# Positive expectancy & Discretionary trades



## saiter (12 January 2010)

If someone is using discretionary techniques to trade, how do they know if they have a positive expectancy? I'm thinking that they get on a simulator, practice their technique to ensure that they generate money, and then apply the same technique to the real market.
Does this mean that when the market changes, your technique will have to change and you'll have to get on a simulator again?
Is there any other way besides this to check for positive expectancy?

Cheers.

PS: I have been out of the "trading game" for some time, so I'm sorry if this is a stupid question


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## saiter (13 January 2010)

If anyone is interested, the simulator I'm using is NinjaTrader. You can replay market data and then practice on that.
This market data can be found on another forum called Big Mike's Trading Forum or it can be recorded from your data provider.


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## Trembling Hand (13 January 2010)

Sim, Sim, Sim.

As you rack up the thousands of hours your learning happens during trading so you spend less and less time on it.

BUT IMO never be afraid to go back to it. Athletes, Musicians, Surgeons, Pilots, crack defensive personal & chess players are not. I don't understand what all this "paper trading" isn't like the real thing BS is about. Why are punters different? ego?


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## SmellyTerror (14 January 2010)

I guess the folk who think that sim isn't useful are the ones who can't get emotionally invested in simming. If you're just looking at trading as a boring way to make money (and a lot of folk say that's the only right way), I can see how it's only the sting of real loss that motivates. They couldn't take a sim seriously.

But who wants to do a boring job? Plenty of those out there.

Here's what's sold me on scalping (forex for now): I've been trying my hand at a lot of things. I trade real money on a few systems old and new, do pretty well, but I've been simming some more active stuff. I've only been trying to scalp forex for a couple of weeks, and I suck at it (ie my entries are pretty good, my stops work, but my exits suck balls. I think it'll take me a year or two to do much better than random...).

So I'm upgrading my gear, and I've been without connectivity for a week (bar some runs over to the neighbour's to keep my 2-weekers ticking over).

What have I missed? Scalping. *On the sim*. Not the stuff that's making me money, not the old stuff that works or the new stuff that I've learned to make work. In Forex I barely tread water, but that's what's been sitting in the back of my head all week - "tonight I can get some more time on the sim - oh wait, crap, no I can't".

If you're simming something you LIKE, it's worthwhile. You don't need the sting of real money to make it count, because *sucking at something you like stings enough*.


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## Mr J (14 January 2010)

Trembling Hand said:


> I don't understand what all this "paper trading" isn't like the real thing BS is about. Why are punters different? ego?




The emotional and mental aspect (for many), but that's irrelevant without good methods, which can be developed paper trading.



			
				SmellyTerror said:
			
		

> I can see how it's only the sting of real loss that motivates. They couldn't take a sim seriously.




I think this is the case for most people. I think simming also allows for better fudging/rationalising, since we can't argue with an account balance.


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## Trembling Hand (14 January 2010)

Mr J said:


> The emotional and mental aspect (for many), but that's irrelevant without good methods, which can be developed paper trading.



 Which can ONLY be developed with sim trading. Everyone bangs on about the emotional aspect of trading. They all want to be ICE MEN trading "without emotion". LOFrickinL.

The torment and emotion they feel when putting real money on the line comes from not being properly prepared with trading skills acquired through simming. Trying to control emotions without going through a proper non threatening learning curve is like trying to stop the bleeding while your hand is still on the wrong end of a running chainsaw. 

Mr C made a very good point about practising on micro accounts. How many ever get to moving real money in the real market? Probably close to nun because they aren't learning anything of value.


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## SmellyTerror (14 January 2010)

But that’s what I mean about liking what you’re doing. If you can’t generate a bit of passion about sim trading, then you’re not going to take it seriously. But why can’t people care enough to take it seriously, when this process (not the making of money - *the process*) is going to take up thousands of hours of their life? Do they want to do this trading stuff, or do they just want money?

If you like the trading you’re doing, you can sim WITH emotion – maybe not as much emotion as with real money, but some. You’ll have the motivation to work at it and get better. Screwing up in sim *should* hurt. Getting it right *should* feel good. You should *want* to do this. And that will motivate you to get serious, put in the hard yards, and get better.

If people don’t give a crap about their sim, and can’t take it seriously, then I think they should take a good hard look at why they’re bothering anyway. If the *only* thing that gets people motivated is making or losing real money, then they’re going to get the crap kicked out of them while they get “motivated”. Probably better to pay someone else to trade their money, and concentrate on a day job they can enjoy.

Why do people want to do a job they don’t get excited about anyway?


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## Mr J (14 January 2010)

Trembling Hand said:


> The torment and emotion they feel when putting real money on the line comes from not being properly prepared with trading skills acquired through simming.




That's not true at all. Many (most?) people become nervous when their skills are put to the test, regardless of how skillful they are. Maybe you didn't, but that doesn't mean it applies to everyone.


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## ThingyMajiggy (14 January 2010)

why would one be nervous if you KNOW your system has positive expectancy?


