Hi guys,
What do you consider to be the best and most important ingredients in your own system?
Yes, I have used the search function. But most topics are to specific. I would like to know, what RaptorUK and the other sophisticated traders have in common.
You assume too much . . . I don't have a profitable EA, I am not a "sophisticated trader", I have learned a little mql4 coding and come here to try and help others learn. Perhaps I don't have a profitable EA because I have a very critical definition of what I call profitable . . .
I don't know if I should be responding with a heading like that :).
However I do agree with RaptorUK coin_toss arguments. Here & Here.
I have a taught question for RaptorUK since he's already been called out :P
Do you believe that the R:R and WR could be manipulated to a traders advantage?
I believe you've hinted that we can force the WinRate to favorable values like 90.
Do you think it'll be possible to force the Average_Win / (Reward) higher by increasing the lotsizes?
In that way, pushing the RR:WR above the coin_toss when ever it falls below it.
1. Being sophisticated does not usually translate in to being successful.
2. There is something to be said for the 'keep it simple stupid' KISS approach.
3. There is only one thing that makes you successful (correction).......
There is only one thing that MEANS you made a successful trade.
4. You bought it cheaper than you sold it. Period.
5. Let the market come to you.
If you like to trade with the larger trend, wait on the pullback. So that you have a framework around which to set a stop loss for good r:r.
(Think of pushing a child on a swing at the appropriate time.)
If you like to trade a range. Wait on the swing high or low for the same r:r reasons.
(Once again think of the child on the swing.)
Look at a range as a sideways trend.
1. look for the high probability places on the chart.
2. Only there can you implement good Reward to Risk.
Does your indicator get you in at some other place on the chart hoping to have 'guessed' the direction to come?
Or, does it get you in at one of the places mentioned above because of WHERE it is RIGHT NOW?
Does your signal come from CURRENT price action. or...
Math on PAST price action?
All that matters is where price is right now. It's either time to get in or time to wait.
Review your strategies and see how many of these rules they are breaking.
I don't care how much equity, leverage or time you have. If you don't buy it cheaper than you sell it. You CAN NOT succeed.
So make sure your strategy doesn't get too 'sophisitcated' and lose it's focus on what it's really trying to accomplish.
I can tell you... It's easier said than done...PipPip..Jimdandy.
p.s. I wrote a few pages about this very subject a few days ago over in my blog. Called the Holy Grail. You may find it interesting.
I've read a few books on trading systems and algorithmic trading.. the one message that keeps appearing, and agrees with my own experience, is:
The actual system can be extremely simple and still earn money. The crucial factor seems to be precise entry and exit strategies.
As for 'days where nothing works', they should be predicted by your backtesting. You should know the (expected) maximum drawdown, and longest drawdown duration before forward testing.
Jim, can you post your blog link? I'd love to read
I don't know if I should be responding with a heading like that :).
However I do agree with RaptorUK coin_toss arguments. Here & Here.
I have a taught question for RaptorUK since he's already been called out :P
Do you believe that the R:R and WR could be manipulated to a traders advantage?
I believe you've hinted that we can force the WinRate to favorable values like 90.
I don't think there is any such thing as a favourable or unfavourable WinRate (WR) just as there is no such thing as a favourable or unfavourable Risk:Reward (R:R) . . . one has no meaning without the other. Why is a WR of 90% better than a WR of 50% ? we can't answer unless we know the accompanying R:R in each case.
Can we force the WR to a desired figure ? lets take my Coin Toss example, yes we can get any WR we desire, just set the corresponding R:R by setting the SL & TP accordingly and the WR will end up where you want it . . . assuming you execute a large enough number of trades. Even with a WR of 99% we will still not have a profitable strategy . . . remember, it's a Coin Toss.
Do you think it'll be possible to force the Average_Win / (Reward) higher by increasing the lotsizes?
