So you want to trade successfully?

[tech/a]

Youve seen myself and a few others banging on endlessly about how 90% of traders have no idea if they have the slightest possibility of being profitable.

From the Practical Trading Thread

(3) knowing you'll be successful.
You can take as much education as you like and it wont guarentee success.
Understand Risk and how to minimise it.
How to manage trades.In particular what your strategy is when your wrong and you'll be wrong more often than right.
You can still be very profitable even when your wrong 70% of the time.
Learn what to do to achieve profitability.

At last the most concise and best presented explaination from a RECOGNISED educator is here.

Actually HERE
http://www.indextrader.com.au/Book_UPST.asp

 

[roland]

Thanks tech, I just ordered one.

A little cheaper on eBay: http://cgi.ebay.com.au/ws/eBayISAPI.dll?ViewItem&item=150446036088

 

[professor_frink]

I'm gathering you like the book tech

Is there much in it for people who have been trading awhile?

 

[RazzaDazzla]

Is this book worth a read if you have already read the likes of Tharp and understand Expectancy etc.?

 

[tech/a]

Prof.& Razza Dazzla.

I think so.

I personally like the snippets you get from experienced educators that you didnt come for.Little gems that make sence in your own world of trading endeavor---expressed by others who have attacked the same thing---possibly from another angle and making other observations.
I certainly like the no nonsense writing style.In your face---This is how it is---and in my view--- he's right!

Ive read Van Tharps work and find Penfold infinitely easier to understand---but that may well be the 12 yrs between books!.

 

[professor_frink]

Prof.& Razza Dazzla.

I think so.

I personally like the snippets you get from experienced educators that you didnt come for.Little gems that make sence in your own world of trading endeavor---expressed by others who have attacked the same thing---possibly from another angle and making other observations.
I certainly like the no nonsense writing style.In your face---This is how it is---and in my view--- he's right!

Ive read Van Tharps work and find Penfold infinitely easier to understand---but that may well be the 12 yrs between books!.

cheers, will have a look if I see it at my local bookshop.

 

[Twiddle]

Cheers for the reccomendation Tech/a.

Just ordered it.

 

[opulence]

Got the book. Read it. Made notes. Chewed through a highlighter.

Great read. Just a few questions though.

In regard to expectancy. Say you have a 3:1 win loss ratio and a 0.3 probability of win. Lets assume its a simple trend following system. You can expect a positive expectancy with those numbers. What the formula seems to lack is some sort of period. Shouldn't the result read out expectancy per year for example? or is it per amount of trades?

Or is it like expectancy in terms of stats like as trades tends to infinity expectancy tends to E(x)?

With risk of ruin? Running those same numbers for the expectancy, and assuming a capital base of 20k, then the amount risked per trade, assuming less than 0.5% risk of ruin is around $2400. Does that mean that your stop loss is set so that at max you can loose is $2400?!?!? Because thats a fair bit! 12%ish.

If you were trading short term with stop losses set to $2400 loss (assuming you've accounted for slippage and transaction costs and that your stops aren't determined by some other factor) your position size would have to be very large. I.e using margin right?

Am I way off here?

 

[tech/a]

Got the book. Read it. Made notes. Chewed through a highlighter.

Great read. Just a few questions though.

In regard to expectancy. Say you have a 3:1 win loss ratio and a 0.3 probability of win. Lets assume its a simple trend following system. You can expect a positive expectancy with those numbers. What the formula seems to lack is some sort of period. Shouldn't the result read out expectancy per year for example? or is it per amount of trades?

Or is it like expectancy in terms of stats like as trades tends to infinity expectancy tends to E(x)?

Expectancy is based upon tests of your inputs relative to a data set.
Alter either and you'll alter expectancy (Generally).
Time does not have a bearing on the actual calculation.

With risk of ruin? Running those same numbers for the expectancy, and assuming a capital base of 20k, then the amount risked per trade, assuming less than 0.5% risk of ruin is around $2400. Does that mean that your stop loss is set so that at max you can loose is $2400?!?!? Because thats a fair bit! 12%ish.

If you were trading short term with stop losses set to $2400 loss (assuming you've accounted for slippage and transaction costs and that your stops aren't determined by some other factor) your position size would have to be very large. I.e using margin right?

Am I way off here?

Your missing some components.
We have number of winners/number of losers.
We dont know average risk or Average Reward.

I dont know where your $2400 has come from?

 

[opulence]

Expectancy is based upon tests of your inputs relative to a data set.
Alter either and you'll alter expectancy (Generally).
Time does not have a bearing on the actual calculation.