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## Trembling Hand (14 January 2010)

Mr J said:


> That's not true at all. Many (most?) people become nervous when their skills are put to the test, regardless of how skillful they are. Maybe you didn't, but that doesn't mean it applies to everyone.




Nonsense. Nervousness is fine to some degree(during slumps & dealing with uncertainty) but if you think that all this talk about the emotion aspect of trading is because they are highly skilled traders with a proven method just "nervous" you are lost about what causes stress.


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## skyQuake (14 January 2010)

If you're going crazy in a trade then its probably skill based problems.







Source: Wiki


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## Trembling Hand (14 January 2010)

skyQuake said:


> If you're going crazy in a trade then its probably skill based problems.
> 
> Source: Wiki




SkyQuake thats a ripper of a chart. No skill & real money you are starting at a minimum in the Worry section. No wounder people end up with emotional trading problems. No diff than putting a first year med student into surgery to perform.


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## It's Snake Pliskin (14 January 2010)

ThingyMajiggy said:


> why would one be nervous if you KNOW your system has positive expectancy?



Or if one knew one's risk.


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## nunthewiser (14 January 2010)

FWIW.

I still often use a sim/ demo account on occasion too .

There are times when the markets *I* trade do not provide me with a major probability trade which i want to enter . 

Rather than waste money gambling on red or black im happy to hit up the sim to put my thoughts and entrys/strategys into play and to revise the whole trade as it happens and after without costing me a cent to test out a new gameplay.

I treat this " paper trade " on the sim/demo account just as i would have with real cash and control my risk and position sizing in the same way .....


But hey im happy to know i still need to polish my skills when im having a bad run or i hit a scenario thats of a dubious nature that may guide me the way next time i hit it because i practised.


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## skc (14 January 2010)

skyQuake said:


> If you're going crazy in a trade then its probably skill based problems.
> 
> 
> 
> ...




SkyQ... with a chart like that you will never be a top tier management consultant. They prefer 2x2 matrix, or 3x3 if you must...


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## Mr J (14 January 2010)

ThingyMajiggy said:


> why would one be nervous if you KNOW your system has positive expectancy?




Why does a rookie pro athlete get nervous before his first big game? Positive expectancy doesn't guarantee success anyway.



> If you're going crazy in a trade then its probably skill based problems.




Who said anything about going crazy?



> but if you think that all this talk about the emotion aspect of trading is because they are highly skilled traders with a proven method just "nervous" you are lost about what causes stress.




You didn't get my point. Sim trading doesn't prepare people for the psychology that comes with winning and losing money. I'm not sure why you think someone can be prepared for that with no experience.


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## Trembling Hand (14 January 2010)

Mr J said:


> You didn't get my point. Sim trading doesn't prepare people for the psychology that comes with winning and losing money. I'm not sure why you think someone can be prepared for that with no experience.



The process for mastering anything is one that is centuries old. You start with the very basics and gradually master each step BEFORE moving onto the next harder one. To learn the basic without learning bad habits one must be free from performance pressures that don't hinder the actual chunked down skill you are trying to master.

The first skills you need are to read markets and act on them. Somewhere at the end of a novices education come adding pressure with small amounts of real money.

Without the skills to read markets and act on them you are stepping right into, as you say, "the psychology that comes with winning and losing money."

So you recommended that first? Here's yet again another perfect example of that method,


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## Wysiwyg (14 January 2010)

Hey, that is my experience.


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## It's Snake Pliskin (15 January 2010)

Trembling Hand said:


> The process for mastering anything is one that is centuries old. You start with the very basics and gradually master each step BEFORE moving onto the next harder one. To learn the basic without learning bad habits one must be free from performance pressures that don't hinder the actual chunked down skill you are trying to master.
> 
> The first skills you need are to read markets and act on them. Somewhere at the end of a novices education come adding pressure with small amounts of real money.
> 
> ...



Good post TH. 

In the absence of any form of simulation experience would it be possible in your mind, considering skills - a money making aspect in the form of ability - and risk stipulation adherence, to be able to successfully turn an account into the positive?

Or is some form of simulation experience totally necessary?


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## ThingyMajiggy (15 January 2010)

Mr J said:


> Why does a rookie pro athlete get nervous before his first big game? Positive expectancy doesn't guarantee success anyway.




Forgive me here, but I have never seen a "rookie pro". If you are "pro" at something, you have worked towards it, have the experience that is needed to KNOW what it takes for success. Know what, when, why, how etc. Therefore this "rookie pro" athlete you speak of should not be nervous, he knows what he must do, and he knows there are going to be winners and losers in his game, losing is a part of it. So I wouldn't think there would be much to be nervous about. imo, but what would I know


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## skc (15 January 2010)

ThingyMajiggy said:


> Forgive me here, but I have never seen a "rookie pro". If you are "pro" at something, you have worked towards it, have the experience that is needed to KNOW what it takes for success. Know what, when, why, how etc. Therefore this *"rookie pro" athlete *you speak of should not be nervous, he knows what he must do, and he knows there are going to be winners and losers in his game, losing is a part of it. So I wouldn't think there would be much to be nervous about. imo, but what would I know




I think it was meant to be read as rookie "pro athlete". It simply means being an athlete is his/her profession. Like NBA players fresh out of universities. 

