Chef, I just want to give you a "Bravo" for your results! I really think low risks and consistency are the keys to succeed over the long run. And 25 to 35% per year is already very good. No losing months is the most important when day trading or scalping. Next step, I guess will be to go live, then perhaps later to increase the trading size if it still make sense to you and if you still can keep the no losing months. Happy trades!
Thank you for the encouragement. Real credit goes to @volpri. I will continue the sim for another week and then go live with a small $1K-$2K account to see if the results can be duplicated. Take care.
I think a better example would be to use for an annualized, daily Sharpe ratio. https://blog.quantinsti.com/sharpe-ratio-applications-algorithmic-trading/ So, I tried this for SPY using yahoo finance adjusted close prices for SPY https://finance.yahoo.com/quote/SPY/history/ (see attached SPY.csv) and the 13-week Treasury Bill rates for the risk-free interest rate https://finance.yahoo.com/quote/^IRX/history (see attached ^IRX.csv) The interest rates are annual, so I converted these to daily values (see attached dailyIRXrates.csv). For example, from dailyIRXrates.csv, Code: 20240430,150000,0.000139918825505791 20240501,150000,0.000139970861420924 20240502,150000,0.000140100946895094 20240503,150000,0.000139788731402968 20240506,150000,0.000419190575889683 The 0.000139970861420924 interest rate for 20240501 would be multiplied by the dollar amount in an account for the interest earned for the one calendar day from 20240430 to 20240501. The 0.000419190575889683 interest rate for 20240506 would be multiplied by the dollar amount in an account for the interest earned for the three calendar days from 20230503 to 20240506. The daily return for SPY is the close price divided by the previous trading day's close price - 1. For example, from SPY.csv, Code: TICKER,DTYYYYMMDD,TIME,OPEN,HIGH,LOW,CLOSE,VOLUME,UNADJCLOSE,UNADJVOLUME SPY,20240430,150000,505.378841,506.372585,498.840000,498.840000,76998922.315630,501.98,77483600 SPY,20240501,150000,498.243557,505.010956,496.743003,497.220000,79740831.449985,500.35,80242800 I calculated the return for the trading day ending 20240501 as 497.220000 / 498.840000 - 1 == -0.0032475342795284 So, the value I used for the risk-adjusted return for 20240501 is -0.0032475342795284 - 0.000139970861420924 == -0.00338750514094932 (see attached dailyReturnsSPY.txt). The mean of the values in dailyReturnsSPY.txt is 0.00111725737937232 with a sample standard deviation of 0.0079936639876742. So, the annualized Sharpe ratio is sqrt(252) * 0.00111725737937232 / 0.0079936639876742 == 2.21874613255864 I'm not as Sharpe as I used to be, and that seems like an awfully high number. So it's possible the value is wrong.
Thanks for the help. This is way more complicated and beyond my pay grade. Maybe since they are done the same way, just comparing the relative number is sufficient? If I eyeball the volatility, SPY looks more volatile.
A relatively simple calculation would be ignore the risk-free rate of return. So an annualized Sharpe ratio to compare your results with something else (like SPY) would be Code: dailyReturn = (todayValue / previousValue) -1 annualizedSharpe = 15.8745078663875 * mean (dailyReturn values) / sampleStandardDeviation (dailyReturn values)
i did ask Brooks. scalping is only profitable if you take highest probability trades. many novices and traders erroneously believe scalping is trading for small profits. and brooks also says that if you are not yet profitable then take only H1H2 L1 L2 trades in a reasonably strong trend. these are trend continuation trades where the trend, if it exists can be reasonably expected to continue. i generally also add second entries and scalp out. failed second entries are good too after that if i get a third entry then i take that too here if the first leg is strong you can expect one more leg. these are the two simplest strategies, a novice can employ while he studies someone like @volpri or Brooks to employ more esoteric strategies.
Please explain this H1H2L1L2 trades. I never read, watch or study Brooks and don't know what you are talking about. Thanks.
hope this helps Many traders find bar counting confusing because they want it to be perfect and clear. What they don’t understand is that the purpose of the market is to create confusion. It wants to spend as much time as possible at prices where both the bulls and bears feel that the price is fair. This facilitates trading, which is the reason why the market was created. The basic idea of these flags is that the market often makes a couple attempts to reverse a trend, which creates two legs. If those two reversals attempts fail, the market usually tries to go in the other direction. Since the other direction is a trend and it is now resuming, the countertrend traders know they are in trouble and will be quick to exit once that second attempt fails. They will also not be eager to try again. The result is a high probability continuation pattern trade that usually moves quickly. Traders often scalp these setups, but when the trend is still strong, they can swing part or all of their position.