CFDs - Eric Kratzer S/T Method

[Trembling Hand]

thanks TH,

thats what i alluded to in one of my other posts.

Do you have any suggestions as to how it could be improved?

im open to all ideas. but basically i want a set of intraday rules/guidelines that i can use for those times when i am in front of the computer.

Have been waiting for someone to ask since this thread started.

Throw away one of the MAs. Why does it have to be a MA cross? They are for dummies looking for a holy grail. They get so wound up in looking for an indicator that they forget about the only thing that matters, the PRICE. Why not a Price cross over one MA have a look at the charts better entry and exit every time.

Why use two lagging indicators to give you a signal?? I have a theory on this one but that’s for another time.

 

[prawn_86]

thanks TH,

i had a quick look at the chart and it looks interesting...

one must remember that Eric designed this to use on stocks, but now im just adapting it on the index.

i guess it just comes down to whatever works for each person. but i will def start looking at just a price cross on the 7min and 15min MA

 

[eric35]

People had some question about the profit possibility of this trading plan. I see it as follows:
Assume you have $5000 in your CFD account. Assume we use this figure to calculate our profit/loss, because this is the amount of money we have tied up.e.g., taken out from our normal trading account.
The profit as show in my table is approximately $1500. We did 33 trades at $10,000, brokerage $10 per trade. Take this amount away so we have a net profit of about $1170.
A profit of about 23%, not bad for 2 months investing. I leave it up to you to work out the annual return.
You do not have to sit at your computer everyday unless you wish to increase your trades. Many days you could have 2 trades, up to you. But it is a good little system to carry out if you are sitting at your computer do other trading.

 

[prawn_86]

Welcome aboard Eric

I trust you will find some interesting discussion here at ASF.

Just to follow up from my other posts i executed one other trade of the index today.

Trade 5
Long 6486 Out 6494 Profit 6


Total profit for the day = $12
Total profit over 2 days (8 trades) = $12

This is assuming a 1 contract 1% CFD via CMC Markets which would have a margin each trade of approx $64. You could purchase more contracts and scale up the margin and profit/loss.

therefore profit over 2 days = 18.75%.
Not too shabby at all

I will be continuing next week, but due to exams will not have a lot of time so probably not many trades will be executed.

 

[Trembling Hand]

People had some question about the profit possibility of this trading plan. I see it as follows:
Assume you have $5000 in your CFD account. Assume we use this figure to calculate our profit/loss, because this is the amount of money we have tied up.e.g., taken out from our normal trading account.
The profit as show in my table is approximately $1500. We did 33 trades at $10,000, brokerage $10 per trade. Take this amount away so we have a net profit of about $1170.
A profit of about 23%, not bad for 2 months investing. I leave it up to you to work out the annual return.
You do not have to sit at your computer everyday unless you wish to increase your trades. Many days you could have 2 trades, up to you. But it is a good little system to carry out if you are sitting at your computer do other trading.

Welcome to ASF

I have to say that I find it amusing, misleading and maybe even dangerous to be concentrating on % gain with a couple of CFD trades.

Your exposure when you open a CFD trade is not the margin required. Anyone serious about a trading system would be more interested in their exposure or real risk rather than return on a very highly leveraged product.

I would suggest also that if you really want to pimp a 'system' that a bigger sample is tested. If you have a larger sample, either live or back tested, it would look a lot better. Really a system should be judged on numbers like,
Avg win, Avg loss
% win, % loss
Max # of losers
Max draw down... Etc. not on return over a month or two.

Then after you know these numbers can you draw a real conclusion about the expected return.

But in any case look forward to some more results.

 

[prawn_86]

TH,

i agree that there has not been enough trades carried out in order to decide how good this method really is.

However, how is one supposed to backtest when the method relies on judgement, and is more of a 'framework' than a mechanical system? three out of my 5 trades today were exited on my own feeling rather than the 'rules'

After my exams finish i will experiment with just one MA and price action also.

 

[eric35]

Trembling Hand,
What do you think is the real risk or exposure? Of course in this case, the exposure is $10000, but where do you place the real risk?
In day trading the ASX20 you attend to your computer all day and you can get out of a trade anytime you wish. So your risk is down to your stop loss. Perhaps you don't fully understand day trading.
As far as your %win,%loss and number of wins and number of losses etc are concerned, you can easily work them out for yourself on my table on my web site.
Yes, the sample is far too small to do any statistical analysis, backtesting is impossible due to the flexibility invoved. Wait til the sample grows, then we can assess further.
BTW, I put ALL my daytrades on the website, not just a few selected ones.

