Major Factors to Consider on a Trade

While this is not Mouteki specific, I have been working with Mouteki for the last 3 weeks so this Niche forum is now my unofficial home away from home away from home..

As I try to build up and understand how to have a good system, I am learning about the factors that effect you as a trader if you want to be successful.

So, I will make an attempt to list all the relationships of all the variables and how they effect everything else. There are "major" variables, and "hidden" variables, and as I go on in this thread, I will attempt to explain in more detail, how one thing effects another.

Front 6 Major Variables:

1) Win%
2) Payrate in Ratio to Risk Units (i.e 6:1)
3) Frequency of Trade (How often you get a signal)
4) Cost of Doing Business
5) Size of Capital
6) Money Management

These are the front 6 as listed by Dr. Van Tharp's book.

Hidden Variables that effect or are effected by these 6:

1) Kelly
2) TimeFrame
3) Risk of Ruin
4) MM the 3 styles:

1. conservative
2. mixed
3. aggressive

5) Expectancy
6) Parallel Trading
7) Peak to Troff
8) Max Drawdown



On the Back side, we have:

1) Entry
2) Exit
3) StopLoss Point
4) Take Profit Point


The Hidden Variables of the backside:

1) Exit on a loss but before StopLoss
2) Exit on Profit but before TakeProfit
3) Movement of StopLoss Point
4) Movement of Take Profit
5) Duration
6) Setup
7) Pulling the Trigger
8) Table Limit
9) Timeframe you are awake
10) Frequency of chart review

So, like a bad soap opera, we will try to name all the complex web of relationships which is going on:

Win% effects Risk of Ruin
Win% effects your expectancy
Win% effects your Kelly
Win% effects your MM
Win% effects the size of Capital needed
Win% effects your Peak to Troff
Win% effects your Parallelling

Win% is effected by your timeframe
Win% is effected by your Payrate
Win% is effected by your Cost of Doing Business

Payrate effects your Risk of Ruin
Payrate effects your expectancy
Payrate effects your Kelly
Payrate effects your the size of Capital needed
Payrate effects your Paralleling
Payrate effects your Peak to Troff
Payrate effects your MM
Payrate effects your Win%

Payrate is effected by Size of Capital
Payrate is effected by Cost of Doing Business

Frequency effects EVERYTHING

Cost of Doing Business effects Win%
Cost of Doing Business effects Payrate
Cost of Doing Business effects Parallelism
Cost of Doing Business effects timeframe
Cost of Doing Business effects MM

Size of Capital effects Frequency
Parallelism effects Frequency
Cost of Doing Business effects Frequency
Aggressiveness of MM effects Frequency

Size of Capital effects Parallelism
Size of Capital effects timeframe
Size of Capital effects MM aggressiveness choice

MM effects EVERYTHING

Timeframe effects everything

Parallel Trading effects Peak to Troff as well as Max Drawdown



etc... and it goes on and on and on..


The relationships go on and on; and it seems that the lack of understand on why one effects another, results in underoptimized performance.


"Duration" though is a hidden variable I have discovered that is not really covered in any material I have read thus far... I am trying to figure out the role it plays in all of this; but thus far, it seems that:

Duration effects timeframe
Duration effects Size of Capital
Size of Capital effects Duration
Payrate effects Duration
Cost of Doing Business effects Duration
Maximum Drawdown effects Duration
MM aggressiveness effects Duration

So Duration is one that crosses from the backside to the frontside.. So it's an interesting creature.


One of the things I have not added, but am considering the addition of it, is "Heat" as defined by Ed Seykota. It might stick it's ugly head out when you are trading OPM, but until then, it will probably stay a dormant non-variable.

I invite everybody who is serious about becoming a successful trader to study some of this stuff like I'm doing. I hope it can lead to useful discussions. This entire forum seems hell-bent on "Entries" which make up less than 10% of any system, and is definitely the smallest role in the entire play. I think most don't have a CLUE about the frontside of trading, so to be studying the backside is ridiculous IMHO.

Hope this thread leads to FRUITFUL discussions and not stupid PM's...

And might I add, people, I have 24Hours in a given day, must like all of you. I'm more than happy to share, but as the old saying goes, I'm more than willing to show you where to buy the toilet paper, but buying it and USING it, is up to you. I'm not going to be wiping for you, thank you very much. Stop being so lazy.

www.google.com <-- Before you ask stupid questions, type it into this URL..

Twoblink

Its always good that someone like you reminds us of the basics. If one does not follow the rules and have no game plan then one will always be destined for failure in trading. Many times I read posts, and cannot believe some of the questions posed by those who do not want to read the thread or do any type of research, and just wants everything handed down to them just like a roll of toilet paper ...

ET

Twoblink dude, I really admire you for your perseverance. I was finding this place so boring that I can't be bothered to check the forum anymore when I received notifications (and since I don't log in, I won't receive further notifications ).

What can I say... ? May the force be with you!

all i can say is..

Ditto.
Great post. Twoblink I don't speak much but I really like your contributions and appreciate your efforts.
Have a nice trading (or else) day !
QG

edit: I see my mistake in forums is simplifying too much, probably because I don't really master english language. For the lazy ones (for me when I'm lazy), read the above post, you DO need a reasoned entry, 10% of the plan, and you need to detail the other 90% BEFORE entering the trade and you need the ability to monitor your decisions for as long as needed. If you can do that with reason you can trade, else keep studying or find another hobby, one choice or the other will make you happier.

GREAT analysis, i like it very much… <o></o><o></o>But there is a time for brief synthesis. First let us answer the question to what it all lead. <o></o> The ultimate goal is increase of deposit over a long time period. <o></o>

Analyzing any system we should look at a whole not only most “emotional” parts. <o></o>

My point is – sometimes more means less and less is more. Less pips means more money… <o></o>

Here is how: <o></o>

<o></o>System with good win rate with only 20 pips a day may be BETTER than one with large gains but at the same time larger risk. The “pips” part is only a part of the system. <o></o>

<o> </o>“Kelly problem” for forex can be solved numerically for various VAR (value at risk) and we get sth like a bell curve with one maximum. Systems more “stable” with less risk (and less pips) – are better for larger VAR so you cen “bet” larger portion of account than in systems with large gains.. Thats my experience... Sometimes less is more... <o></o>

<o> </o>Apologies for my English… J <o></o>