how do you get back trading your system?

Discussion in 'Strategy Building' started by macgibby, Oct 25, 2005.

  1. macgibby


    I have this dilemma: last 2 days I wasn't trading but when I checked my system it performed very well and had a lot of winning trades. Do I just keep trading it tomorrow or wait till my system generates couple of losses. I feel like even though I am the one who developed my system I have a hard time getting the same results.

    How do you get back trading your system if you didn't trade for couple of days?
  2. If you have to ask this, better quit all together. If not, you'll ruin yourself.
    You need MUCH more work.
  3. macgibby


    why? can you explain?
  4. If you flip a quarter 4 times in a row and it comes up heads do you expect that the next flip is more likely tails?

    Unless you have some valid reason for not trusting your system after a successful 2 day run then why wouldn't you trust it now?
  5. It depends among other things, the characteristics of your system, your capital available to trade it, etc. From prior posts of yours, you may be undercapitalized to trade this system comfortably which is very important in order to succeed.

  6. ptunic


    You should examine the dependency of your return time series. If there are statistically significant forward-tested relationships in your strategies' return set, then it is possible you could increase performance further (particularly if there is some logical reason that explains it). In other cases there is no dependency.

    In other words it completely depends on the distribution of your returns. That is why some trend-followers say it is vital to take every single trade, in cases where a large portion of the annual profit comes from a tiny number of trades. However, for a system with a smoother equity curve where gains and losses are more or less evenly distributed, it makes little to no difference.

  7. If you believed your system was good before the last couple of days, then you should just go ahead and start trading it right away without waiting. But again ask yourself what made you stop trading it??

    If you keep changing your mind about your system every time there is few good trades or few bad trades, then you're not ready to trade your system.

    Knowing that you just had few good days or few bad days with your system has NO impact at all on the next trade. The market doesn't know and doesn't care about that.
    As the erlier poster mentioned: Before you flip a coin 10 times you expect to have 5 heads and 5 tails. Once you flipped it 9 times, even if you had 9 heads on a row, you still just have 50% chance of having a tail on the next flip (basic statistics).

    Good luck
  8. macgibby


    I didn't stop trading my system because it wasn't performing , I just wasn't trading at all last two days, I was sick. And also I noticed that over last 2 years my system had maximum 5 winning trades in a row. And it just had 5 winning trades last two days. That's why I'm thinking now if I should just skip couple of trades. Of course over the long run it all doesn't mater....
  9. Ok, I see... Then I back what ptunic said.

    How many trades where generated in total the last 2 years? If you had a large number of trades then statistically your rule of "never had more than 5 successful trades on a row" might be a valid one.

    If this is the case, check how many bad trades do you usually have after the strike of 5 winning trades. That is how long I would wait before trading it again if I were you. But again this is just IMHO knowing very little about your system.

    You need to look at all your data as ptunic suggested and make your decision based on that.