My Trading Plan/System (Beginner)

[skc]

At $7.5K capital, 2% risk per trade = $150, less $12 commission = $138. Shares get batted around 10-15% easily in a matter of days so your position size is probably no more than $1000 per trade. So you will probably have around 5-7 positions open at the one time, if you fully invest your capital.

One trick that is potentially useful is keep roughly your longs and shorts to the same amount. In the current market, a good (or bad) night on the US means everything goes up (or down) by 3-5% in the morning. By having a collection of longs and shorts can give you some protection against the overall market movements. It also makes prunning your loses easier as you will still see the winners within your small portfolio. Of course, this doesn't negate the fact that you got to be right on your stock picking.

In your backtesting (which I hope you will do at some stage), make sure to consider slippage in your entry and exits. That is, if three consecutive higher closes actually signaled an uptrend, prices may gap up on the 4th day's open, so being able to buy on the closing price of the 3rd day is an exercise in theory only. Same with exits

 

[tcoates]

Using the volume system in your first post on the ASX200 (slightly outdated)...

Feb 19, you got 24 entries (14 buy, 10 sell)
Feb 20, you got 21 entries (5 buy, 16 sell)

Looking only the closes...

between Feb 19 and Feb 20, looking at the buys only... the largest gain was 4%, and the largest loss (over 1 day) was 10%. If you were able to buy all signaled, then between these two days, you have an average loss of 3%.

Assuming you were able to enter all buys, did you have enough to buy those triggered on the 20th.

Look at the trades signaled and see if there is something that you could do to filter to weed the good from the bad???

Tim

PS. Not suggesting it is a good or bad system, but with the amount of capital, the number of signals, and current environment, might want to refine it somehow.

 

[MS+Tradesim]

That is, if three consecutive higher closes actually signaled an uptrend, prices may gap up on the 4th day's open, so being able to buy on the closing price of the 3rd day is an exercise in theory only. Same with exits

Actually, it's not. But you have to be there to be able to participate in the closing auction. A case in point, I have an overnight momentum system which operates by buying the close and selling the open. A perfect example was CFU the other day. I paid 0.061 on close and sold on open at 0.076. I didn't get the 160% run for the day but small consistent profits can be had through strategies like this.

Of course, this doesn't negate the fact that you got to be right on your stock picking.

With an actuarial approach, being "right" on stock picking is irrelevant. My system is "right" 50% of the time. But it averages about 2% a week.

Saiter, you can theoretically achieve what you want to achieve (depending on your exit strategy) but you are going to need to follow your rules 100%. That is what remains to be seen. However, as TH points out you have no idea if your goal is possible if you don't know how the idea will perform. Get your exits sorted, backtest, then forward test in real time for a month or two. You will collect a lot of useful info that just isn't available through back testing. And then when you use real money you'll face a new set of issues again....the ones that involve the psychology of losing/winning real money. Live trading just isn't the same as demo trading.

Good luck. Sift the advice that's been given to you. I have 5 mechanical systems - only 2 are live in the current market conditions. But all 5 would be considered "impossible" by quite a few people on this forum. Remember that those who think some thing is impossible are ignored by those who are doing it. But stay grounded...as a newbie you will learn the most when you go live.

 

[Stormin_Norman]

when you use real money you'll face a new set of issues again....the ones that involve the psychology of losing/winning real money. Live trading just isn't the same as demo trading.

Good luck. Sift the advice that's been given to you. I have 5 mechanical systems - only 2 are live in the current market conditions. But all 5 would be considered "impossible" by quite a few people on this forum. Remember that those who think some thing is impossible are ignored by those who are doing it. But stay grounded...as a newbie you will learn the most when you go live.

i can't reiterate those points enough.

most likely youll have to lose money to realise those however.

 

[tech/a]

Saiter, you can theoretically achieve what you want to achieve (depending on your exit strategy) but you are going to need to follow your rules 100%. That is what remains to be seen. However, as TH points out you have no idea if your goal is possible if you don't know how the idea will perform.

