- | Joined Feb 2007 | Status: Small is beautifull | 1,368 Posts
- Joined Mar 2006 | Status: Member | 1,120 Posts
- Joined Mar 2006 | Status: Member | 1,120 Posts
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I am trying to evaluate a system based on the mathematical equations given in this post. The trading system is based on daily charts so i am using the data since 2002
As suggested by Moh in previous post I have calculated ME for all the trades since 2002. I found that the ME is gradually increasing and decreasing (with profits and losses). After some days the ME remained +VE.
The problem is with the runs test and Serial Correlation. Should we calculate this only for a shorter periods (last 10 or 20 trades) to make sure the correlation exists or does not exists in the recent days. The problem is again how many days to consider?
Does any of you guys really use these techniques in your daily trades or just implement MM based on the risk percentage? (1, 1.5, 2% etc ...)
And by the way I have almost blew my first live account (may be in the next few days unless things dont turn my way again). Fortunately I was trading with very little amounts in my account. My account almost doubled in 7 months and lost every thing in the past one and half months. I guess this might be because of POOR MONEY MANAGEMENT. So I am trying hard to understand this LIFE SAVER PILL MONEY MANAGEMENT when things dont go the way we want..... I came to know from my recent readings that traders start to belive in MM only after they blew up the first account and sadly I am one of them .
And yeah I have used compounding in an attempt to quickly build equity and it DID work till the things went my way but the same thing brought me down quickly also....
I am glad to see that you are getting serious about this. Rest assured you are on the right track, MM will help you maximize your growth and preserve your money.
As per calculating the dependency statisticians recommend looking at 100 trades, on the other hand in order to calculate the confidency limit from the "r" you need to have at least 30 trades in your book.
Oh I almost forgot. Regarding evaluating your system, once you saw a positive ME it means that this market system is potentially profitable and it is the time to forward test it and apply MM. Be careful that the goal in calculating ME is to check if the strategy is profitable in this specific market or not. Simply put you want to check to see if the game that you are playing is profitable not just the strategy. Chances are for some strategy to lose in one market but win in another.
It is the combination of both that counts.
I dont know if you are new here, but for the last months there has been a discussion that has been developing here in an endless way. Some might say that this is starting to get boring (and i agree) but, i like when i see ppl using mathematics to disproof another mathematical wrong ideas.
And what i mean by this, is that, the last arguments have been using in wrong a way, mathematical possibility instead of mathematical certainty.
Im not sure i understand but, in your view, if the trading is bad, not matter what kind of fantasy ppl have about changing margin to compensate other trades, the bottom line is that without pip consistency, we will fall, despite the wierd belief that we might be more sure about making one big position trade to compensate the loser small position one.
DislikedGreat post Gmak.
Unfortunately pips gained is widely used . It is also fact that $ per pip gained in each pair varies quite a lot between the pairs .Ignored
DislikedI'm not sure I quite understand what your saying but the references you give seem to be quite correct in what they say.
now don't get me wrong, being in positive pips is better than not being so, however you will glean far more information from determining the % increase in your account balance than determining the number of pips it took you to achieve it.Ignored
DislikedHello Moh. I am still evaluating the techniques you mentioned in this thread. What concerns me most is that these techniques make me devote a great deal of my time calculating these stuff. How do you handle this in your day to day trading?
DislikedBTW I am still waiting for position sizing techniques you promised in another post.
DislikedI will definitely write about this. There are a number of topics that I want to discuss with you guys like position sizing, diversification, comparing trading systems, asset allocation and ... .
Don't worry we've just started. Stay tuned good stuff is coming up.
DislikedFixed dollar amount of equity:
Not to forget that we should always take leverage into account after we did our calculations for the size of the position.
Dislikedwe can stop trading when equity curve crosses below the moving average. In this way we stop trading when it starts to lose, and start trading again when the curve crosses above the moving average again.Ignored
DislikedHey Moh can you explain more about this? What do you mean by leverage after calcualtions?Ignored
DislikedGood thread. It looks like we're just about to get to the meat of it
Quick question with regards to the following statement:
I'm not sure how the equity curve is supposed to move back above the MA if you're not trading... The curve should remain flat and the MA should converge with it, but never cross it. Please let me know if I'm missing something.