Need to Regroup

Discussion in 'Trading' started by John9999, Oct 4, 2018.

  1. I have the same problem.

    ES

     
    #21     Oct 7, 2018
  2. Which timezone?

    ES

     
    #22     Oct 7, 2018
  3. EST USA
     
    #23     Oct 8, 2018
  4. ironchef

    ironchef

    In the current market? Since March 2009.

    If we have the good fortune to trade trend following, breakout, long calls, short puts.... since 2009, we all look like trading geniuses, pros. :D
     
    #24     Oct 8, 2018
    tomorton likes this.
  5. imjohn

    imjohn

    Long post - this is what I do when I have an idea for an entry signal (day trading):

    Start with a signal that you can clearly define.

    You must be able to look back over several months of charts and pinpoint the exact points you should have entered, and exactly where your initial stop should have been set. It needs to be crystal clear.

    Then, record the distance between your entry point and stop loss point, and the distance of how far the price extends beyond your entry. Also, screenshot the trade.

    Now you have some critical pieces:

    1) how big your risk is (distance between your exact entry point to where your stop is set).

    2) how far the price moved in your favor for each occurrence, before it went against you (or perhaps reached the level of another signal).

    For example,

    trade 1
    initial risk = 8 ticks
    price move = 13 ticks

    trade 2
    initial risk = 7 ticks
    price move = 4 ticks

    trade 3
    initial risk = 8 ticks
    price move = 17 ticks

    trade 4
    initial risk = 7 ticks
    price move = 3 ticks

    trade 5
    initial risk = 6 ticks
    price move = 20 ticks

    Divide number 2 by number 1 for each occurrence. Using the above examples, the maximum possible risk:reward for these trades

    trade 1 = 1.625 (13/8)
    trade 2 = .57 (4/7)
    trade 3 = 2.12 (17/8)
    trade 4 = .42 (3/7)
    trade 5 = 3.33 (20/6)

    Now determine how many trades you would have won/lost, when applying different fixed targets.

    In other words, if you applied a 2:1 target to all trades, what would be your win rate?

    For the 5 examples

    using .5:1 target, win rate is 80% (4 winners, 1 loser)
    using a 1:1 target, win rate is 60% (3 winners, 2 losers)
    using a 1.5:1 target, win rate is 60% (3 winners, 2 losers)
    using a 2:1 target, win rate is 40% (2 winners, 3 losers)
    using a 3:1 target, win rate is 20% (1 winner, 4 losers)

    Do this for a few hundred occurrences of your defined signal, or at least a 6-month period, and look for a combination of win rate and risk:reward that is profitable.

    Some entry ideas might be profitable using a 1:1 target, but would be losers if you tried to apply a 2:1 target. Also, take note of losing streaks so you're aware of potential drawdown amounts.

    If no combinations are profitable, then your signal idea does not have a positive expectancy. Try to figure out a way to filter out losers (review your screenshots for ideas), or scrap your signal idea and start over.

    If you find a signal that is profitable, then you can focus on trading setups as they occur in real time, and being a disciplined button pusher. Continue the above practice trading live, and refine if needed.

    Note: My stops/targets do vary a bit from trade-to-trade, but over many hundreds of trades, "averages" are achieved.
     
    #25     Oct 9, 2018
  6. Handle123

    Handle123

    Nothing in this detailed list do you include what price action would negate a signal, you are lacking patterns that would stop you from taking otherwise good signals. Not ever signal should be taken, in my backtesting, some signals have more than 50% losses when other patterns come into play to left of current action. It could be when you have some losses, had you read the chart better, never have taken the signals. Just my 2 cnts worth.
     
    #26     Oct 9, 2018
  7. tomorton

    tomorton


    When price is in an uptrend you should be long. You should stay long until price is more probably going to fall than rise. A moving average or two can help but are not essential.
     
    #27     Oct 9, 2018
  8. ironchef

    ironchef

    So obvious. But easier said than done sir. I still haven't figure out the timing.
     
    #28     Oct 10, 2018
  9. tomorton

    tomorton


    The timing - of entry and exit - is not the most important issue in trend-following, but if its important within the context of your strategy, risk management etc., and you cannot reckon the best timing criteria, come at it from the other direction, i.e. figure out what would be the WORST timing, and trial opposing tactics.
     
    #29     Oct 10, 2018
  10. d08

    d08

    You're using standard methods to become successful in something that requires unconventional methods. You can't be doing what all the others are trying to do.
     
    #30     Oct 10, 2018