But I think I see where TH is coming from... there are steps that must be taken in order.

1. Read market
2. Play with small money
3. Deal with psychology issues with real money
4. Deal with more and more money

Taking these steps out of order, while possibly more exciting, may not always be the best for learning.


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## It's Snake Pliskin (15 January 2010)

ThingyMajiggy said:


> Forgive me here, but I have never seen a "rookie pro". If you are "pro" at something, you have worked towards it, have the experience that is needed to KNOW what it takes for success. Know what, when, why, how etc. Therefore this "rookie pro" athlete you speak of should not be nervous, he knows what he must do, and he knows there are going to be winners and losers in his game, losing is a part of it. So I wouldn't think there would be much to be nervous about. imo, but what would I know



Sam,

Is it not possible to be a 'rookie' at the next level? I find it hard to give decent analogies to trading due to it's uniqueness.


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## Trembling Hand (15 January 2010)

It's Snake Pliskin said:


> Good post TH.
> 
> In the absence of any form of simulation experience would it be possible in your mind, considering skills - a money making aspect in the form of ability - and risk stipulation adherence, to be able to successfully turn an account into the positive?
> 
> Or is some form of simulation experience totally necessary?



 Well it would seem to be a common form of entry into this game. Though for many reasons you don't see a lot of them surviving. Taking it as probable that most are under funded and don't stick to correct risk levels anyway adding to the mix that you are hoping to survive a less than perfect "education" is just another handicap. Its 'do able' of course but surely the most expensive form of education, in $ terms and physiological terms. Lots can come back from the $ damage. Few can shake the hit to the head. :bloated:



Mr J said:


> Why does a rookie pro athlete get nervous before his first big game? Positive expectancy doesn't guarantee success anyway.



 Actually thats a classic example of backing up my approach not yours. *How long has the rookie spent in a non-threatening simulation by the time she takes her first step onto the pro field?* From what I know of pro athletes about 10 to 15 years!! Close to 75% of their life at that stage. Take a footballer for example from the age of under 10 you start playing to build skills gradually increasing task difficulty, from play to school to junior comp etc, and performance pressure from doing it purely as fun to increasingly becoming goal orientated, making the junior starting side, to making the state squad etc. 

So by the time you step up against the pros, mostly around the age of 20, for the first time you already have all/most of the skills. The last step is to put them together with "the psychology that comes with winning and losing".

For some reason what makes sense in ever other field but happily gets thrown out the door in the rush to own the :car:


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## ThingyMajiggy (15 January 2010)

It's Snake Pliskin said:


> Sam,
> 
> Is it not possible to be a 'rookie' at the next level? I find it hard to give decent analogies to trading due to it's uniqueness.




Well, good question. Being a rookie and being nervous are 2 different things though, and imo I don't believe there is a reason to be nervous, more so in the example of trading, with sports and athletes etc some might even approach it with confidence. But anyway, interesting topic, lets get back to reviewing


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## Mr J (15 January 2010)

Trembling Hand said:


> The process for mastering anything is one that is centuries old. You start with the very basics and gradually master each step BEFORE moving onto the next harder one. To learn the basic without learning bad habits one must be free from performance pressures that don't hinder the actual chunked down skill you are trying to master.




I understand that, but the only way to learn to handle trading real money is to trade real money. Sim trading doesn't prepare us for that. I wouldn't recommend jumping in the deep end and trading the full amount, but starting smaller and working up to it. 



> So you recommended that first? Here's yet again another perfect example of that method,




No, I didin't.



> Actually thats a classic example of backing up my approach not yours.




I didn't state an approach, you just assumed I did (note - you haven't yet made a correct assumption about me, at least none that I've read . The only reason I posted was to point out that while sim trading was a very useful tool, it doesn't prepare people for the psychology of real trading. This suggests that I actually agree with "your" approach, that going from sim trading to trading real money at the full amount is a poor idea. Highest chance of success is starting small, slow and steady, building skill and confidence. We don't see athletes turning pro after 6 months of experience.

If you want to hear the approach I'd suggest for the sake of clarity, it would be to sim trading, watching the market and develop methods. After methods have been developed and confidence is high, move to real trading for a fraction of the full amount. Increase the amounts at a comfortable rate. 

However, that does *not* guarantee success, as many people just can't tolerate variance. We can prepare and prepare, but at the end of the day we're subject to our own limits.

It seemed to me that you were suggesting that anyone who experiences emotion has not prepared correctly. All of us are emotional, it's just a matter of how much, or how well we control it. If you're suggesting preparation is all we need, talk to an athlete of the highs and lows, the slumps, focus etc. There's plenty of emotion flying around in trading, and it shouldn't be assumed that person just lacked preparation.