 

[nizar]

Welcome to ASF

I have to say that I find it amusing, misleading and maybe even dangerous to be concentrating on % gain with a couple of CFD trades.

Your exposure when you open a CFD trade is not the margin required. Anyone serious about a trading system would be more interested in their exposure or real risk rather than return on a very highly leveraged product.

I would suggest also that if you really want to pimp a 'system' that a bigger sample is tested. If you have a larger sample, either live or back tested, it would look a lot better. Really a system should be judged on numbers like,
Avg win, Avg loss
% win, % loss
Max # of losers
Max draw down... Etc. not on return over a month or two.

Then after you know these numbers can you draw a real conclusion about the expected return.

But in any case look forward to some more results.

TH you have putting up some really good posts lately.

This one I like it very much -- in fact, it could have easily been me that wrote this, lol.

One more criteria to judge a system ESPECIALLY if using high leverage, is the largest string of losses.

Its critical to know this beforehand so you will know the probabilities that the system will destroy you.

And Prawn, you'd do well to listen to what TH is saying.
Try to look for price based signals, not MAs that lag the price action.

 

[nizar]

Trembling Hand,
What do you think is the real risk or exposure? Of course in this case, the exposure is $10000, but where do you place the real risk?
In day trading the ASX20 you attend to your computer all day and you can get out of a trade anytime you wish. So your risk is down to your stop loss. Perhaps you don't fully understand day trading.
As far as your %win,%loss and number of wins and number of losses etc are concerned, you can easily work them out for yourself on my table on my web site.
Yes, the sample is far too small to do any statistical analysis, backtesting is impossible due to the flexibility invoved. Wait til the sample grows, then we can assess further.
BTW, I put ALL my daytrades on the website, not just a few selected ones.

Daytrading or any type of trading has risk.
As competent traders, its important that we understand this, and try to quantify and manage our risk.

You say your risk is down to your stop loss.
But how many consecutive losses can your capital handle?

How many consecutive losses are statistically possible according to the win% of the system?

If you don't know this then you have no idea of what your risk of ruin is from trading the system.

 

[CFD]

~~
How many consecutive losses are statistically possible according to the win% of the system?

In Excel
=ROUND(LN(1000)/-LN(1-35%),0)

Trades = 1000
% of winning trades = 35%
Longest loosing sequence = 16

Maximum draw down is something different, because you could have say 2 or 3 wins after this loss sequence and then have another run of outs of say 8 or 10 or 12.

 

[nizar]

In Excel
=ROUND(LN(1000)/-LN(1-35%),0)

Trades = 1000
% of winning trades = 35%
Longest loosing sequence = 16

Maximum draw down is something different, because you could have say 2 or 3 wins after this loss sequence and then have another run of outs of say 8 or 10 or 12.

Yes thats true.

But even 16 losses in a row, Im pretty sure this would send all CFD traders bankcrupt.

 

[vishalt]

imo aussie shares are the worst to day trade due to the market generally pricing in all the good news right before the open,

i disagree with his methods but yeah, it really sounds like you have to be hawking the computer to trade.

 

[nizar]

and wow @ all these forumlas to calculate a good trade, sounds like youd have to a full time sit at home all day trader for that.

Actually no, not quite.
I use "all these formulas" and I trade using a weekly timeframe. I only have to really spend 1hr a week trading roughly.

 

[vishalt]

[QUOTEnizar;225015]Actually no, not quite.
I use "all these formulas" and I trade using a weekly timeframe. I only have to really spend 1hr a week trading roughly

is it working?

 

[nizar]

Too early to tell.

But i need to have some degree of confidence in the system before i start trading it -- as opposed to "trading blind".

Trading blind is where you trade a system having no idea if the system is even profitable, no idea of how profitable it is, no idea how long to expect before results start to show, no idea on what sort of drawdown you are likely to experience during trading, and no clue as to what largest string of losses will be.

Though I must say I am suprised at the number of people (or punters?) that trade a system without knowing the basics as I've outlined above.

Each to their own i guess.

 

[So_Cynical]

I cant help but think all these "methods" are just a way to be more confident with
your punting....i used to do the same with horses and roulette wheels.

Happy Trading/punting.

 

[professor_frink]

Trembling Hand,
What do you think is the real risk or exposure? Of course in this case, the exposure is $10000, but where do you place the real risk?
In day trading the ASX20 you attend to your computer all day and you can get out of a trade anytime you wish. So your risk is down to your stop loss. Perhaps you don't fully understand day trading.
As far as your %win,%loss and number of wins and number of losses etc are concerned, you can easily work them out for yourself on my table on my web site.
Yes, the sample is far too small to do any statistical analysis, backtesting is impossible due to the flexibility invoved. Wait til the sample grows, then we can assess further.
BTW, I put ALL my daytrades on the website, not just a few selected ones.

