The Race

[thalestrader 14]

...The bottom line is that for good or for bad you need to stick to your plan. If it goes bad, then if your plan is sound, just hold your sack and wait for it to go right...

 

Absolutely, sicko. Having a plan, trading the plan, and sticking with it so long as it is sound is all part of, well, my plan.

 

Part of my plan is to refuel if I blow my initial base. I have already drawn out another $1500 from my InteractiveB account to seed a new stake for The Race if necessary, and it is sitting in a checking account ready to be wired in if necessary. I figure if I can get past 5K, my risk of blow out will drop to nil, and I will then use the $1500 for an extra week of vacation this summer with the family. Nothing has been left unplanned.

 

Here is my statement for Friday - as you can see, no trades (This time of year, I start to take a lot of Fridays off).

 

 

And now a chart showing the ShouldaWouldaCoulda. Like Monday of this week, which I also failed to capitalize on, the system I cobbled together had a pretty good day on the ES. This is not surprising, as the system I put together is basically two sets of moving averages, and thus, this type of system will excel on a trend day, keep you close to even or slightly positive on a range testing day, and chop you to death on a range contraction day.

 

The system I cobbled together uses one set of MA's to define the trend. If those MA's are aligned in a downtrend, then I only take short signals, and vice versa for longs. I use another set of MA's to provide the signal.

 

The signal is a 5 minute bar close below each of the MA's in the signal set. Got it? Two sets of MA's, the first defines trend, which determines which signals I take. The second set provides the actual signal, defined as a five minute bar close below each of the MA's in the second set. For example, there actually was one long signal yesterday. Had I been trading, that signal would simply have been ignored like it never even happened, because from bell to bell the trend set was aligned in a downtrend. There is no special magic to the MA's I am using. Anyone of you could put something like this together over a weekend or two.

 

At any rate, this thread needs some dressing up, so I thought I'd share my ES chart with the MA's removed - the yellow line is the 9:30 AM EDT US open. There is on every trade a "signal bar" which tells me to place a stop entry order one tick below the signal bar low for shorts, vice versa for longs. The trigger bar is the bar that caused the stop entry to be filled.

 

For the ES, I the plan is to trail a stop, and either taking a stop out or limiting out at +30 ticks.

 

]

 

Best Wishes,

 

Thales

[amswak 10]

Thales,

 

do you use a longer bar interval for your tend defining MAs, or just a longer averaging length on the 5min chart?

[amswak 10]

which resembles 2^x, not x^2.

 

Your right - either I wasn't stating properly what I meant to state or I didnt know what I was actually trying to state....lol, I'll blame it on a long week...

[sicktrader 10]

I think what is important is to not just look at the Race aspect of this money management style, but to realize that an abbreviated version could be applied to your everyday trading. When I started trading I knew what I wanted to accomplish, and that was finding a system that would give me the potential to double every two weeks on average. Keep in mind that it is just and average. I have doubled in two days, and two months. Well, over time I have found a few appropriate systems. The benefit of my cuurent system is that I know exactly when to turn the platform on, watch for 5 to 20 minutes, then either I am in a trade or not. This happens about 20 times a week, and saves me from watching the price movement all day. This current system fits me because I will place bets outside of my system if I am bored and have the chance, and now I don't have the chance to be bored. In any event, I found a number of systems the would give me the chance to double within a two week period. Choose what is best for your personality.

 

Once you have the system, you need to realize why you are trading. I am trading to put money in my bank account. As such, in the real world I cash out each time I double. I do this because my base account is set at a point where I will be delighted if I only have one cash out a month, two is obviously great.

 

If you try an approach like this, you would need to establish a reserve that could be applied to your account when you have big drawdowns, which you will. I have about three to four a year, but again, this is part of the plan. If you have to post up $50K thoughout the course of the year that may seem bad, but realize on the other end that you have made say $300K. You can insert any numbers that you choose, but it is the point that posting up more cash can be part of the overall plan. I don't see what is wrong with that, and no one will ever convince me otherwise.

 

Hopefully a few here will reach the goal, and maybe in different ways. That is the outcome that I am hoping for, because then we can all see different systems and money management styles that achieve the same outcome.

 

Off to family functions. Good luck next week.

[thalestrader 14]

do you use a longer bar interval for your tend defining MAs, or just a longer averaging length on the 5min chart?