More Big letters for more Big must have's.

Test and re test.
Learn how to test and learn how to evaluate those tests.
That doesnt mean trading a demo account either.
Which is just a small apect of Forward testing.

 

[MS+Tradesim]

Saiter,

I got bored and for the hell of it developed a simple shorting system using CFDs.

Very basic - looking for overbought on stoch along with some volume factors and close less than yesterday's close. Exit after X number of days. Start with $7500 trading only on ASX50. (whole bunch of considerations such as slippage etc. allowed for). Portfolio limit of 50%. Basically divide the other 50% and allocate no more than 25% of that to 4 signals. So max 4 positions with 12.5% total equity in each. Nb: this is NOT a %risk model.

Tested only on 2008. This is a bear market trading idea. You would get slaughtered trading this in a bull or sideways market, I think.

Some backtested stats:

Starting Capital: $7,500.00
Finishing Capital: $26,317.71
Maximum Equity/(Date-Time): $21,706.18 (16/01/2009)
Minimum Equity/(Date-Time): -$832.26 (22/02/2008)
Gross Trade Profit: $33,788.49 (450.51%)
Gross Trade Loss: -$14,970.78 (-199.61%)
Total Net Profit: $18,817.71 (250.90%)
Average Profit per Trade: $226.72
Profit Factor: 2.2570
Profit Index: 55.69%
Total Transaction Cost: $996.00
Daily Compound Interest Rate: 0.3044%
Annualized Compound Interest Rate: 203.2660%

Winning Trades: 45 (54.22%)
Losing Trades: 38 (45.78%)
Largest Winning Trade/(Date-Time): $5,048.00 (10/11/2008)
Largest Losing Trade/(Date-Time): -$1,906.48 (28/01/2009)
Average Winning Trade: $750.86
Average Losing Trade: -$393.97
Average Win/Average Loss: 1.9059

Maximum consecutive winning trades: 5
Maximum consecutive losing trades: 6
Average consecutive winning trades: 2.50
Average consecutive losing trades: 2.24

Maximum Dollar Drawdown: $5,869.43 (20.1000%)
Capital Peak/(Date-Time): $29,200.18 (16/01/2009)
Capital Valley/(Date-Time): $23,330.74 (6/02/2009)

Absolute (Peak-to-Valley) Percent Drawdown
Maximum Percentage Drawdown: 20.1000% ($5,869.43)
Capital Peak/(Date-Time): $29,200.18 (16/01/2009)
Capital Valley/(Date-Time): $23,330.74 (6/02/2009)

I ran 2000 simulations of this. The worst DD was 22% and the worst result was a profit of 174%. Before you start drooling and jump in tomorrow, the point of this is to show it is certainly possible to get the returns you want but it will take a helluva lot of work to get to that stage. As someone mentioned, 2% a week is pro-trader level. This is not contradicting what I said earlier. It is possible to get these kind of returns but it takes a lot of commitment, experience, learning from mistakes, not making them again, and perseverance to get this kind of result.

Here is a sample closed trade equity chart. How would you feel in real life sitting through a drawdown from $29,500 down to $23,500? Would you give up long before the DD bottom is reached? Really think about this...how would you feel seeing $6k evaporate in a 6 trade losing streak? This resulted in 3 losing weeks in a row! What happens if you experience a losing streak straight off the bat? You have suggested the odds of a 10-loss streak is quite low. But here is a system with a win rate of 52% on this iteration and it experiences 3 streaks >= 5 losses in a row with one of them right at the start. Using different money management models will result in different returns for this particular entry/exit idea. MM is something you should put the most thought into as it will determine whether or not you will hang around to realise the expectancy of your idea.

 

[Page]

Friends, the data given here is ok but seen the world wide market their positions are unstable for the coming week.