Yes, of course . . . but that will also make the Average loss higher . . . R:R is a ratio and is independent of position size . . . unless you have some way of knowing in advance which trades will be winners and which losers, then you can have a bigger position size on the winners
In that way, pushing the RR:WR above the coin_toss when ever it falls below it.
If you look at my data here you will see that my table contains actual measured WR and theoretical calculated WR, there is a difference even bearing in mind the number of trades, for example: measured WR 37.79% vs calculated WR 37.5% number of trades 111,418. So even with over 100k trades we can still get an inaccuracy of 0.77%. My average error was 0.3% and my max error was 6% followed by 2.5% then 1.66%, so most data points have an error of less than 1%.
For my Coin Toss system it's simple to determine the R:R, the EA has fixed SL and TP, my tests were all run with 0.0 spread so it's very simple to calculate the R:R. In many Strategies there may not be a fixed SL & TP, is many others there is no SL and maybe not even a TP, so in these cases how can we determine the R:R ? I used to think that the Average Loss:Average Win would give us our R:R and in many situations it will, but not all . . . in the situation where a set SL & TP are used it will give us the R:R and account for the spread at the same time. In situations where a set SL isn't used the Average Loss doesn't give the true picture about the risk, why ? risk is not the same as loss, loss is determined by realized risk, risk can be greater than the realized risk but it is still risk even if it is not realized. The same is not true for reward and win, win does equal realised reward. This may seem counter intuitive but think about it for a few minutes . . . risk is a potential measure not an actual one, reward is an actual measure not a potential one.
So what do we do where there is no set SL ? in this case I think we have to use the average MAE instead of the average loss. So now we can calculate the achieved R:R and use this to establish what WR we need to break even and compare this to the WR being achieved, what difference do we need to have some confidence in our Strategy ? I don't have a concrete answer but the greater the difference the more confidence we can have, I would also say that for a low value WR ( < 50% ) we should be looking for a difference of maybe 10%, obviously for a BE WR of 90% this would require a WR of 100% and perhaps in this situation we should be aiming for a WR at least 10% lower than the required BE WR and then use this strategy in reverse.
Note: Please bear in mind this is all in my opinion, I'm happy to be contradicted by anyone as long as they can backup their contradiction with a reasoned argument.
I've read a few books on trading systems and algorithmic trading.. the one message that keeps appearing, and agrees with my own experience, is:
The actual system can be extremely simple and still earn money. The crucial factor seems to be precise entry and exit strategies.
As for 'days where nothing works', they should be predicted by your backtesting. You should know the (expected) maximum drawdown, and longest drawdown duration before forward testing.
Jim, can you post your blog link? I'd love to read
@RaptorUK:
I agree that by increasing the lot_size, there's a potential risk of increasing the average_loss also. I was just hoping that should I somehow increase the win_rate to say 90% by having Take_Profit=6 and Stop_Loss=60 (for example). Then somehow, if I toke a loss, or kept taking a loss, the increased lots on future trades would stand a better chance of success. But of course, thats probably the definition of gamblers fallacy. Funny thing is, I've probably already performed this test sometime in the past and trashed it :) cycles:cycles.
Anyways, reason I'm bringing this up_now is because I'm wanting to generate a thread or case_study about evaluating edge/advantage for systems. A recent system of mines makes me want to believe that a trader can influence his RR:WR. I have some theories which I'm studying with no_stoploss systems. Believing that what applies to no_stoploss could also apply to stoploss systems is why I'm asking these questions. Of course I don't fully understand the answers, so apologize if I sound elusive.
As far as floating losses, I've always considered them as realized losses. One problem which always jumps at me when attempting to use floating losses in the RR:WR equations is the fact that the average_loss becomes huge for no_stop systems. I think most negative_grid systems would appear (unjustly) negative with such approach. Therefore my compromise was looking at the account (profit / drawdown) in $$. Instead of pips, $ is much more flexible to variable lots tests. This ratio should be calculated on on-going basis.
