Predictor

I can tell you that I've met with proprietary trading firms where traders have access to millions of dollars and their traders are definitely feel that HFT is affecting their trader performance. Of course, they rely on getting a speed edge. Some of these firms have indicated they are moving away from discretionary traders or at least not hiring any new ones. I agree that the changes are less noticeable on the longer time frames, if at all. However, for the active/very active day trading time frame then yes I think I'm seeing some changes. And yes when the market moves too fast to see then its relevant for the discretionary trader who is trying to trade in real time because when the market moves too fast to see then obviously you can't react to it. One way to test this would be to see if the depth of the book over the last couple years has changed.. There are at least 2 explanations: 1. The HFTs are making the market more volatile because institutions aren't using as many limit orders. 2. A study indicated HFT hasn't net/net changed the spread when accounted for trade size. This might suggest that HFT does decrease the movement in the market but at the cost of larger sudden movements (faster/larger). So, we get markets that don't go anywhere and then suddenly move a greater distance in a shorter period time.

I've found the optimal condition is usually not to set a target on my systems. I trade a variation that uses targets often because my win ratio jumps to 80% and the equity curve is much smoother. I feel that most traders who scale out do so because if you exit 100% and the market keeps ripping then that frustrates many. Likewise, if the market comes within 1 tick of your exit and then reverses, that can be very frustrating. I typically exit 100% at my targets because I can call a PEAK (not a TOP) with high accuracy. But as I eluded too, unless you have perfect knowledge.. they are pretty much equivalent except for the smoothing function.. Why lets say I have 3 contracts I have 3 possible targets Low target -> highest probability, highest win ratio, lowest return Normal target -> high probability, high return, moderate win ratio High target -> Lower probability, higher return, lower win rate So, if I have 3 contracts I set for each one then I get an average of the "normal" target. If I have 1 contract and choose target 3 then i make highest return but equity curve will be choppier. I can scale out 2 at normal and 1 at high.. net return will be less then 3 but win ratio will be higher too. I have found my trend strategies tend to be most efficient at producing max profit per contract. However, they suffer from choppier equity curves. I often put on more contracts, make less per contract, but do it with higher probability. Trading to target is not as optimal on a profit per contract but can produce much higher net returns. I don't think you've really thought about this as much as you act. Whether you trade to target or trend then is a function of the # of opportunities you can take... One benefit to Tim's claim is also the standard deviation per trade should be less scaling out. Its just basically combining a target system with a trend system. Again, I think for most it will be equivalent... I take 100% off at my targets because I like to take 100% responsibility but I also scale in/out. Tim's right though about 1 lot traders. You need ability to add.. 1 lot traders are also more likely to push a trade too far because the profits are so small. --- See my stops article to see another reason why its equivalent. The higher target pays off more but is less likely to get hit.

I think Blue is right. I've tried scaling out and sometimes I'll do it but I don't think it improves profit. I find that adding works better but adding is intraday requires a high degree of skill. People like to scale out because most don't like to miss the top. Its frustrating. Scaling out is kind of a response for having to take responsibility. But I can see it can work To Tim's point, one benefit to scaling out is that you are effectively trading 2-3 systems which could smooth the equity curves. If you are good at setting targets you'll find that scaling out is equivalent to holding to the "best" target because your average will be the same as your highest probability target. The larger traders do tend to scale.. you'll find that this why vwaps develop.. etc

Is it just me or does the ES seem to be making more Flash 2-3 point movements then historically? And is this another sign that HFT is active in the ES?

Well the institutions have perhaps adapted to use market orders or iceberg limits. Does the FOK a market order that gets filled at desired price or killed? It went right back where it was before. It happened in less then the blink of an eye. Its also possible that everyone had MIT orders set where I went to market.

Algorithmic is not HFT. Traders have been trading algorithmically for years and thats been available to retailers for probably since the computer came out. As stated, HFT is distinguished by requirement for co-location,automation, and speed. Some of the early definitions that came out originally wanted to say anyone who was a day trader was an HFT trader but that misses point completely.