 

[nunthewiser]

thanks bro

 

[tech/a]

Good stuff M/S

 

[saiter]

Classic!! So you haven't a clue about your trigger, what to expect as far as stats, expected size of initial stop, win rate, DD, Amount of opportunities this will trigger daily OR as bunyip & I suspect that it would be a better trigger for a opposite entry and on and on....



:afro::shake::microwave:grenade:
What are these? just thought I would lighten my post

Hahaha exits would be at points where my original analysis would be incorrect:

1. VSA
   
   A bar with a wide range, closing near the low and on high volume would indicate weakness and hence an exit.​
2. Trends
   
   2 or 3 bars of sideways movement with average to above average volume OR where the price has broken through a recent flag.​
3. Reversals
   
   Price breaking through flag or another reversal in the opposite direction​

I think I have more of a hard time coding them into amibroker, hence I can't back test the system properly. Also, I wouldn't know how to fix stops or set position size.

 

[tech/a]

Hahaha exits would be at points where my original analysis would be incorrect:

Thats more so a hard stop.

1. VSA
   
   A bar with a wide range, closing near the low and on high volume would indicate weakness and hence an exit.​

1. 
   
   Actually in many many cases the exact opposite. I suggest re visiting the basics of VSA.
   
   

   [*]Trends
   

   2 or 3 bars of sideways movement with average to above average volume OR where the price has broken through a recent flag.​

   
   ???
   

   [*]Reversals
   

   Price breaking through flag or another reversal in the opposite direction​

???

I think I have more of a hard time coding them into amibroker, hence I can't back test the system properly. Also, I wouldn't know how to fix stops or set position size.

I would definately re think your exit criteria.

 

[Page]

Bravo!!!
It'll work I guess...
watch the market trends sharply...

 

[Trembling Hand]

Page you are a cryptic one.

 

[beerwm]

nice work there mstradesim, good read

with your exit;
Exit after X number of days.

arent you ignoring the advantages of position sizing in all this? and a maximum ammount of risk per trade, i would of thought i set % would work better in preventing heavy drawdowns,

might be missing something though,

 

[MS+Tradesim]

nice work there mstradesim, good read

with your exit;
Exit after X number of days.

arent you ignoring the advantages of position sizing in all this? and a maximum ammount of risk per trade, i would of thought i set % would work better in preventing heavy drawdowns,

might be missing something though,

I typed out a reply, browser crashed and I lost it.

Basically, tailor the MM to the strategy and objectives. IMO, one-size-fits-all money management is not the way to go. As an example I simulated my above idea with everything the same except to risk 2% of total equity on each trade to size positions. DD is about 11% and net return about 40%. Very different outcome.

I am not suggesting saiter or you or anyone use the MM model or trading idea I used above. It was simply given to demonstrate what can be achieved with $7.5k.

Have a read of TH's "Nothing to Something" thread for more evidence that big things can be achieved from modest starts - with the caveat that a new trader should not expect that kind of outcome.
https://www.aussiestockforums.com/forums/showthread.php?t=12683

 

[Temjin]

I would advice against attempting to trade and use the profit for living expenses. While the amount you are talking about is quite small, it is extremely psychological "taxing" to maintain (and to expect) consistent profit week after week.

In fact, based on the second question you were asking, you do seem to focus on just that. I tell you what, forgot all about "consistent" profit because there is no such thing. I'm sure the more experienced traders here would have mentioned it.

You need to be prepared for the massive drawn down when it inevitably comes. In fact, you mentioned you have not yet back tested the system, and do not even know how to set position sizing.

So I'm going to ignore commenting on your "entry/exit strategies" and advice you to really focus on that first before worrying about "how much profit will I get per day".

 

[saiter]

Thanks for all your help guys.
I'll have a look at intraday data and get some more reading done. I'll post up what I've learnt in a few weeks time.

 

[Trembling Hand]

Thanks for all your help guys.
I'll have a look at intraday data and get some more reading done. I'll post up what I've learnt in a few weeks time.

