figure they likely are not worth acting on as they currently work. I would like each trade in the basket to have a stop loss between -$500 to -$1,000 so no single instrument makes up a majority of the loss potential each day. Running my signal variants over the past couple weeks in NQ shows a -100 to -150 NQ stop as optimal, but I do not want one instrument risking a -$2,000 to -$3,000 draw. I have chosen to select a different timeframe to enter the NQ trade this week and keep the same stop loss ratio in line with the other instruments. Instead of a pre-market trade open, I'm waiting until mid-morning to open a position to help avoid a lot of the two sided action currently occurring pre-market and in early regular trading hours. I'll use this later open few a few weeks and see what the results are. In essence I'm really a beginner at trading most of these instruments and certainly a beginner in trading a diversified basket each day. I feel there is no better learning experience than by actually doing, so I'll risk what I feel I can risk to learn and hopefully improve. The thought behind the public journal was to bring in experiences of others to provide perspective and new thoughts. I suspect most other people that trade are in my situation where I have no friends able to help with the challenge of trading successfully. The drawback from reading the public ET journals is there are people that seem to enjoy seeing others fail and offer nothing other than general skepticism for commentary or the all-star trolls who just instigate against everyone. It is easy enough to use the ignore function on the trolls though, so at least I don't have to see their nonsense. In the end I'm willing to take the slings and arrows from the negative naysayers in an attempt to gain a few nuggets of useful information. Thanks for your post.
I thought of PMing you my question but then I thought your answer would be good for others looking to trade this way since you already exhibited a willingness to share this foray into a diversified basket, whatever the result. Not sure if my method of approaching a basket of systems will help with your learning but I'll throw it out there for others as well. 1. Develop systems - Ideal systems are those with the shortest drawdown recovery time. I am not a fan of back testing to far into the past nor do I believe that a system will last for very long into the future, the longest I have experienced was 1.5 years. (For back testing I'll take data from the last year or two and parse out 150 days - 30 days open on lows close on highs, 30 days open on highs close on lows, 30 A shaped days, 30 V shaped days and 30 open and close on same price days. 2. Forward testing for a month. 3. Begin live trading and hold breath until 1.5 times total historic drawdown of individual systems is achieved. If a system hits the its 1.5 DD level before profiting that amount it goes into monitor mode eventually being reintroduced with a new DD level or being replaced with a new system. I am always watching for any deviation from original testing results, primarily through increased consecutive loses, increased size of loss (I don't use fixed stops) and any change in the historic MFE/MAE from signal, both volume and time based. I have been fortunate trading this way but I have also experienced that when the entire basket eventually dies I have sometimes suffered traders block - not being able to come up with new profitable systems. When this happens I generally take a year or two off from trading and eventually some new trade logic idea comes and I test it out. If it proves itself the process begins again. I hope this is a helpful nugget. They
I agree that this is a good way of learning. On the condition that you are able to take a step back and analyse objectively what actions you've taken and what the results were. On the other hand, there are people who can't recognise the forest when they are surrounded by trees. For them would this approach not work.
Thought I would post a sample of a simple tool I use when trying to construct a basket of futures trading strategies. This simple visuals helps me see the ebb and flow of what I am getting into from back test results. The below is an Excel screen grab showing the back test results of the each instrument and the combined daily expected P & L. Some might find this useful as it is simple to create. Column Descriptions Major Reports - Major Economic reports released that day. Date - Date -400 or More Loss Recovery Days - Total number of trading days it took to recover major draw downs highlighted in yellow of the 8 Trade Total column. -400 or More Loss Runs - Total of a major drawn down run. -400 ($-4,000) or more for this basket. CL Trade through HE Trade Columns - The daily trade result for each instrument. Note figures are in 10s, so 80 is $800, -15 is $-150, etc. They are rounded to nearest 10 for simplicity. Comiss and Slip - Additional slippage and expected commission cost. 8 Trade Total - Total expected P & L for all 8 futures trades that day. Weekly Total - weekly total Monthly Total - monthly total Best Monthly Win Streak Total - Most consecutive positive days P & L total for the month. Pink highlight represents when any single instrument hits a losing streak of 5 consecutive days or more. Yellow highlight represents when the entire basket is in a major draw down run. -400 (-$4000) or more for this basket. Bold black result in the 8 Trade Total is the highest daily P & L result for each month.