There is debate on this... it is also said the HFT have caused a decrease of institutions to sit at the limits which could increase slippage. There was a report. I think it might be true. if the institutions decrease their trading on the futures then the retailers will follow suite.. hope the exchanges are paying attention.

I have never used the DOM. I made over 60% last year with a minimal DD (hypothetical) trading the futures. I have subscribers who take my signals with real contracts and are profitable. I do think the DOM might provide some edge. However it will likely require programming skills and possible co-location. I watched a webinar from CQG and the tools that the little guys like us are up against will make it very hard. Take a look at my Price Driver vs Liquidity Provider article here for some good ideas. Basically, all trades can be broken down into drives or liquidity provisions. I've read tape for 5-6 years. It is very hard to learn to read tape and your chance of success is very low.. without knowing what to look for. It is unlikely you will learn by just watching tape. In fact, I watch it for 3-4 years but my skills were still rudimentary compared to what they are today. I'm undecided how much of an edge order flow is, however. I'm not convinced its enough an "edge" by itself for the futures market. The futures game tends to reward in proportion to skillful risk taken. I do offer some tape reading/order flow materials at my website. I'm not sure why you are looking at a DOM if you have foot print/market delta information(?) I use a completely unique method which enabled me to take my tape reading skills to a completely new level. My recommendation would be don't get tunnel vision. I speak to a lot of traders, many of whom are tape readers but they don't understand the whole game. This puts them at a significant disadvantage. If you're not consistently profitable.. I wouldn't even bother spread betting at $1 per point.. One thing you can do that I recommend is I recommend you start with say a reasonable SIM account like 30k give yourself a max loss limit per of say 1.5k/day and "trade" 24/7. I did a similar activity and it improved my overall trading. You can't trade this way with real money unless you want to lose it all but you will learn a lot. I want to be clear about one thing. I think you are headed down wrong path with focusing on the DOM. I think order book edges are one avenue to explore with programming but I don't think you will be able to read that. Even if you found an edge, you will still have to get your order into the market! It is not even possible to read all the information in time&sales. This is where I made my break through was understanding how to really read tape. Good luck! ---------- Curtis http://themarketpredictor.com

I've been noticing a higher percentage of bad fills in ES, like losing 2 ticks on market orders. I had this happen today even though the market didn't appear volatile. Is this a sign of increased HFT activity or merely a coincidence? It may also just be result that doing more "micro trading". Thoughts discussion

Most traders focus a great deal of effort on studying how the market moves and why the market moves. But, comparatively fewer spend time thinking about who moves the market and how they make money. One practical benefit of understanding the various participants is the advantage that comes from being able to state more precisely the type of business that you are conducting as a trader. Understanding the various market participants and their objectives, also, helps one to understand the order flow and price action. Who moves the market? The most common participant is the uninformed market participant. The uninformed market participants trades are random, having no edge. These participants do not have an advantage and will lose more money the more they trade. They can make a profit but only by holding the market as it appreciates over time. The next market participant is somewhat familiar and is known as the LIQUIDITY PROVIDER. The liquidity provider attempts to profit from capturing the spread. The liquidity provider attempts to profit from the uninformed order flow by taking the other side. Liquidity providers attempt to make as many trades as possible and pocket the spread over and over. Many displaced floor traders played the role of liquidity providers. Liquidity providers need to trade when the instrument doesn’t move much and when they can execute many trades without risk of the market moving. They profit not from the market making significant movements but rather by the number of times they can capture the spread. Indeed, they are more likely to pull out when the market trends strongly because of the greater risk they take. Finally, we consider what I feel my primary trading role is in the futures market which is driving price to the real value (or predicting the future value). I therefore call this participant a PRICE DRIVER. Price drivers drive the market toward the future value by using market orders. It may seem contrary but price drivers get paid for placing market orders because the payoff comes not from the spread but from the movement of the market to the future value. In general, participants that are time sensitive will use market orders whereas participants who are price sensitive use limit orders. I tend to enter on market and exit on limit. Price drivers do run stop orders. However, it is more an effect of the stop orders being placed at the wrong place then a cause. Price drivers can only get paid when the market moves in their favor. Of course, a more passive form of price driver is the statistical arbitrage trader. The statistical arbitrager is more concerned with price rather then time and may prefer limit orders. Even so, they still need the market to move to make a profit. Understanding the participants that trade in the market, their intentions, and how they make their profits explains various patterns that the market exhibits and clues one into where to look for opportunities. For example, trends on low volume are the understandable result of liquidity providers pulling out as the market moves against them and price drivers dominating. Trend exhaustion is seen as the combination of buyers filling all of their orders and liquidity providers re-entering the market, eventually encouraging new price drivers to enter in the opposite direction and new cycles to develop. --------- Curtis http://themarketpredictor.com

