I'm surprised to read that you were going for 8R wins. You did mention that earlier, sorry. 8R even 5R wins are worthwhile targets. With a W% > 50% a AW/AL of 2R is a good edge. 100+ tick wins would be rare in the ES (~25pts), maybe slightly easier in the NQ, but more common in the currencies. If most of your trading is done on the ES then your current results are understandable. The ES has enough liquidity to use a 6 tick SL and most intraday ES traders seem to think that a 2 - 3 point move is great. If you are managing your trades for more, you are on the right track (IMO).
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OK. I can see that I am on the right track, and need to increase the W%.
I reckon that this is the biggest challenge to a random strategy like the 'coin toss' as it is likely that the losses are going to be greater than when you use your intellect to determine high probability entry points. So, the first lesson is that a higher probability entry point equals less underlying losses.
The second part to it is the W%. The W% is no doubt affected by the higher probability entries, but I have noticed that the W% is determined in part on how big the R multiple is. e.g. 4R multiple = higher number wins achieved, and less breakevens. The reverse is true for multiples 8R. So, to get the W% up, the size of a stop loss needs to be considered. Is it better to have a bigger risk factor and higher W% or a smaller risk factor and lower W%. Ideally, a smaller risk factor and higher w% is the holy grail.
This shows that money mngt has limitations on its own. Nevertheless, it is a good start as you say.
You mentioned that you are trading the 30min charts. This confused me for a while. You're not really trading 30min charts as you use a coin toss (random) entry technique. A few authors have stated that traders could make money using a random entry technique and strict loss management. Your results have shown that it is possible and that the most important aspect of trade mgt is restricting your losses to as small amounts as possible. You have also demonstrated how much of a drag even basic commissions are on our accounts. Now you know that your edge has to be much bigger to overcome the basic costs
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Agreed. Another factor determining the W% is how tight your stops are. I have played around with my entry stops and there is a definite relationship between them. Assume risk is X, x/2, x/4 and so on:
As stops are tightened, there is a big drop in W% rate, and a big increase in Av. Gains: Losses. My thinking is that it is important to aim for the big plums and protect against losses at all costs. For me, lots of BE, and a few big Plums is OK. There comes a point where the having a stop too tight becomes counter productive as it reduces your gains disproportionately as shown by X/2 v X/4.
You have demonstrated that you have the skill to keep your losses small. A huge start. Now you need to build on your very small edge as you know it's not enough to support you or reach your goals. The other costs of a trading business will soon erode your capital quickly.
There are two main aspects that you can work on to increase your edge. I discussed them before. Can you identify higher probability entries? This will reduce the number of losses and BE results (adds to your edge). Can you increase the size of your ave win? Once you have improved your edge, creative money mgt will help you reach your goals quicker.
Yes, I think that it has been a worthwhile exercise from that point of view. So, really, there are three things parts to a trader's edge:
1. Keeping Av. Losses Small: I can say I check that box. This means small risk entries and protecting self by moving to a no lose position early.
2. High Probability Entries: I am quite sure I can tick that box also and this will increase my W% and reduce L%.
3. Increase Size of AV Wins: Aim for high multiples 4R, 5R or 8R. I am checking this box. This means being patient though and being willing to let my stops hang back a bit once the market moves and being willing to sacrifice small profits for a few larger ones.
So, really, the next step for me is to move to higher probability entries!
Thanks for your feedback Peter.