Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

GeneTrash

Realistic Trade System 1 Contract/month P/L?

Recommended Posts

Hi Everyone,

 

It's been an few months since I last posted. I have been working very hard on a couple of systems and have a few questions some of the more experienced chaps could help me with. I have been developing two trading systems which I am looking to begin trading live on the ER2. I have back tested both systems one year back so far. (It is very time consuming as I prefer to do it manually.) The two systems have combined for ~+$4000 average a month using a two contract scale- in entry system. (Includes all fees/commissions, slippage is not an issue.) As of yet I have not had a losing month and the biggest draw-down period has been ~$1900. I have put a lot of work into the systems to minimize my initial trade risk, lowering the draw-down. I plan to back test to three-five years. My question is are these numbers poor, average, good, or great?

 

The systems works on e-minis and the few commodities I have looked at, as the ideas are fairly simple. I have also made a effort to make the systems as robust as possible with minimal discretionary trade management needed. I believe live results should be close to those on paper. The systems are very easy to trade and require no emotion. The only thing that would change results would be sporadic trading.

 

With your experience and such what is a good 1 contract/month P/L number to look at when building or evaluating a system? I have come across some numbers in my reading/surfing ($3000, $6000 and some crazy P/L on those pre-made mail-order systems, though I don't put any stock in those.) Should I be moving on to other ideas or trying to optimize more or should I continue back-testing what I have?

 

This may sound like a dumb question to some but sometimes after all the hard work I can get discouraged if the data is not generating what feels like a ton of money haha. I know it's a newbie feeling to want to make lots of money right away but I realized I really didn't know what is good or bad as far as systems go.

 

So what kind of numbers do your trade systems generate per month per contract?

 

P.S. Keep in mind the R/R ratio and and win/lose percentage of the systems are good.

Share this post


Link to post
Share on other sites

If I may ask, what are the r/r and win %? How many trades does it make?

 

Those are petty good stats, especially if it's more mechanical than not. I would go ahead and backtest it over as much as you can, and as many different market conditions as you can. Does the system favor certain conditions? Moving from here, you want to pay attention to the maximum drawdown. $1900 is pretty steep, especially if it's making a lot of trades, and that's only 1 year. If you allocated $5k per contract, you'd be looking at an almost 40% drawdown. Could you handle that? Do other years have similar / worse drawdowns?

Share this post


Link to post
Share on other sites

$1900 is not steep for ER2, IMHO.

Gene- you said slippage is not an issue... does that mean you have limit orders? Curious because slippage is ALWAYS an issue, maybe in ways you don't suspect.

#1 problem is the word "Limit" order. These often don't get filled for winners, and ALWAYS get filled for losers. So you have to go back and make sure you had at LEAST one tick in your direction.

If you are using market orders, a fast market can give you terrible fills, but your system will trade it perfectly. ER2 is not always the most liquid market.

 

So the best question here is, what is your average win/loss $ size per contract?

 

Don't worry about the profit # for the system. If the system is good, you can scale it up as you go and trade 100 contracts, $1000/point. You are a long way from scaling up though.

Share this post


Link to post
Share on other sites

I don't see how the magnitude of the pnl of a system is all that meaningfull, its somewhat of a number without context.

Since the system seems to be working nice over the past year it obviously enjoys volatility. I would test it against highly correlated instruments over the past year just to make sure that you didn't just get lucky with the data you picked to test on and that you are truely capturing something that profits from volatility.

Then test it against data from a time period with lower volatility. Even if the system doesn't work as well you can just add filters to make sure it only trades when there is enough volatility for the system to work. VIX > X is a nice simple tool for this.

The most dangerous thing I would think you want to protect against is that everything looks good in the rear view mirror, volatility then dries up and your system is then trading market conditions that it simply can't perform in.

Share this post


Link to post
Share on other sites
Guest forsearch
I don't see how the magnitude of the pnl of a system is all that meaningfull, its somewhat of a number without context.

 

Magnitude without vector is meaningless. Add vector (such as + or -) and things come into focus.

 

Still, knowing whether your P&L is enough to overcome transaction costs such as slippage and commission is very important too.

 

Then you can judge whether the system is scalable, that is, tradeable with increased size.