This is a reasonable perspective. However, we are referring to a system in this case which had a historical drawdown and return. I may have should been clear that there are exit rules in a system like this. It takes losses: it just doesn't take stop losses. As I noted, its not about wanting to use a stop or not use a stop. In this case, the system returned more without using the stop. I should probably add too and this maybe something new for those who haven't built system is that typically the tighter the stop one uses on a system then the GREATER the drawdown. Let me repeat, the tighter the stop then the systems will typically experience GREATER drawdown. Of course, there is value in decreasing the maximum risk per trade because with less max risk per trade it is possible to leverage the system higher. My perspective in this article was that a person starts to trade a system that historically had DD of 40% or 50% because they know they will only have to risk x$ because the system uses a stop. However, they are really kidding themselves versus accepting the risk of taking that 40% or 50% loss. Where I agree with you.. is that yes if a trader doesn't have a plan to take losses and doesn't have an edge then that's a disaster waiting to happen.

The valuation comes from extrapolating the returns over the system some years into the future. The basic idea is that if I start to trade a system then I've already extrapolated the results into the future and therefore I can extrapolate the returns into the future. The real key to making this work though is that I take out my profits as the account increases in value at a defined rate. Based on the historical return rate and my cash flow plan then I can come up with a realistic valuation that doesn't require for me to risk "all future gains".

Hopefully not.. a smaller tick would invite more HFT trading. The spread does not equal the liquidity available in a product.

I don't really pay much attention to any of the moving averages, although I'd pay more attention to the longer term averages. It might have been easier to calculate the 200 MA before computers.