When observing our recent FastWayToMillions, it reminded me about something I discovered and neglected sometime ago. At the time, I wrote this comment here. I'm really trying to figure-out how to apply this concept to stop-loss systems.
@RaptorUK:
As far as floating losses, I've always considered them as realized losses. One problem which always jumps at me when attempting to use floating losses in the RR:WR equations is the fact that the average_loss becomes huge for no_stop systems.
And this gives the real story and explains why a signal that appears to be working well suddenly goes bang . . . if the real R:R had been considered instead of the Ave Loss:Ave Win the real potential performance would have been apparent.
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Hi guys,
What do you consider to be the best and most important ingredients in your own system?
Yes, I have used the search function. But most topics are to specific. I would like to know, what RaptorUK and the other sophisticated traders have in common. I am talking about fundamental beliefs. Before you judge me to hard, let me explain: I am 43 years old, from Germany (so please forgive me my mistakes) and in the last year or so I learned to code in MQL4, studied a lot of good and bad books and developed several systems that made money or lost money. Right now I use an EA that I think is a mirror of my beliefs. I guess there is code out there for almost every possible function one could need. But I have spend some time to find a list with - hmm, let’s call it “automated trading fundamentals”. Maybe an example might help. My EA has gone through several stages of development. Now it trades each week 24 hours on five days on 4 Netbooks and 6 demo accounts in 9 currencies and several different time frames before I adopt changes to my real account. But in my opinion the results are still not meaningful, because accurate backtrading seems to be impossible (even with imported data) and if it was, I still couldn’t trade 9 currencies at the same time in backtesting. Don’t get me wrong, at the time I am writing this I am satisfied with the results so far. But I guess I miss out something, so I would like to know, what ingredients the pros consider to be indespensable in a good MQL4 recipe.
Here is what I got so far:
One takes a good portion of demo money, enough to take hundreds of trades. My broker allows up to 10 demo accounts and has no time limit or any restrictions redarding automated trading. The trades are taken in real time, to prevent incorrect conclusions because of corrupt backtesting data. I use trend following and I only take trades if the higher time frame confirms the direction. I use filters to prevent trades, when the direction is sideways. Those filters are volume, the direction of an EA and IHIGH and ILOW in two further timeframes (most likely 1h and daily). I calculate the strenght of a trend with an array of price date up to 100 candles in these three timeframes and only take trades when all timeframes confirm each other. I use a fixed stop loss (30 pips for 1h timeframe) in the beginning (and that is my highes possible loss on a position), move it to break even once it reaches the profit amount of 30 pips and change it to a trailing stop according to technical analysis to trail along the last highs or lows. I never risk more than 1 percent of my trading account and only upsize my position sizing when my equity extends my account balance by a substantial amount. I use a variable “RequiredEquityToTrade” as an emergency stop if the market goes nuts and do not take further trades on that day. I use the Screenshot function to save each trade taken for further inspection afterwards. I do not longer use the take profit function, because I was never able to find out how far a winner could go.
Here is what I think might be useful:
It might be helpful to consider a kind of emergency scenario when the account equity goes through significant changes in a short time span. I have already implemented a “Close all trades” function. I realized that there are days when nothing works out and other days when you can’t fail and I maybe want to create an indicator that shows rising or falling account equity and calculate a “daily amount to risk” or something. I would love to find a way for automated mobile trading with Android and already thought about opening pending orders as a code to influence the behaviour of my EA (for example a buy stop at 1,40 € could advise the EA to stop trading and a buy stop at 1,40 € could mean “double position size for all further trades”). I believe in technical analysis, trend following and long term expectancy. If Van Tharp is right, the entry is only 10 percent and the position size and the “trademanagement” determine if you lose or win on the long run.
I would like to know, what works best for YOU
Do I miss out an important puzzle piece?
What would you consider to be the ingredient, that really made it for your EA?
What are your fundamentals for automated trading?
Thanks in advance and
have a nice day,
Ray :-)