> Forgive me here, but I have never seen a "rookie pro".




You have seen plenty of rookie pros - any pro in the first year is a rookie. Rookie doesn't mean professional or not professional, just new to that level.


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## Trembling Hand (15 January 2010)

Mr J said:


> (note - you haven't yet made a correct assumption about me, at least none that I've read .



 I don't have to assume. I already know you can do it all easily. You told us all about it, just haven't shown us   



Mr J said:


> It seemed to me that you were suggesting that anyone who experiences emotion has not prepared correctly.



Not true at all. I've always said that this game isn't about being an ICE man controlling your emotions nor the victims favorite excuse, discipline!!!!! Those that go on about that stuff just happen to also be the least prepared with skills. If they had skills that they could take to market and on balance win more than loose the emotional game becomes a million miles away from the BS you hear the punters sprout on forums and the like.


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## Mr J (15 January 2010)

> f they had skills that they could take to market and on balance win more than loose the emotional game becomes a million miles away from the BS you hear the punters sprout on forums and the like.




You're right, but it's mental skill that is lacking, and some may never have enough of it. We all have different levels of mental strength, and training will affect us differently. Some may develop quickly and become quite strong, while others may learn slowly, and others not at all, or be limited to a low level.

I still think that much of the mental aspect of trading requires experience trading real money. Trading real money doesn't have to be "serious" immediately, like I've said previously, I think starting with a fraction and working up is a safer way to develop control and tolerance. I jumped in the deep end, but then I know this works well for me I can cope with it. I'd never suggest it to anyone else.


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## It's Snake Pliskin (15 January 2010)

Trembling Hand said:


> Well it would seem to be a common form of entry into this game. Though for many reasons you don't see a lot of them surviving. Taking it as probable that most are under funded and don't stick to correct risk levels anyway adding to the mix that you are hoping to survive a less than perfect "education" is just another handicap. Its 'doable' of course but surely the most expensive form of education, in $ terms and physiological terms. Lots can come back from the $ damage. Few can shake the hit to the head. :bloated:



Thanks for your thoughts. I forgot to mention funding in my question being that of _well_ funded.



> Well, good question. Being a rookie and being nervous are 2 different things though, and imo *I don't believe there is a reason to be nervous*, more so in the example of trading, with sports and athletes etc some might even *approach it with* *confidence*.



Yes, that's why I asked TH the question above. 

Yes interesting topic, I agree.


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## Mr J (16 January 2010)

ThingyMajiggy said:


> Well, good question. Being a rookie and being nervous are 2 different things though, and imo I don't believe there is a reason to be nervous, more so in the example of trading, with sports and athletes etc some might even approach it with confidence. But anyway, interesting topic, lets get back to reviewing




Yes, but a lot of rookies are nervous, because it's the moment of truth. Their skills haven't been properly tested at their level, and they wonder how they will measure up. It isn't quite the same with traders because they already know how their skill stacks up before they go live, but it doesn't mean nerves don't apply. Anyway, I think TH was talking about stronger emotions than typical first-time jitters.


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## So_Cynical (22 November 2010)

I followed tech/a advise from the Technical Analysis - Smoke & Mirrors? thread and looked up positive expectancy and thus found this online calculator that seems to do the job.

http://www.stockresearchpro.com/an-expectancy-calculator-to-monitor-forex-trading-strategies 

And since i just finished imputing all my trades over the last 3 and a bit years into my expensive new stator software...thought it was probably worth while finding out what my expectancy is, and since im a discretionary punter though this thread was appropriate.

I'm guessing 20+% is pretty good? 
~


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## tech/a (22 November 2010)

So_Cynical said:


> I followed tech/a advise from the Technical Analysis - Smoke & Mirrors? thread and looked up positive expectancy and thus found this online calculator that seems to do the job.
> 
> http://www.stockresearchpro.com/an-expectancy-calculator-to-monitor-forex-trading-strategies
> 
> ...




20% is very good.
But your losing trades are nearly twice the size of your winning trades.
Your bottom line would increase considerably with even a slight decrease in your losing trade size.

STATOR should print out all the stats you need if you've input everything.


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## So_Cynical (22 November 2010)

tech/a said:


> 20% is very good.
> But your losing trades are nearly twice the size of your winning trades.
> Your bottom line would increase considerably with even a slight decrease in your losing trade size.
> 
> STATOR should print out all the stats you need if you've input everything.




Stator is putting out lots of stats but i haven't come across an expectancy stats yet...still learning how to drive it.

I think there's scope for me to reduce my average loser size as its inflated by 2 particularity large losers that i seriously doubt i could let happen again....on the other hand there's also scope for my winners to losers ratio to pull back a little as i have to admit im finding easy winners harder to come by over the last 6 months and i have cut some winners to cover my losers and that's probably inflated my win/loss ratio.