One of my systems has historically returned, via hypothetical backtest, around 60%-80% per year (for the past 10 years) when tested with a wide stop loss. The return jumps into the 100%-120% annual range when the system forgoes the stop completely. A 10k account will grow to over 2.5 million dollars in just 8 years with a 100% annual compounded return! These results lead to some interesting questions. First, we always read that past performance is not indicative of future performance. Obviously, various agencies and regulatory authorities require such disclaimers. Yet, anyone who trades a system believes that past performance is a good indication of future returns. I doubt there is any trader who doesn’t believe that. Of course, traders understand that such extrapolations are often wrong. Yet, I don’t know anyone who would trade if they didn’t on some level believe that historical performance had value. Even if its not a backtest and someone claims that the performance in a future test is important, the implication is the same which is that eventually your past performance has some value. A reasonable question is that if we rely on the historical results to guide our trading and the system performs better without a stop then what is the justification for using a stop loss. Personally, I do like the idea of the stop loss and I understand that one bad trade could wipe out a highly leveraged system as I describe. In fact, the variation that I offer has such a stop loss and stop loss guidance for this very reason. One reason that’s the case is that its my personal preference, secondly the system with the stop still produces a strong return, and last but not least is that I do design systems, like any product, for a target audience. I know that my consumers would not accept a system without a stop loss. Yet, all those reasons aside there is a strong logic that if we accept the historical results as being indicative of future returns, which we already have by virtue of using the historical returns in the first place, then without a rational basis we should trade the best returning system -- which in this case was the system that didn’t use any stop loss! I know that some will rush to judgment and assume that trading with very high leverage and no stop loss that one would be destined to blow up the account. However, the system I’m describing is a real system and was backtest over 10 to 12 years and the largest loss without a stop would have been around $2500 and there were probably no more then a couple losses that large out of hundreds of trades. It could also make sense to use a stop loss wider then any historical loss. Such a stop loss would both be unlikely to ever be hit and could provide much needed peace of mind and would, moreover, protect the majority of the account if a truly unusual deviation were to occur. I think part of the reason we like stop losses is because we don’t really want to accept the risk inherent in trading. Perhaps more to the point, we believe we can time the system or we’ll get lucky and avoid the historical losses. As a discretionary trader, I do feel that it is possible sometimes to time systems. Yet, if we choose to rely on a statistical methodology, that is not introducing unknowns, then it is rather likely that the account will be completely exhausted or mostly exhausted by the time we could recognize that the system had failed. A different approach would be to consciously allocate the entire starting balance to the system with the intention of trading the system until failure or success. It is basically a bet the farm approach. The mindset has some advantages. One primary advantage is that such an approach is simply the act of consciously realizing and accepting the risk inherent in trying to achieve the desired returns. Following this logic, we would also see that using the stop loss wasn’t optimal and may choose rationally to trade without the stop with the full knowledge that single trade could wipe out the entire account. Mathematically, sense we are already extrapolating the past performance into the future, we can also extrapolate the returns and come up with a “valuation” for the system based on the historical performance. A system that returned 100% with a 10k starting balance would be worth, as described, approximately 2 million dollars with an 8 year horizon. We could even look at it like a single trade. In this case, it would represent a 200x potential return for the starting risk! There is a problem with the extrapolated returns though. Even accepting that it could make sense to risk a small nest egg on a high risk trading system: it is much harder to justify the risk required to meet the returns extrapolated. In other words, one would have to risk 100k to make 200k and 200k to make 500k and 500k to get to a million and a million to get to 2 million. At some level, the risk required to make more just simply doesn’t make sense. As such, the extrapolated return isn’t realistic and therefore we face that problem of valuation again. Remember, we had justified trading our 10k starting capital based on the valuation that the system would produce over 2 million dollars. Clearly, this thought experiment is missing a very critical element required for implementation. The missing element was first introduced to me from another trading associate and CTA, and that missing element is the systematic method of taking out profits as the account balance grows in value. This cash flow principle completely solves the problem conceptually and completes this idea. The extrapolated returns will, of course, be reduced but the overall theses becomes workable. In fact, there is certainly a possibility that the system could fail and take a complete account loss while the trader actually produced a net profit. If the system generates enough cash flow to “pay off” the initial investment before failure then one can walk away with a net profit even in the event of system failure. The method for this calculation is based on fractional position sizing and is outside the scope of this article. Completing the paradigm would involve trading multiple systems and treating each system like an individual trade. The stop loss would be the starting account value and each “trade” or system would offer a very high extrapolated return compared to the starting balance. In this paradigm, a total account loss doesn’t infer that one “failed” as a trader but merely the system failed. The reward to the risk taken was already accepted. It goes without saying that I would only even attempt this with systems that I had a very high confidence in because bad systems could easily result in a total loss. But, let's assume we start with 50k and 5 solid systems with 100% annual returns per system and an 8 year time horizon. We'll reduce the implied return to 1 million per system due to the anticipated withdrawals. The actual reduction depends on the rate that we withdrawal profits. Furthermore let's assume that every single system but a single one fails. The net result is still that we made 1 million dollars from a 50k starting investment and that doesn't even take into the very real possibility that some systems could have payed off the initial investment and even made some profits before failure! The net result is achieving nearly 50% annualized return with an 80% system failure rate! It is clear that having a plan to withdrawal and protect profits is the cornerstone that completes such an ambitious plan. The trader who wishes to execute such an ambitious methodology needs both the capital for at least a few seed systems and perhaps more importantly the wherewithal to execute the plan over many years. Notably, there is no requirement that the trader/system developer remain inactive and dormant over so many years. The more professional approach would be to invest some of the cash flow into new systems, update working systems, and adjust allocations based on performance and market conditions. -- Curtis http://themarketpredictor.com

dm - glad you appreciate it.. I have 2 systems at collective2 search under predictor day systematic and predictor discretionary for my results. As you realized, this is a conceptual topic. Sometimes I use this concept in my trading but generally I'm weighing additional important factors.. might share in a future article.

