When it comes to trading another aspect of utmost importance is purely psychological in its nature. Psychology refers to the way every trader perceives what is happening in the financial markets and how this perception can be influenced by emotions and one’s susceptibility to different biases.
Are there some conclusions possible? 1. We all trade using different approaches 2. Multiple different approaches can be made to work 3. Mostly we found a successful approach after trying multiple other approaches which we thought would work for us - and which didn't 4. Most of the successful approaches we're now using are ones which we either didn't know about when we started out or which we consciously believed would not work for us If accepted, what do these conclusions mean for new and struggling traders? - 1. Non-trading qualifications, success and learned tendencies are misleading? 1. The approach is not important? 2. Different approaches are not comparable using data like draw-down, r:r, win rate, % profitability etc.? 3. Mismatched personality type versus approach type will predict failure?
----------------------------------------------------------------------------------------------- I started trading options the first trading day of January 1998. I learned to create programmed mathematical mechanical trading systems. After several years I discovered the key to success for each system, was "forward testing each system for 1 year minimum." What I mean by this is: Lets say your system generates a trades signal for tomorrow, including the exact BL (Buy Limit) Price, SL (Sell Limit) Price & STP (Stop) Price. Computer Output Example: Signal Date: 01-23-2018 SYSTEM: M25 CALL=40-66-80=L5 PUT=10-10-10=L2 CODE: UA5W2=WP-2 RELIABILITY 6/7 (86%) OUTPUT: DIA FEB258P B1=1.35 SL=1.75 / B2=1.10 SL=1.55 STP=0.90 If I was simply forward testing the above signal, I would have to follow it tomorrow with a Real Time Live 1 minute chart to make sure B1=1.35 occurred. If it did occur, I would then bring up a Time and Sales Report to make sure an Ask Price of 1.35 was available. Then after seeing 1.35 Ask on the T & S Report, I am now watching for SL=1.75 occur on the chart and confirm it with the T & S Report. If the option tanks after B1 (BUY 1)=1.35, Then I have to watch for B2 (BUY 2)=1.10 with the Option Charts and T & S Report. After the B2=1.10 Ask occurs on the Option Chart & T & S Report, again the same routine of watching the Option Chart & T & S Report for either the new Sell Limit of 1.55 or the Stop of 0.90. This can go on day after day for a Time Limit of 4 days. Its time consuming and a pain to test that way, but in the couple of decades I have been doing this, its proven to be 99% accurate. On the other hand I have found Back Testing to be about 70% to 75% accurate. That means a Back Tested system generating a W/L of 90%, is actually about 63% to 67% accurate. There is simply too many unknowns in Back Tested data!
Wow, lots of work indeed. May I ask why not just try trade live with one contract instead(maybe under separate account)? Were you testing more than two strategies/variations at a time? If so, how did you decide to give up on strategy or did you always give it about a year? Appreciate you sharing your experience.
-------------------------------------------------------------------------------------------------- If I get 3 months of success forward testing I then start using 1 cash contract to continue forward testing. If 6 months successful I go to 2 contracts, 9 months successful 3 contracts and 12 months successful I go to 5 contracts. I keep adding in an additional contract every few months of successful testing and trading until I hit my comfortable limit. I have 6 different mathematical mechanical systems that are computer programmed since 2004-2005. Four of the six systems continue to work well in various market conditions.....i..e.....uptrending....downtrending...sideways...choppy, with each having its own particular strength in different market condtions. Those 4 are my bread and butter. 2 of the 6 systems have stopped working and I no longer use them. I am currently forward testing 1 additional system that I started in October 2017. It is designed specifically for this current bull market which has made getting filled at a discount to the closing price difficult.
Please stop pasting in, unaccredited, chunks of text from articles found on the web, and trying to pass them off as your own "forum posts". (If you think they're valuable, relevant and worth sharing here, there's nothing wrong with doing so with a link and an accredited quotation. That's "fair usage" for the purpose of commenting, and isn't legally a breach of copyright, but what you're doing is.)
---------------------------------------------------------------------------------------------------- Following through with my forward testing example from last night's signal of my newest system which began on Oct-2017: This latest system has been successful for over 3 months, so that means I go from tracking the Real Time 1 Minute option charts and Time and Sales Reports, to actually forward testing with 1 contract (as explained in my second post above). I initially set up a bracket order for BL=1.35 SL=1.75 STP=0.90 and wait at least 15 minutes after the opening to press transmit (on some odd ball openings I wait 45 minutes after open to enter). When I pressed transmit the market was tanking fairly good and B1 filled at 1.34 at 9:48:59. Shortly after the option tanked to 1.22 (of course) at 10:02:47. The market started reversing and as selling increased the FEB258P rapidly increased in value in "jumps upward" and by 12:41:01 the Sell Limit of 1.75 filled at 1.77. The High Bid after my Sell Limit filled was 2.00 (of course) at 13:23:55. Note: I have been trading with I.B. since around 2000 and the wonderful thing about them is I have constantly gotten price improvement both on the Buy Limit and Sell Limit on a rapidly moving market day. In conclusion, this new system is working out well so far after 3 months and 24 days, and its even catching the intraday market reversals, like today.
I think people should use notes when they reference other sources, at least acknowledge other peoples writing skills!