-----------------------------

Would be nice if some others could post up there expectancy.


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## tech/a (22 November 2010)

Last 2 mths only trading the FTSE Futures
Only one contract a discretionary method which to be honest is based on VSA clear buy and sell. I usually set a buy and when triggered a sell (Short or long) and go do something else---walk/tea/TV.

I close out before I go to bed if not already closed before Which I am now.
Values are in Pounds  = $1.68.

Will get serious one day but great interest and fun.
Could refine much more but enjoy my own time at the expense of some profit and loss.
I like to shorten the risk by moving the stop up if Im watching if not its is no more than 10 pips wide if I cant get a trade under that then I wont take it.
Blah blah.


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## satanoperca (22 November 2010)

So_Cynical said:


> I followed tech/a advise from the Technical Analysis - Smoke & Mirrors? thread and looked up positive expectancy and thus found this online calculator that seems to do the job.
> 
> http://www.stockresearchpro.com/an-expectancy-calculator-to-monitor-forex-trading-strategies
> 
> ...



fantastic and thank-you.

These bits of information are gems and I hope one day I will understand.

Cheers


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## Julia (22 November 2010)

Above winning and losing trades are in very small dollar amounts.  Are these net of brokerage?  Even then, is it really worth your trouble to bother with a couple of hundred dollars?


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## So_Cynical (22 November 2010)

Julia said:


> Above winning and losing trades are in very small dollar amounts.  Are these net of brokerage?  Even then, is it really worth your trouble to bother with a couple of hundred dollars?




Not sure if your comments are directed at me or tech...perhaps both?

As for me the stats are closed trades only and im assuming Stator (the software that produced to numbers) has taken out brokerage :dunno: so its 40 winners averaging $501 = $20040 not a fortune but certainly better than a kick in the nuts.  Must be a nice feeling to have some serious money hey Julia.

As for tech...from what i understand of high frequency trend following, its quite common to have many small winners...also the position sizing tends to be small per trade due to risk management, my position sizing is closer to 10% than 2% (another reason my losers can be large)


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## Julia (22 November 2010)

Hi So Cynical, yes, I was thinking about both you and Tech with my question.
But it was not meant in any way to not give you due credit for what you're doing.  Just seems to me that if you produce a decent result, you might as well do it with a few more dollars, and so your overall capital keeps growing at a faster rate. 

But you know your limitations, and you know whether or not you're comfortable with leverage to increase your profits.

That's all I was wondering about.  Absolutely not being critical, and my apologies if my question came over that way.


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## skc (22 November 2010)

So_Cynical said:


> Not sure if your comments are directed at me or tech...perhaps both?
> 
> As for me the stats are closed trades only and im assuming Stator (the software that produced to numbers) has taken out brokerage :dunno: so its 40 winners averaging $501 = $20040 not a fortune but certainly better than a kick in the nuts.  Must be a nice feeling to have some serious money hey Julia.
> 
> As for tech...from what i understand of high frequency trend following, its quite common to have many small winners...also the position sizing tends to be small per trade due to risk management, my position sizing is closer to 10% than 2% (another reason my losers can be large)




2% is on risk per trade, not position size. Depending distance between entry and the stop, 2% risk could be anything between 10% to 100% of capital.



Julia said:


> Above winning and losing trades are in very small dollar amounts.  Are these net of brokerage?  Even then, is it really worth your trouble to bother with a couple of hundred dollars?




Looking at expectancy alone doesn't answer whether a strategy is worthwhile or not... there are many variables yet.

The key variable is trade frequency. If the strategy only brings out opportunities 50 times over 3 years then a few hundred bucks will be nice pocket money but probably not sustain a full time income. If the strategy works 50 times a month ... then it begains to have some legs.

The other issue is scalability - which may be close to infinite on FX to $10-12K limit on small, illiquid speculative penny shares.


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## professor_frink (23 November 2010)

Julia said:


> Above winning and losing trades are in very small dollar amounts.  Are these net of brokerage?  Even then, is it really worth your trouble to bother with a couple of hundred dollars?




that still works out to be a roughly $3K a month in tech's case(assuming it's before brokerage). That could be easily scaled up to 5 times that size without even breaking a sweat trying to fill an order.

Not a bad little hobby if you ask me


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## tech/a (23 November 2010)

I'm actually live trade testing a few ideas of my own coupled with VSA.
Its not something I myself am talented enough to code up and test.
Im using 9 min charts so I dont have the data at my disposal.

It really is only pocket money as pointed out but I could and if all works out well---will trade multiple contracts.
Which then brings in all sorts of possibilities like adding and subtracting contracts as you trade a move.

The point is that there are multiple trades which give a blueprint of how your discretionary trading is performing.
We can look at frequency (in my case) drawdown in Cynicals case and a host of other things----once we have the information----we are creating our OWN data..


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## Gringotts Bank (23 November 2010)

Regarding emotions, the trick is to let them flow, and feel them fully.  The second you try to control them, you're cutting yourself off from valuable information your subconscious is picking up.

