Prudent Risk Management + No Edge = Positive Expectancy??

Discussion in 'Risk Management' started by ironchef, Nov 14, 2023.

  1. zghorner

    zghorner

    profit factor?

    Have the past 7 weeks been traded in a live account?
     
    #11     Nov 14, 2023
    MarkBrown likes this.
  2. Zwaen

    Zwaen

    Just a ma crossover. Ma 200, or 180, 220, 223 etc it doesn't really matter. I think every line is possible. It's the risk and monymanagement which can make or break it. And being creative in how to make the losers less losers.
    Just my experience and this is position trading, larger timeframes only.
     
    Last edited: Nov 14, 2023
    #12     Nov 14, 2023
  3. hilmy83

    hilmy83

    EV is 1.11

    If you can automate it, you'd be good.
     
    #13     Nov 14, 2023
  4. Zwaen

    Zwaen

    I think you could also look at the homo- or heteroscedasticity of your returns, it could reveal interesting things on how to make your method more adaptable (if you are interested)
     
    #14     Nov 14, 2023
  5. M.W.

    M.W.

    You need to analyze in more detail where the gains originate from. Even with a 50/50 win/loss ratio if your gains on average exceed the average loss then you are ahead. But this has to originate from somewhere. If you don't have any edge whatsoever then as you hinted at, your recent profile is purely random. But if your profitable positions for whatever reason run further while cutting losses early this could be because of some sort of edge you are exploiting, even unknowingly. Note here that risk management (the fact you decide to cut losses early and let gain run) is not an edge in itself ever. I strongly suggest you run more extensive back tests to investigate.

    For example, if the market exhibits momentum with statistical relevance and you are able to exploit such moment (meaning you got an edge) then you can figure out at what level you cut losses and by how much you let profitable positions run. But you need that edge. Without edge you got nothing. Not in trading, not in gambling.

     
    #15     Nov 14, 2023
    ironchef likes this.
  6. hilmy83

    hilmy83

    YOu know what I learned after testing out my bot using all different settings:
    • Averaging in will kill you eventually
    • You can make random entry work if have multiple entry tries and you close your trade at the end of of the day.
    • OR trading is the purest trading method known to mankind
     
    #16     Nov 14, 2023
    zghorner likes this.
  7. schizo

    schizo

    POSITIVELY YES! BUT WITH AN EDGE, EVEN BIGGER YES!!
     
    #17     Nov 14, 2023
    ironchef likes this.
  8. Zwaen

    Zwaen

    Markets in itself contain edges, distributions are skewed
     
    #18     Nov 14, 2023
  9. ironchef

    ironchef

    Live, small size.
     
    #19     Nov 14, 2023
    zghorner likes this.
  10. ironchef

    ironchef

    Thanks. That makes me feel better. But how do I know it is not random due to small sample size? Sometimes when on a roll I made good money playing the roulette betting on red.
     
    #20     Nov 14, 2023