You don't need more reading. That's were unrealistic goals come from, you need PRACTISE.

Back testing and sim. Only then will you see whats possible and what you need to work on.

Or you could just keep throwing ideas around in your head and dreamin'

 

[saiter]

You don't need more reading. That's were unrealistic goals come from, you need PRACTISE.

Back testing and sim. Only then will you see whats possible and what you need to work on.

Or you could just keep throwing ideas around in your head and dreamin'

Okay well here's the first system that's being backtested:

/*Variables*/
/***********/
y=MA(Volume,10); /*Formula for Average Volume*/
spread= H-L; /*Size of the spread*/
mid = L + spread/2; /*The midpoint of a bar*/


/*Going Long*/
/************/
[B]/*Buy Condition: Three consecutive up-thrust days with successively increasing volume*/[/B]
Buy = Ref(C,-2)<Ref(C,-1) AND Ref(C,-1)<C AND Ref(C,-2)<C AND Ref(V,-2)<Ref(V,-1) AND Ref(V,-1)<V AND Ref(V,-2)<V;

/*Sell Condition #1: Three days where the close is sideways (+/- 5% of each other) and volume is successively decling but larger than average for the first two days*/
/*Sell =  (Ref(C,-2)<1.025*Ref(C,-1) AND Ref(C,-2)>0.975*Ref(C,-1)) AND (Ref(C,-2)<1.025*C AND Ref(C,-2)>0.975*C) AND (Ref(C,-1)<1.025*C AND Ref(C,-1)>0.975*C);*/

[B]/*Sell Condition #2: Sell on the bar with the smallest spread for the past 15 days, above average volume and a close towards the high*/[/B]
Sell = LLV(spread,15) AND V>1.5*Y AND C>mid AND HHV(C,90);

/*Going Short*/
/*Short = Ref(C,-2)>Ref(C,-1) AND Ref(C,-1)>C AND Ref(C,-2)>C AND Ref(V,-2)<Ref(V,-1) AND Ref(V,-1)<V AND Ref(V,-2)<V;
Cover = ApplyStop(stopTypeTrailing, stopModePercent, 2,0) ;*/

Entry/exit conditions bolded. The system used a 1% stop loss and a 5% trailing stop. Only long positions were taken.

Results of Backtest for 1/01/09 to 20/02/09
==================
Starting capital: $7500
Ending capital: $6830.59
Net Profit: -8.93%
Total Trades: 23
Winners: 3 (13.04%) with average win of $328.36
Losers: 20 (86.96%) with average loss of $82.72
Max system %DD: -19.6%
Risk/Reward Ratio: -46.51

Results of Backtest for 1/09/08 to 20/02/09
===================
Starting capital: $7500
Ending capital: $8384.56
Net Profit: 11.79%
Total Trades: 64
Winners: 8 (12.5%) with average win of $903.45
Losers: 56 (87.5%) with average loss of $113.27
Max system %DD: -32.53%
Risk/Reward Ratio: 6.94

Results of Backtest for 1/01/08 to 20/02/09
===================
Starting capital: $7500
Ending capital: $4139.26
Net Profit: -44.81%
Total Trades: 115
Winners: 17 (14.78%) with average win of $387.65
Losers: 98 (85.22%) with average loss of $101.54
Max system %DD: -64.83%
Risk/Reward Ratio: -3.82

I thought I'd also test the system from 01/01/01 till today, but it didn't get past 30/06/2006 when I had 100% DD

Time to make this profitable?

 

[Trembling Hand]

Okay well here's the first system that's being backtested:

I thought I'd also test the system from 01/01/01 till today, but it didn't get past 30/06/2006 when I had 100% DD

Time to make this profitable?

Good one. Bet you learnt something more valuable than reading your next book?

If a system fails badly consider flipping it - long when short. It may be a winner. Like a couple suggested