For me, a discretionary buy entry would be when you feel excited and positive about the impending upwards move.  Then as soon as you've made the buy, re-check how you feel about it, ie. scan for somatic markers of tension or ease.  If excitement has turned to "oh ****, this is going to move against me", then sell for a loss or break even - whatever you can get away with.  If you still feel good, ride that feeling till it changes.  The feelings can be quite subtle, and that's the art of it.  

Sounds easy put this way, but your subconscious might be full of all sorts of distracting noise relating to money and success issues.  eg. if you grew up in poverty, the mere thought of a losing trade might send extreme levels of emotion through your body.  The second you place the trade, your body is screaming "oh ****!!!" and you misinterpret this feeling as information coming from the charts, so you sell, and get whipsawed to buggery!  Just one of many ways emotion-based trading can go wrong.

For it to work well, I believe you have to be very closely in touch with your emotions _as they happen_.  But of course opening that floodgate might mean you also have to feel all sorts of other painful things you've been trying to avoid all your life!!  A clean, clear communication between your conscious (thoughts, logic, rational stuff) and subconscious (emotions, feelings, hunches) would be necessary.  Also a subconscious that's clear of "money issues" or "success issues" or "failure issues".


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## nomore4s (23 November 2010)

Gringotts Bank said:


> Regarding emotions, the trick is to let them flow, and feel them fully.  The second you try to control them, you're cutting yourself off from valuable information your subconscious is picking up.
> 
> For me, a discretionary buy entry would be when you feel excited and positive about the impending upwards move.  Then as soon as you've made the buy, re-check how you feel about it, ie. scan for somatic markers of tension or ease.  If excitement has turned to "oh ****, this is going to move against me", then sell for a loss or break even - whatever you can get away with.  If you still feel good, ride that feeling till it changes.  The feelings can be quite subtle, and that's the art of it.
> 
> ...




Are you for real? Sounds like a great blue print to lose money in the markets! Trading like that would be extremely draining imo, entering or exiting a trade because you feel "good" or "bad" about it is asking to be burnt. I've lost count of how many times I've entered a trade and it has moved against me and I've thought **** this isn't going to end well but have stayed in the trade because my method had not given me an exit signal (ie my stop hadn't been hit and I had no other real reason to exit) and then it takes off and I get a huge R/R winner.

I've also lost count of how many times I've done the opposite and panicked in a trade and exited even though I had no good reason too besides getting a "bad" feeling about it and then watched it go to the moon, missing out an that huge R/R winner.

Understanding and controlling your emotions in the market has nothing to do with the above, it is about understanding your system (discretionary or not), the skills required to implement that system and then being able to control your emotions to use those skills to implement that system ie following your *proven* positive expectancy method/system/whatever.

Instead of spending time on all the junk you've gone on about imo traders are better off improving the required skills to be a good trader.


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## Gringotts Bank (23 November 2010)

Fine then, don't use it.  And tell everyone else here not to use it.  I don't mind.

Found this, which might be helpful for discretionary trading practice.  Frink had posted it on another thread.

http://www.amibroker.com/kb/2006/05/06/discretionary-equity/


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## tech/a (23 November 2010)

Gringotts Bank said:


> Regarding emotions, the trick is to let them flow, and feel them fully.  The second you try to control them, you're cutting yourself off from valuable information your subconscious is picking up.
> 
> For me, a discretionary buy entry would be when you feel excited and positive about the impending upwards move.  Then as soon as you've made the buy, re-check how you feel about it, ie. scan for somatic markers of tension or ease.  If excitement has turned to "oh ****, this is going to move against me", then sell for a loss or break even - whatever you can get away with.  If you still feel good, ride that feeling till it changes.  The feelings can be quite subtle, and that's the art of it.
> 
> ...




He HAS to be taking the pee wee.(Good god he's not!!)

Still---Neurotic late middle aged Women bordering on menopause should do particularly well.


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## skc (23 November 2010)

Gringotts Bank said:


> Fine then, don't use it.  And tell everyone else here not to use it.  I don't mind.
> 
> Found this, which might be helpful for discretionary trading practice.  Frink had posted it on another thread.
> 
> http://www.amibroker.com/kb/2006/05/06/discretionary-equity/




People in this thread are discussing positive expectancy as revealed by historical simulated or real statistics.

Would you by any chance be able to provide some statistics on your "gut feel" method as well?


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## lindsayf (18 December 2010)

I sim traded this method for a couple months ( here and there when I had the screen time) and it gave me the confidence to go live on a single contract.  Its early days with 20 trades done and now stopped trading for the year.  If it continues to perform reasonably well I will consider adding contracts.   Im interested in what readers see in these metrics.

thks


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## Trembling Hand (18 December 2010)

lindsayf said:


> I sim traded this method for a couple months ( here and there when I had the screen time) and it gave me the confidence to go live on a single contract.  Its early days with 20 trades done and now stopped trading for the year.  If it continues to perform reasonably well I will consider adding contracts.   Im interested in what readers see in these metrics.
> 
> thks



Is that traded on the spi? If so you may struggle a bit with a 3 tick stop.