Tim Sykes has a profitable record. I do not know any mentor that I'd trust except myself. Actually, I know one or two other mentors who may know what they are doing. I would always demand a track record from any mentor and make sure that you understand how it was made. Now, realistically, just starting you don't need the best mentor and there are some vendors who offer free stuff that could be valuable to you. Realistically, without a few thousand dollars you will not find any serious mentor that will help you. I didn't look at the strategies but your approach isn't really the way to develop market expertise. Developing market expertise is more about thinking about the markets and studying them. There are some traders who develop systems and do well but they are always working on their systems. It isn't just throwing some indicator down but working, backtesting, revising, evaluating, and thinking why it should work. You need to think about the concepts. My best trading systems and most other systems I've seen offered from other vendors require about 7k to trade the ES. Remember, it is $5600 just to hold 1 ES overnight. Even day trading margins can be up to $1500ish per contract. Even at $150 per trade, you would be risking 5% of your account per trade.This is a high risk to take without a significant edge. Also, I know many brokers who require 5k to even open a futures account. I'm not saying its not possible but you will need to really know what you are doing to do this. You don't have capital to make mistake and learn. Honestly, you may be better off going to currencies. Sometimes I wish had I started with FX. You can trade FX with 3k. I'd recommend reading traderfeed.blogspot.com. It isn't updated but if you study it then you can get some ideas about how to approach the market. You can also look if you are in US for a traders meetup group. You'll get exposed to a lot of different traders of varying levels and methods for free. Basically if you going discretionary then you need a holistic and professional way to view markets. This is not easy to get and won't be discussed any indicator vendor. Ray Barros has a complex methodology that might help. I do not use his methods but I got the impression it would be a decent place to start. If you are going systems then you need tools and programming ability.. stats knowledge.. stuff like that

I'm sorry to say but you aren't preparing to be great in this field. This is not trading. Great traders don't do what you are doing. Of course, we may build systems that are profitable but you're probably not even trading a profitable system. I'm sorry to say but you aren't learning to trade. At 2k-3k dollar, don't step anywhere near commodities. That's not even enough to trade the ES! I would recommend you do something else. If you are really serious, the best thing you could do is to make a lot more money. You need more capital. Be careful of vendors but finding a strong mentor would be worthwhile. You should do own work, as well. Its only way.

It takes a lot of experience to win in futures game especially with such a small account. With only 5k-10k, you can't afford to make many mistakes. Tough way to learn.. I'd recommend taking a look at YM, ES, and NQ. I'd personally avoid crude. The currencies are also an option and more suitable to that account size. Prepare to spend at least 6-12 months in simulated trading. Don't try to do it for 1 month then go live. You can often get a better rate by funding your account. There are often specials. I would look at CQG, Ninjatrader, Tradestation, ThinkOrSwim, and DTN.IQFEED and see what's available.

I thought I'd add some color since last touching this topic. I have some of the top ranked public ES systems, and I also monitor the best ES traders that I can find. What I've found is that excellent ES day traders/systems will average around $30 per contract after costs. Anywhere from $10 to $40 per contract is typical. The more one trades then the lower this number tends to go. I have some day trading systems that trade infrequently that can do much more. It is easy to extrapolate and estimate the number of contracts required that one must trade to do the claims they make. At 5k per month (and they had some months showing more then that), then you need to trade roughly 250 contracts/month or about 12 contracts per day. Also, I've monitored trading competitions where we know the traders are both professional and taking more risk then one would in a normal account and returns over 4x-6x are excellent and top of field. They were showing returns of 24x!! Realistically, this means that an excellent trader in a best case scenario might do 30k on a 5k account over a year. This is an excellent return but a far cry from the 24x returns they claim. More over, such a return could easily be strong enough to win a trading competition. Think also, even at "only" 100% return over about 5-8 years it is possible to take a 10k account to over a million dollars! I believe that it is possible to make a lot in futures market if one is very skilled and perhaps doesn't get too unlucky. It is certainly possible to make a whole lot over an intermediate time frame. But 24x in one year, I have not seen anyone do this. The only way possible would be to trade 24/7 but again with 5k then the overnight session wouldn't be an option. I admit it seems like it shouldn't be that difficult but all the data suggest otherwise. Even risking 15% to 20% of the account per day, I think it would be difficult to hit those numbers. I'll grant it is conceivably possible but great claims require great proof. I certainly don't believe they are doing that. --- Curtis themarketpredictor.com

