I have been running some analysis on the ability to average up or double down on strategy performance. In other words, if my strategy performes well one day, then I should have increased confidence in it the following day. Other varients I have been looking at include: -If strategy performs poorly, then more likely to have a positive day following -more granular: trade live after each losing paper trade -or reverse- trade live after each winning trade. The whole concept is that the strategy wins more often than it loses, but does not win every trade or every day and maybe there is a way to increase the probability of which days will be more profitable than others. Either: a negative day(or trade) is more likely followed by a positive day(or trade), or a positive day or trade is more likely to occure after a positive day or trade. Is anybody else trying to time there strategies like this and any insight you can provide to my initial thoughts? Any correlations you have found that would be insightful? Thanks
yes, I have tried just about everything trying to turn the market into a roulette table and roulette strategy into an ATM. My advice? Paper trade until you have a winning day. Then paper trade until you have a losing day. I lost 30% of my account in about 3 hours trading one of those crazy schemes you are talking about. There are many mathematicians who will explain to you "gamblers fallacy" and "positive expectancy". I would not bet on the chop, even though most of the time the market chops. Learn how to manage your money so you can survive the chop and have plenty left when the trend is your friend.
Thanks, it seems to me that the most difficult part of trading is all centered in market behavior of each day. Discipline, strategy, direction indication - all of these can be built into a system. But still, the system is only going to work under certain market conditions/behaviors, which as you point out as well as many recent threads about predicting trend days, cannot be predicted. My analysis shows most effective when looking at individual trades. It seems more likely for these to clump together into strings of winners and losers - which really represents market behavior for that day in a sorts. Any other thoughts?
well, make up your mind. If it loses on Monday is it more likely to win on Tuesday? or If it wins on Monday it will win on Tuesday? I had a strategy that had a hit rate of 50%. I tried every which way to make it profitable, including starting out medium, and trading small after long winning streaks, or trading big after long losing streaks. Everybody and his brother tried to tell me why the very foundation of my strategy was weak, but I wouldn't listen. Had to find out for myself. Very few win, most lose. Stay in that paper account for a year and you will be one of the few who broke even. Not bad for a start. I never had a major breakthrough, just kept tweaking day by day until finally I was doing exactly the opposite of what I started out doing, and that has been very profitable. Main thing is to set yourself up so you can endure very bad luck. And I mean very, very bad unheard of bad luck.
no, I mean when you buy it goes down and when you sell it goes up, over and over and over again all while dumbasses are telling you there is something wrong with your entries.
otherwise, to answer your question honestly, Yes, size is critical to my trading, and often that means increasing or decreasing the basic starting unit. I hesitate to even mention it because it brings out all the Martingale critics who think along very simple normal trading methods. I don't try to guess what the market is going to do and then add size if I am wrong, although sometimes that is exactly what happens. I am constantly adding and decreasing size on individual positions, sometimes piling on to winners, and always decreasing losers, but sometimes adding to those very small losers. My losers eventually become small enough that I can let them move against me to infinity with no stops. And even a very small position on the wrong side of a strong trend can amount to a sizable loss. The rules are pretty simple Number 1 is the most important 1. NEVER TAKE A PROFIT and that is the rule that most of us break, oh well, no one is perfect the others have been written about many times in thousands of trading books 2. Don't close out your winners and hang on to your losers hoping the market will turn in your favor and make you a winner. Nothing more depressing than looking at your portfolio and all of them are losers. 3. etc I have been trading nothing but forex for the last 5 years. 4 of them were profitable, although one of them I could have made more money just buying QQQ on Jan 1 and turning off the computer until Dec 31. I have been underwater almost all of 2014, to the point where on a bad night I questioned whether my strategy was even viable. Ii I quit right now today, my account will be less than 200% but more than 100% where it was Jan 1. And all that from following some simple rules, and increasing size at the exact time I accidently got long at the bottom of a strong never look back trend, and also accidently getting short at the top of an equally strong trend. so yes, size does matter, but I tried what you are talking about and that is a dead end street, but it is a good place to start in a paper account better effort is spent learning how to use size to protect you when you are wrong
well, you are an experienced trader, you tell me. If you never take a loss, will it evaporate or turn into a profit?
My experience is that the market maker will maximise their profit and minimise their loss. That means they will evaporate the profit then turn it into a loss, then into a bigger loss, until the money is theirs. So my counter measure is to take the profit.