Friday, October 29, 2010

Weekend Thought: Finding the right system

Finish this week early, just watching the screen, aiding more confidence to trade.
Even with this kind of slow market, my system worked quite good. 10-20 ticks on average. There're also some nice swing for >30ticks but took more than 4 hours to develop.

Here's some of my thought about my system:
1. I Trade breakout, faked out means higher probabilities success at next breakout. It means to receive higher winning ratio, I can trade only after the first signal. If the first signal work already, then it's not my fortune.
2. Profit taking also play a good role. Profit taking earlier have better probabilities than late profit taking. Work best on choppy day, also work on trending day. No need to explain here.
3. Adjusting the Stop Loss. If I was afraid with big losses, I just waiting for a better price with still old Stop Losses intact. If I don't get filled, then it's not my fortune.
4. Watch another pair. I set 3 currencies: 6E,6B, and 6A. If one another give opposite entry, I'll wait till better confirmation. Best thing happened when three of them breakout at same direction, almost same time. The key is, not enter at the opposite direction on each currencies.
5. Backtested as far as I can go. Focus on maximum drawdown at the system. If the maximum still within reach, then I am still good to go. So far the max drawdown is -32 ticks. That's almost $400, and it's on the standard system. With the four rules, the drawdown can be minimized. With 10 ticks PT, there's still no drawdown. That's right. No negative day as far as I go, all of the three currencies.

Combine four of the rules give me incredible high winning ratio. I must say more than 80% with 1:1 Risk Reward Ratio. It's not best things for optimizing my profit, but definitely good thing for recovering my mental state.

Tips from me is working hard finding your system. The system should be adjustable from high winning ratio to risk reward ratio. I can't see both of them collide. If any of you know how to do it, let me know :) I believe to achieve better winning ratio means you must accept missing some good opportunities.

I have a dream someday, if I just don't feel to trade, I just took my high winning system then get out quickly with small profit, around $100 or so. Feeling good to have a Ca$h Machine right?

My mission is to complete backtesting all the three currencies starting from June 10 until now. I can't go further since I don't have the resource. But I think with 5 months backtested, combined with above 4 conservative rules, I'll be good to go.

This project is just temporary. Once I recovered, I'll take the next step and become a better trader, even better from my old proftable me.

Every suggestions are gladly welcome, even the cold harsh one and let me know if you enjoyed reading this posts.
Have a nice weekend :)

6 comments:

  1. Press hard the accelerator of the cash machine before it breakdown again :-)

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  2. Hi TST,
    Have no guts to press hard. There're chance to breakdown but sometimes it only need a little repair and modification, it's like new again.

    Thanks for coming :)

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  3. "I believe to achieve better winning ratio means you must accept missing some good opportunities."
    You mean higher reward? If so, you can close positions with 1/3, 1/2. It gives you flexibility and sometimes you are rewarded with more than you could think it can be made with smaller positions. Or just by taking profits and adding it back or by letting it run.

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  4. Hi Peter,
    I already trade with 1 contract. If I add more than 1, my % loss would be > 1% and that's inconvenient. But I'll do it when the time's come.

    Tq for coming Peter :)

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  5. The "reward" is a big lie and if you start thinking that you know what prices will do in the future you are setting yourself up to confront your expectations and deal with issues like being wrong, not being in sync with the markets, not cutting losers etc.
    I wrote a post about this a couple of years ago
    http://fearandgreedtrader.blogspot.com/2008/11/risk-reward-lie.html#links

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  6. Tq Scott,
    Already checked the link. With enough capital, we can position sizing. Before entry, we should determine the SL spot and from there, we know how much we're willing to risk. Thar's advantage of enough account. CMIIW

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