First, I think it is only fair to provide a discreet link to where people can go to find more of my material if they like it. I mean, I guess, you rather me post my material under an anonymous handle with no link to my work? I had other free articles I had planned to post but will not do so until I'm assured that I can provide references to my material. SIUYA: This is the problem with stops no matter how they are used. If you use a tighter stop then you're going to be stopped out more often and if E is zero then you're going to lose even more/faster. Experienced traders know that one has to be more aggressive when using tighter stops. It should make sense due to the false positives. I was going to post another more in-depth article about knowing WHEN to use big vs small stops but I'm going to wait for an official word from the moderators about if they will accept a link to my website. Options are different then stops because the price can go lower then your stop out level and come back. Stops are PATH DEPENDENT whereas options are sensitive to the END POINT. Likewise, options have time decay whereas holding the underlying doesn't. These are much different trading vehicles.

I appreciate that this topic generated a lot of consideration. There are many ways to look at it and many lessons/implications that can be derived from this simple article. One thing that really stuck with me though was that I made a system that bought the SP 500 at the open on random days and sold at the close. This system was basically break even over a long period of time. I ran the same test with a 20 point stop. The system that used the stop lost 100% of capital. I build a lot of trading systems. I find that on the systems I've been able to test that using stops hurts the performance in almost every case. The worst combination has been the tight stop and large target combination in my testing. Perhaps, it is not surprising that this is the favorite combination favored by most traders. There are a lot of take-aways One take-away should be obvious that the concept of risk/reward if defined by a static risk and reward is irrelevant and not meaningful. When a trader says he only takes 2x reward/risk opportunities then his E is also going to be zero. It is much more useful to think in terms of probabilities. This introduces such concept but again not in the ultimate form that is most useful but certainly it introduces it. Another way to view this is that if you choose to use an equal stop/target combination that you have a 50% probability of getting stopped out just by random chance. On the other hand, if you set it higher to something where you win 80% by random chance then you know there was only a 20% chance that you were stopped out due to random chance. As the article clearly states, this is not an edge in itself. Think about a system without stops that wins 10% more then it loses. That's a bigger edge then many casinos have. But, it is still relatively small, it is only winning 1 extra trade out of 10 more then a random system. Adding a tight stop is very likely to erode that edge. Logic reveals why. We know that any identification system will have false positives. The implication is that improper usage of stops can basically erode a significant edge. It is worth to consider what type of edge one thinks one has. If the edge is more about predicting big movements, i.e trends or tail risk events, then one might be better to use options. If the edge is more about saying we are more likely to go up or down then this should work well. The usage of a tight stop with large target implies one can both predict tail risk type events and also the path followed. Of course, these are concepts for the beginner trader. Even so, experienced traders may improve their results when considering these implications. I should stress these are concepts. In my tape reading course, I share methods for managing risk that goes beyond the use of stops. I will also add that stops don't work the opposite of trading targets. One would think they would but form my testing, they don't. One reason is that true protection would work more like an option, it would pay out a certain amount when you win and limit your risk when you lose. Stops don't really do that though. This is why it is important when appropriate to be aggressive on re-entering after stop outs when one uses a tighter stop loss.