So I would imagine then that time is only a function when you look at how frequently a strategy has opportunities to trade? In that case is expectancy just a comparative tool to ensure a) that it's positive and b) compare strategies? I'm also guessing that you cannot use expectancy to give in indication of profit forecast?

Your missing some components.
We have number of winners/number of losers.
We dont know average risk or Average Reward.

I dont know where your $2400 has come from?

Ok my understanding of the point of the risk of ruin formula is to ensure that a trader will never hold such a large position as to increase the likelihood of so many consecutive losses that he would wipe out to less than 1%.

The formula in the link requires you divide your capital up into units small enough to achieve the required risk of ruin. The $2400 is the capital my formula gave me that I would have to risk to achieve less than 1% risk of ruin if I started out with $20,000.

Does that make my original question clearer? I'm not sure if I've understood/explained it properly.

 

[IB12]

Thank you for the recommendation.
I will order the book and read it when I have time. Sounds like a good book.
I'm usually too busy in my day schedule to comment much, but when I see something of value I will.

Does anyone know Brent's background and whether it's worthwhile to research/take up his services/trading philosophies?

This World Cup of trading that I accidentally stumbled upon sounds interesting.

Thanks in advance.

 

[tech/a]

So I would imagine then that time is only a function when you look at how frequently a strategy has opportunities to trade? In that case is expectancy just a comparative tool to ensure a) that it's positive and b) compare strategies? I'm also guessing that you cannot use expectancy to give in indication of profit forecast?

If you add frequency to the mix then sure

Ok my understanding of the point of the risk of ruin formula is to ensure that a trader will never hold such a large position as to increase the likelihood of so many consecutive losses that he would wipe out to less than 1%.

Risk of ruin V Expectancy are 2 different things.
You need to know expectancy before you can calculate risk of ruin.

The formula in the link requires you divide your capital up into units small enough to achieve the required risk of ruin. The $2400 is the capital my formula gave me that I would have to risk to achieve less than 1% risk of ruin if I started out with $20,000.

Clearly risking $2400 a trade is not ideal.
Have a look at fixed Fractional positionsizing to understand calculating a position size.

Does that make my original question clearer? I'm not sure if I've understood/explained it properly.

No not really but investigation will help you dramatically.

 

[Junior]

Thanks for the recommendation Tech, sounds like something I would be interested in.

I have ordered my copy online via "QBD the Bookshop". $54 incl. postage and should be delivered in 2-4 days for those who are interested!

 

[nomore4s]

Don't forget you can buy it through the ASF book shop and help support the site.

And it's currently on sale until 31st of July

http://www.moneybags.com.au/default.asp?d=0&t=1&id=6101&c=0&a=74

 

[Tanaka]

Don't forget you can buy it through the ASF book shop and help support the site.

And it's currently on sale until 31st of July

http://www.moneybags.com.au/default.asp?d=0&t=1&id=6101&c=0&a=74

I wish I knew that before I ordered it on Amazon. After exchange rate and shipping and handling I paid a couple of dollars less on Amazon, but I would have paid an extra couple of dollars to have supported this forum!

 

[nomore4s]

I wish I knew that before I ordered it on Amazon. After exchange rate and shipping and handling I paid a couple of dollars less on Amazon, but I would have paid an extra couple of dollars to have supported this forum!

Just click on a few adds to make up for it then, lol

 

[Junior]

Don't forget you can buy it through the ASF book shop and help support the site.

And it's currently on sale until 31st of July

http://www.moneybags.com.au/default.asp?d=0&t=1&id=6101&c=0&a=74

And it's the cheapest place to buy it...too late for me!

 

[Temjin]

Thanks for the recommendation Tech/A.

You've got me to consolidate my reading list again and had a big search last night on new publications that are worthwhile to read. (especially from authors that I truly respect and know what they are talking about)

 

[RazzaDazzla]

Apologies in advance to the mods; (I'll click lots of ads to make up for it)

But IMO you can't go past booko for finding the best priced book!

http://www.booko.com.au/books/isbn/9780470825808
shows the book being mentioned for some $A 38 delivered! Sure beats paying $75 at Big W or $70 odd at Angus and Robertson \.

Mods, maybe you can drop ship your books using Booko to source your books?

 

[Temjin]

Apologies in advance to the mods; (I'll click lots of ads to make up for it)

But IMO you can't go past booko for finding the best priced book!

http://www.booko.com.au/books/isbn/9780470825808
shows the book being mentioned for some $A 38 delivered! Sure beats paying $75 at Big W or $70 odd at Angus and Robertson \.

Mods, maybe you can drop ship your books using Booko to source your books?

Great find Razza!

Sorry Mods, free market wins. Will click a few more links to compensate for it though. heh