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## lindsayf (19 December 2010)

Gday Trembler
No its on  YM, NQ and 6B.  Chose these because the tick values suits the small account.
Lindsay


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## Trembling Hand (19 December 2010)

lindsayf said:


> Gday Trembler
> No its on  YM, NQ and 6B.  Chose these because the tick values suits the small account.
> Lindsay




Good oh. Then my question would be your stops are around 6 ticks? Just a hunch but you may want to try and get your avg win a bit higher because you will probably get a lot more slippage than what the NT sim gives you on stops. What will help is the odd runner. Whats your exit method? As in fixed distance target or an exit signal?

Just as a warning the shorter trade length the system takes the dodger the sim results. Whats your avg hold time?


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## lindsayf (19 December 2010)

ah I didnt make it clear did I - this is on a live account, did a lot of simming previous to October.   The stops are from 10 to 20 ticks.  The method is based on price action ( ie outsidebars/pinbars/3 bar reversals) at levels I define as important.   I use a 2000 tick chart.  I aim to take profit at the next 'level' but not less than 1R.  Avg time in a trade is 7 minutes.

thks


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## Trembling Hand (19 December 2010)

lindsayf said:


> ah I didnt make it clear did I - this is on a live account, did a lot of simming previous to October.   The stops are from 10 to 20 ticks.  The method is based on price action ( ie outsidebars/pinbars/3 bar reversals) at levels I define as important.   I use a 2000 tick chart.  I aim to take profit at the next 'level' but not less than 1R.  Avg time in a trade is 7 minutes.
> 
> thks




Ah OK then all good. 

Then in that case trading more contracts as your account can handle it will help. You can take 1 off at the first target and then every now and again let the others run a little with a BE stop.

Very hard to trade with 1 contract IMO.


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## lindsayf (19 December 2010)

Will get there one day as it seems that most successful traders scale out from what I can gather.  But my experience of scaling out ( on other methods)  is not good in that I find the profitability of parcels after the initial one is not as good as the first one over a set of trades.  I also have found that the ave win/ave loss is hard to keep above 1 as an early stop out is on the full position.  But it is my aim to  be trading multiple contracts  by mid next year and no doubt I will do more practice of exit methods.

Any other comments on these metrics?

thks


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## Trembling Hand (20 December 2010)

lindsayf said:


> But my experience of scaling out ( on other methods)  is not good in that I find the profitability of parcels after the initial one is not as good as the first one over a set of trades.




Thats because your thinking like a poor old system trader. Your thinking of probabilities over averages etc etc blah blah.

Think like a discretionary trader. There will be times when the trade you have been waiting for for weeks eventually rolls up. Or there will be times when over a period of weeks a big dick will hit the market at the same time or same way and you will just know how to trade it and want BIG volume. Thats the disc traders edge. To hit the market when it suits. 

Position sizing is for whimps and system traders :


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## tech/a (20 December 2010)

> Position sizing is for whimps and system traders




Hmm I dont know about that!
Unless your trading with your total capital (Available) on every trade---your position sizing.


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## lindsayf (20 December 2010)

Trembling Hand said:


> Thats because your thinking like a poor old system trader. Your thinking of probabilities over averages etc etc blah blah.
> 
> Think like a discretionary trader. There will be times when the trade you have been waiting for for weeks eventually rolls up. Or there will be times when over a period of weeks a big dick will hit the market at the same time or same way and you will just know how to trade it and want BIG volume. Thats the disc traders edge. To hit the market when it suits.
> 
> Position sizing is for whimps and system traders :




haha..my trading is far from that discretionary

think Ill be a discretionary trader with a systems approach for a while yet.  The kind of market reading and feel that it would take to trade like you describe is a long way off for me.

I reckon if I maintain performance similar to above and then load up contracts over time I will be pretty happy.  

Anyone notice that I had 18 shorts and only 2 longs?


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## Trembling Hand (20 December 2010)

lindsayf said:


> Anyone notice that I had 18 shorts and only 2 longs?




No. I didn't but it does bring up a point I was going to say considering the small sample. Be careful of the daytraders curse. Playing range bound/revision to the mean trades when a period of trending comes about or the opposite. You can give back weeks of work in a few days when the market changes.

Also the same kinda thing happens when you get in sync and seem to be reading the market well then all of a sudden nothing works. And ya give it all back before you realise you're a mug not a master of the universe


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## lindsayf (20 December 2010)

yeh 20 trades is nothing...see where I am at after 100....hopeful though..and need to look into what looks like a tendency to a short bias.