I'm somewhat doubting the bolded line.. is this true for ES? I thought only limit orders were held at the exchange. This just doesn't make sense to me unless you mean that the platform will execute the market order faster then one can manually. Tips for Breakout Traders If you are the type of trader who likes trading breakouts, instead of waiting for price to breakout and then clicking the market button consider using buy stops and sell stops. Placing a stop just above the break out point where you would like to enter will push your order into the market at the point that the market breaks your level. While this order is a market order, placing it well in advance will help reduce slippage because most platforms use a FIFO, (first in, first out) method. Meaning if you want to buy above highs and place your order sooner than the next trader, you will be filled first. If you wait for that breakout and then hit the market button you will be last in line.

I want to share a technique that can help you to choose your desired winning frequency before you enter into a trade. I would guess a larger number of retail traders don't lose because they are wrong but because they use stops improperly and lose money even when they're right. Assume for these purposes that the market is mostly random, if true then that means that an X point move up or down has little value in determining what the market will do next because, of course, if it did have value then we could use that predict it. Now, it is true that I predict the market but I will agree that the market is mostly random to most people most of the time. This implies we can determine our win frequency before entering a trade simply by choosing a stop and target of the appropriate size. The expected profit must be zero. The formula is: WIN AMOUNT * WIN FREQUENCY – LOSS AMOUNT * LOSS FREQUENCY = 0 Examples: +5 and -5 point target and stop will win 50% by random chance +5 and -15 point target and stop will win 75% by random chance +5 and -20 point target and stop will win 80% by random chance Formula examples: 5*W-5*(1-W) = 0 5W – 5 + 5W = 0 10W = 5, W = ½, W = .5 5*W-20(1-W) =0 5W -20 + 20W =0 25W = 20 W = 20/25 = .8 If these are challenging, you can use the equation solver at http://www.algebrahelp.com/calculators/equation/ You can choose any winning ratio that you desire using this method. I personally would feel quite comfortable with 65% to 80% win ratio. Of course, your profit expectation is still going to be zero unless you have an edge. My point is that many people may have a slight 2% to 5% edge but ruin it with poor stops. It is very easy to erode such a small edge with a poor stop. The goal is to use the mathematics of randomness to prevent that. While the expectation is the true measure of a system, if one chooses a system with a very low win rate then by random chance they could experience a very long streak of losers. Psychologically this will be difficult for many to work through. I have, also found that when win rates drop below around 55% that the resultant equity curves become rather unstable. It is worth to consider the assumptions in which choosing a higher win rate would work better then not. If our model is such that we can predict that the market will move in a given direction more times then not then choosing a higher win rate should be beneficial. However, if our ability is more about predicting the larger movements then we may want to choose a lower risk and a higher reward payoff. This is an updated authorized partial excerpt from My Favorite Edges Bonus. Chapter "Choose Your Win Rate". ---- Curtis

>Good judgement comes from bad experiences. Go and get yourself >some bad experiences, but try and keep them as cheap as possible. I would disagree to some extent. The trader who hasn't had a bad experience may trade better then the one who has. This holds true in Gymnastics where the younger gymnasts aren't afraid to do the moves whereas older gymnasts may have memories of painful accidents. The same is true of heart attack. If you've had one you are prone to another because you've weakened the muscle. I'd say the same could be true for trading. I know it is because I've always won but have had losing streaks. My resilience is much higher then if I had lost to begin with. This also true in condition responses. Of course, this is the basis also behind problem gambling but would equally apply to successful trading. At any rate, I'd say that often bad experiences may be the result of bad behaviors and we all know that behaviors are hard to correct. I'd say a trader like Rob Hoffman has a much greater chance of blowing up again then a trader who controls risks and understands the market can do anything. ----------- Enough of that, I wanted to update what TradingAdvantage and one of Larry's reps had to say to my question about if Dan's results were made with real money. Does Dan take every trade with real money? This is education.. blah blah blah Can you show me the real money results from Dan's room? No. that's illegal. They'd shut this place down in a heart beat. You will never get the real money results from us. --- I've never heard that showing a real money equity curve is illegal if it is a real money equity curve. I'm absolutely done with these jokers.