I’ve probably designed at least a dozen marginally profitable trading systems (0.2 to 0.4R expectancy), but thus far have failed to come up with a high-expectancy system (>1R) that can compare with professional traders.
Then I asked myself, why fight using my weakness? Why not deploy all these mediocre systems and let frequency of trades compensate for my low expectancy? The more systems you use, the more trading opportunities you will find.
Obviously these systems should be non-correlated as possible. But as a retail trader, I think this is one way we can shift the odds in our favour against the professionals and institutions. Thoughts?
I’d have to disagree with that, it would appear to me that KingKaivar’s mindset is focused on his systems as opposed to what the market is doing, and when and where to apply those strategies.
Never embrace mediocrity, always strive to be the best.
The better trader will wait for the market to come him/her, and that can mean staying out for 2 weeks or more quite often! A profitable trader will not force the issue where the potential to crash and burn is high.
Well dude, you have to detach from money. Avoid indicators they kill the fun of trading, instead try naked trading and price action. Mediocre does not work and perfectionism neither so what is left: uncertainty and incertitude. If you can tell what are you gona do tomorrow then trading is not for you. I have a system based on support and resistance levels and trend channels and i seek for a specific market behavior but each trade ends up entirely different even if i look for the same pattern. You are looking for the same thing to happen in an enviroment that changes with every tick. Other problem you have is you are relying purely on system itself. Well you must have one, and follow estrictly. About cutting profits too early is a matter of confidence and detaching from fear and is not an easy thing to do, it takes time to adquire that skill. You have to combine with a strict quote of loss. Me personally i allow myself two loses maximum per week and one trade per day. For you to maximize your profit level i recommend you to increase your level of expentancy gradually. Start with a little level of ecpectancy, let’s say 5 pips, ech week you add 1 pip. With time you will get used to wait and to handle with loses because the higher your expectancy the higher your changes to lose. Part of the key for a succesful trading is to trade the less as possible because each trade is a potencial loss.
One thig that helps is reading, read and read until the day you die about psicology of trading, I recommend you: Ari Kiev, Mark Douglas and Alexander Elder. Once you get into “Te Zone” don’t screw it up, that is how almost succesful traders end up in the same vicious cycle, there is no light at the end of the tunnel. Mediocres always seek for the light but never for the tunnel.
My trading methodology is a little different. Rather than spending years “perfecting” 1 trading system. I like to trade several at once, assuming they all have some sort of an edge. Typically, I look at the profit factor of each trading system and if they are above a minimum standard, I’ll usually run it. The point is that I’m looking for frequency over quality. I guess in my case, quantity over quality is true! My risk is small, 0.1% - 0.25% for the most part, but I’m taking 100-200 trades a week, with a statistical edge. You can say that I’m essentially speeding up the “law of large numbers” process!
But I do want to say that I am mostly automated. And that, I would agree with you, that as a manual, discretionary trader, my methodology probably will not work.
I have a system that provides an average of 10R per month…by no means the holy grail, but by risking 3% per trade it generates an average of 30% a month. The key word here though is average. In between the months of data tested I have seen monthly ROI swings from -10% to +90%.
It’s all about grinding with the edge you have, and running with the losses. You will turn to a profit providing you keep the emotion aspect to one side.
The most dangeous words in english are “What If”, and what if you have a losing streak after leveling up risk? Have you ever considered that? There is no quality trading, you are as good as your last trade. Let’s say you enhanced your trading up to 95% of winning and you have decided to risk 20% per trade. It means that you only need 5 wins in a row to double your account with 1:1 ratio but having a probability of losing 5 trades for every 100 you make what if you have 5 loses in a row, i mean those 5 happens simultaneously, you lose you entire account. Frequency, bad idea, quality bad idea. This is not for perfeccionists nor greedy peoply, bad compynation. The less you trade the more you make. Trading more won’t enhance your profits it will only increase your loses. Is up to you to take my advice, i don’t care.
Mr. Gone, this is why I said, [B]Why not look for Quality, and maximize risk? You would probably make 20fold…[/B]
I think you read it wrong,
That is exacly what I said, and exactly what I meant. Look for the 1 trade, a trade that you can get 1:3 , and go all in.
If you have a great system, and your good at finding that 1:3 or even 1:2, Risk on, 25 pips, day over…
With my Money Management, I only allow my account to lose 5%, which is also my daily goal, so I lose 1 day of progress, gather myself, and learn from my mistake, and continue to the next day…Great chance you wont make the mistake again, that is of course you know what you did wrong prior.
This is why problem solving is very very important skill to have in Forex.
I think a good course in statistics is required here, start with normal distribution and standard distribution. Going all in on the one trade you feel to be right is silly. What have these forums come to. It’s not even Monday…good grief, what will Friday bring.
Of course I am always looking for the best. When a good trading system comes to my attention I’m not going to replace with mediocrity. But the point is I’m sacrificing some quality for increased frequency.
For example, let’s say I take on average 200 trades a week, at 0.2% risk per trade, and my win rate is only 55%, my reward to risk is on average 1.5:1, what is my theoretical return per week? This is using mediocre trading stats with a very high frequency, but with a very low risk percentage.
Now let’s look at scenario B, you take 3 trades a week, at 1%/ risk per trade, your win rate is 70% and your reward to risk on average is 2:1. what is your theoretical return per week? This would be a typical day trading strategy, with a decent hit rate and a medium frequency.
At the same time, which scenario’s equity curve is going to be smoother? Take an educated guess?
For the guys too lazy to calculate it, the first example would theoretically yield 8.40%/week. The second scenario would yield 3.30%. As far as which trader’s equity curve is smoother, if I had to take an estimated guess, the first example’s is smoother relative to scenario B.