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## Wysiwyg (20 December 2010)

> Also the same kinda thing happens when you get in sync and seem to be reading the market well *then all of a sudden nothing works*. And ya give it all back before you realise you're a mug not a master of the universe




I experience this phenomena too although changing nothing about my strategy. Strong growth and then consecutive losses to cull growth rates. I have always felt there are other forces at work controlling the outcome so no one gets away. I can't prove it but I got a hunch. 
Maybe why only few go on to make millions out of securities trading.


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## tech/a (21 December 2010)

> Maybe why only few go on to make millions out of securities trading.




No
*Only a few trade with enough to make millions.*
Most trade with peanuts.

Presuming you are a competent business person.

If you had a company which cost you $50K (turn over $120K) Say a Lawn Round what would you expect to return from that a year?
If you had a Mc Donalds Franchise that set you back $1 mill (Turn over $2.5 mill) what would you expect return from that a year.
If you had a company that cost $5 million (Turn over $12 mill) what would you expect that to return in a year.

Good* nett* profit before tax is generally 10-18%

Trading is no different.



> I experience this phenomena too although changing nothing about my strategy




Dont know that that's a good idea either as you should include and adjust parameters as soon as they are evident particularly if at right angles to expectation of your methods performance.


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## Wysiwyg (21 December 2010)

tech/a said:


> No
> Good* nett* profit before tax is generally 10-18%
> 
> *Trading is no different.*



I understand the bankroll size bit but if a gumby like me (with relative peanuts) can make 35 k in three months and + 10 k in a trading session on two occasions, then this is evidence to me that anything is possible. The sky is the limit? 

If not, where are the boundaries or limitations? The circumstances or the individual? Why can this not be repeated? Is it luck? Maximising return is the goal so it can be done.


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## tech/a (21 December 2010)

Wysiwyg said:


> I understand the bankroll size bit but if a gumby like me (with relative peanuts) can make 35 k in three months and + 10 k in a trading session on two occasions, then this is evidence to me that anything is possible. The sky is the limit?
> 
> If not, where are the boundaries or limitations? The circumstances or the individual? Why can this not be repeated? Is it luck? Maximising return is the goal so it can be done.




Anything is possible it can be seen time and again.
Your figures are way way off a million.
Money makes money and few understand the concept even though its bandied around.

There are boundaries both individual and circumstantial.
IT (regular good profits) can be repeated and so can extended losses.
Is it luck.
Its been my experience that the life changing occurences in life are indeed luck.
Luck that you placed yourself in a position with enough to make a dramatic difference.

Many watched the housing boom---some bought an IP
Very few bought 10 or more!
Same with Gold many saw and participated but few (That I know of) with 500K or more.
And so it goes on.
If you had 10x your trade capital your 10k in a session would be 100k your $35k--- $350k---very very different.If you get my drift.


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## tech/a (21 December 2010)

saiter said:


> If someone is using discretionary techniques to trade, how do they know if they have a positive expectancy? I'm thinking that they get on a simulator, practice their technique to ensure that they generate money, and then apply the same technique to the real market.
> Does this mean that when the market changes, your technique will have to change and you'll have to get on a simulator again?
> Is there any other way besides this to check for positive expectancy?
> 
> ...




*This question doesnt seem to have been correctly addressed*.

*HOW?*

Going over your trades over a period of time you would want to see
(1) More winning trades than losing trades resulting in profit
OR
(2) Larger winning trades than the total of all losing trades.

From here you can calculate the "expectancy" for every dollar invested in the method you are trading in a discretionary manner.
You could do this after every closed trade.


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## skyQuake (21 December 2010)

tech/a said:


> Anything is possible it can be seen time and again.
> Your figures are way way off a million.
> Money makes money and few understand the concept even though its bandied around.
> 
> ...




Just like to add that the bigger the line you swing, the more difficult it is to trade with decent size. Make 20% of 10k? Easy, buy a breakout on a 10c speccie. 20% of a mil? You cant put it all into that speccie anymore. 
Liquidity constraints.


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## tech/a (21 December 2010)

skyQuake said:


> Just like to add that the bigger the line you swing, the more difficult it is to trade with decent size. Make 20% of 10k? Easy, buy a breakout on a 10c speccie. 20% of a mil? You cant put it all into that speccie anymore.
> Liquidity constraints.




Yes very true Sky.
50-100% looks spectacular and can be done on individual trades even portfolios but do it on 500K plus is an entirely different matter.

If your a Futures genius then all your liquidity issues disappear.!


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## Wysiwyg (21 December 2010)

Thanks a million tech/a for your invaluable contributions. Happy New Year.


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## lindsayf (8 January 2011)

tech/a said:


> Last 2 mths only trading the FTSE Futures
> Only one contract a discretionary method which to be honest is based on VSA clear buy and sell. I usually set a buy and when triggered a sell (Short or long) and go do something else---walk/tea/TV.
> 
> I close out before I go to bed if not already closed before Which I am now.
> ...




Hi Techa

How are you going with this?  Are you planning to go for multiple contracts this year?  I'm interested to know what your profit factor is for this method, just to compare to my own single contract trading.

thks


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