Morning Eric,

welcome to ASF

Interesting that out of all of the people that have posted in this thread on your method, you've managed to make this comment to one of the few people on this forum that actually daytrades!

I'm sure Trembling Hand understands daytrading just fine

Couple of questions/coments about your method if you don't mind.

1. Do you have any way of dealing with the opening? Gaps and moving averages don't work too well together.

2. Why crossovers? Wouldn't the method be a lot better off if you used the crossover of the two averages as your trend filter, and then started loking for a pullback in a trend? Most of the time(as prawn found out on Friday) buying crossovers will have people buying/selling into the top/bottom of an inital move up or down. Waiting for a pullback after the crosover will provide a better entry price, closer stops, and will allow the trader to at least scratch out on a minor move on a non trending day.

Though I must say I am suprised at the number of people (or punters?) that trade a system without knowing the basics as I've outlined above.

Each to their own i guess.

BOOO!

So after a total of a few weeks trading a 'system' yourself, and with less than 20 trades under your belt, you are now in a position to refer to people that don't trade the same way as yourself as punters. How funny.

 

[prawn_86]

Though I must say I am suprised at the number of people (or punters?) that trade a system without knowing the basics as I've outlined above.

Each to their own i guess.

Yeh Nizar,

I have to agree with Frinky's comment.

As i have said previously this is not a purely mechanical 'system' so there is no way in which it can be properly backtested, hence making your figures useless, in this scenario.

Maybe it is not a representative sample, but system traders seem to be very 'sole focused' on their method and not able to see that there are other ways/combinations/mixtures/hybrids/styles of trading that can involve a mash up of different styles.

I appreciate the discussion but can you please tell me a way to test and gain all your figures, other than how i am doing it? Ie - paper trading, as historical perspectives will not work due to the human decisons needed to be made

 

[CFD]

Yes thats true.
But even 16 losses in a row, Im pretty sure this would send all CFD traders bankcrupt.

Hence the need to also relate the S/R to the R/R.

 

[Trembling Hand]

Trembling Hand,
What do you think is the real risk or exposure? Of course in this case, the exposure is $10000, but where do you place the real risk?
In day trading the ASX20 you attend to your computer all day and you can get out of a trade anytime you wish. So your risk is down to your stop loss. Perhaps you don't fully understand day trading.

Eric, Sorry to come out on the attack so strong but I do have a real problem with people stating % return on trades or trading systems without recognition of the high leverage and therefore the high risk of the system.

Let me try and explain. What gave you the 20% return is not your system but your leverage. You were buying shares of the value of $10,000. I believe that anyone who has tried to put together a trading system after blowing up a couple of accounts realises that you need a system that works regardless of the leverage. And your system, from a quick scan admittedly, is relying on small win to loss ratios suped up with huge leverage. In this little day trader’s mind is a recipe for going nowhere long term if not going backwards fast.

CFD providers use that kind of marketing to suck the newbies into their market making CFDs by appealing to everyone’s weakness. Who wouldn't want to make 20% in two months. The problem is there is no thought given to your risk. And why do they give you the huge leverage? Because they are on the other side of your trade and they know the best way to ruin someone’s account is give them huge leverage. With huge leverage your chances of getting into a distressed state is great. Not stressed but distressed and as I noticed on your website you are a Psychologist, surely you can recognise the MASSIVE problems that this can create. And once you have taken a decent hit with leverage the damage is done. Rarely do newbies come back from such hits. Which brings me to my point that as a health professional you will surely understand....
Prevention is better than cure.

Systems that rely on leverage to win are destined to fail.

Oh and while I'm ranting on if you think your mental stoploss is your risk you haven’t traded enough yet. How many times do stocks in the ASX20 halt trading unannounced to release news? I would say at least a couple of times a week. There is a big risk that your stop will not help. But the biggest problem with CFDs is anyone that has taken real $$ from them soon finds their account not getting the same fills as when they started. You get requotes just as you try to get out of a trade or their 'award winning' software crashes. Not to mention the effect that always buying/selling 'at market' has on expectancy of a short term trading system. And I am yet to see a new trader have an average stoploss anywhere near their mental stop on a short term market system. Just too hard, when the stocks move they move too fast to get good fills and this effects learners average stop big time.

But still will be more than happy to be shown your system works just not too happy with claims of 20% return due to big time leverage.