 

-fs

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Topics

  • Posts

    • Well said. This principle is highly analogous to trading. Any human can easily click buy or sell when they "feel" that price is about to go up or down. The problem with feeling, commonly referred to as "instinctive" trading, is that it cannot be quantified. And because it cannot be quantified, it cannot be empirically tested. Instinctive trading has the lowest barrier to entry and therefore returns the lowest reward. As this is true for most things in life, this comes as no surprise. Unfortunately, the lowest barrier to entry is attractive to new traders for obvious reasons. This actually applied to me decades ago.🤭   It's only human nature to seek the highest amount of reward in exchange for the lowest amount of work. In fact, I often say that there is massive gray area between efficiency and laziness. Fortunately, losing for a living inspired me to investigate the work of Wall Street quants who refer to us as "fishfood" or "cannonfodder." Although I knew that we as retail traders cannot exploit execution rebates or queues like quants do, I learned that we can engage in automated scalp, swing, and trend trading. The thermonuclear caveat here, is that I had no idea how to write code (or program) trading algorithms. So I gravitated toward interface-based algorithm builders that required no coding knowledge (see human nature, aforementioned). In retrospect, I should never have traded code written by builder software because it's buggy and inefficient. However, my paid subscription to the builder software allowed me to view the underlying source code of the generated trading algo--which was written in MQL language. Due to a lack of customization in the builder software, I inevitably found myself editing the code. This led me to coding research which, in turn, led me to abandoning the builder software and coding custom algo's from scratch. Fast forward to the present, I can now code several trading strategies per day across 2 different platforms. Considering how inefficient manual backtesting is, coding is a huge advantage. When a new trading concept hits me, I can write the algo, backtest it, and optimize it within an hour or so--across multiple exchanges and symbols, and cycle through hundreds of different settings for each input. And then I get pages upon pages of performance metrics with the best settings pre-highlighted. Having said all of this, I am by no means an advanced programmer. IMHO, advanced programmers write API gateways, construct their own custom trading platforms, use high end computers with field programmable gateway array chips, and set up shop in close proximity to the exchanges. In any event, a considerable amount of work is required just to get toward the top of the "fishfood"/"cannonfodder" pool. Another advantage of coding is that it forces me to write trade entry and exit conditions (triggers) in black & white, thereby causing me to think microscopically about my precise trade trigger conditions. For example, I have to decide whether the algo should track the slope, angle, and level of each bar price and indicator to be used. Typing a hard number like 50 degrees of angle into code is a lot different than merely looking at a chart myself and saying, that's close enough.  Code doesn't acknowledge "maybe" nor "feelings." Either the math (code) works (is profitable) or doesn't work (is a loser). It doesn't get angry, sad, nor overly optimistic. And it can trade virtually 24 hours per day, 5 days per week. If you learn to code, you'll eventually reach a point where coding an algo that trades as you intended provides its own sense of accomplishment. Soon after, making money in the market merely becomes a side effect of your new job--coding. This is how I compete, at least for now, in this wide world of trading. I highly recommend it.  
    • VRA Vera Bradley stock watch, pull back to 5.08 support area at https://stockconsultant.com/?VRA
    • MU Micron stock watch, pull back to 102.83 gap support area with high trade quality at https://stockconsultant.com/?MU
    • ACLX Arcellx stock watch, trending at 84.6 support area with bullish indicators at https://stockconsultant.com/?ACLX
    • Here’s something few are talking about: The Chinese are printing money like it's going out of style. Not that you'd hear about it in the mainstream news. But Bitcoin knows.   Bitcoin always knows.   Here’s the thing…   When the Chinese government prints money to paper over the cracks, their smart money doesn't sit around waiting to get devalued.   It usually flows into three things: Bitcoin, gold, and dollars.   After years of being beaten down, gold's having one of its best years in decades. But here's the secret -- whatever gold does, Bitcoin's going to do it bigger.   Much bigger.   Since last November, when China started their printing spree, Bitcoin's been moving in near-perfect correlation with the People's Bank of China's balance sheet. Over 80% correlation, maybe even 90%.   Again, few are talking about it.   But here's why this matters right now: This could be the beginning of a huge breakout in the crypto markets.   Bitcoin broke above its July high, and historically, that's led to new all-time highs over 90% of the time. The only times it failed? COVID and the 2022 bear market.   That's it.” – Chris Campbell   Profits from free accurate cryptos signals: https://www.predictmag.com/     
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.