 

Everything is based on the 5 minute chart. Don't get too wrapped up in time frames and bars. I really do not pay much attention to such things typically, but if you are going to use a mechanical system based upon mathematical derivatives of price, bars offer as easy a way to quantify actionable points as any.

 

Best Wishes,

 

Thales

[thalestrader 14]

Anyway I might be rambling as I started the whiskey wind-down and the real reason I logged on was to see if I was still in the race after I forgot to post my losing statement yesterday. I think I did post that I hit my max loss yesterday - had made up for it today and had a $500+ day but got greedy after my quitting time and ended up with just $265 today.)

 

Hi enoch,

 

You're still in so long as you post screen captures of your last two statements and PM me your closing equity by 12 noon EDT Sunday. I will be posting the Week One summary tomorrow after we get home from church, unless you get your stuff in sooner. I have the data from the other seven participants, and you are the last hold out for the week. If you do not post by then, you will be out of the official tally. You can rejoin whenever you wish, but you will be starting from the starting line by doing so.

 

If you decide you do want to stay in, you must post screen captures of your statements every morning like the rest of us. I will allow some excessive slippage this week as it was the inaugural week and it is a new addition to our routines, but going forward, we must all abide by the same standard. Sounds fair enough, right?

 

Best Wishes,

 

Thales

[snowbird 10]

this type of system will excel on a trend day, keep you close to even or slightly positive on a range testing day, and chop you to death on a range contraction day.

 

Thales

 

Do you have examples of a range testing vs a range contraction day? Is a range contraction day basically a wedge... so the day after would likely be expansion (i.e higher probability for successful trades in this particular system the day after a range contraction day?)

 

snowbird

[BlowFish 10]

thales,

 

out of curiosity, and maybe I am just thinking backwards this evening, why do you stick to a doubling position size strategy? If you grow your account based on a fixed position-to-equity ratio to size positions (and assuming ideal constant gains) it should follow an exponential curve, not a square curve (as simply doubling would). Is sticking to doubling done for risk management purposes?

 

Good point and an interesting question. The smaller the 'size' of the instrument the closer you can get to 'continuous compounding'. It wont be quite exponential as that requires varying the size continuously in infinitesimally small steps. This is an advantage a micro lot has over a full one.

 

Brown (and others) have posted how it may be unlikely that anyone crosses the racing line. I am sure the racers understand precisely how and why this might be. One of the downsides of continuous compounding is that your risk of ruin is the same whatever the account equity. With doubling your RoR diminishes until your next double (where it jumps back to where it was). And here is the quandry for the racers, how much to reduce risk by as the race proceeds to give a better chance of not wiping, whilst still propelling them fast enough towards the finish line. It is quite the dilemma for the racers.

[thalestrader 14]

Do you have examples of a range testing vs a range contraction day? Is a range contraction day basically a wedge... so the day after would likely be expansion (i.e higher probability for successful trades in this particular system the day after a range contraction day?)

 

snowbird

 

If you think back to the discussions about chop zones in the Reading charts thread, a range day would be one where the market establishes a chop zone, a range contraction day would be where the market continued to vacillate witin the chop zone making lower highs and higher lows.

 

I think that it is a mistake to try to game a system by trying to figure out when a day will be a trend day, range day, contraction day. If you are going to trade a system, trade the system. The one advanatge a mechanical system should have over discretionary trading is that it takes the emotions out of the trade. Once you introduce even the slightest element of discretion, you lose that one advantage and are instead left with the worst of both.

 

Best Wishes,

 

Thales

[thalestrader 14]

One of the downsides of continuous compounding is that your risk of ruin is the same whatever the account equity. With doubling your RoR diminishes until your next double (where it jumps back to where it was). And here is the quandry for the racers, how much to reduce risk by as the race proceeds to give a better chance of not wiping, whilst still propelling them fast enough towards the finish line. It is quite the dilemma for the racers.

 

Excellent contribution, Blowfish. This is why I keep referring to the "puzzle and problem of trading a small account" (in the context of the objective of The Race). However, you explained it so much more clearly than I ever could have hoped to do. Thank you!

 

Best Wishes,

 

Thales

[sicktrader 10]

Excellent contribution, Blowfish. This is why I keep referring to the "puzzle and problem of trading a small account" (in the context of the objective of The Race). However, you explained it so much more clearly than I ever could have hoped to do. Thank you!

 

Best Wishes,

 

Thales

 

I suppose I look at the risk of ruin a bit differently. From my perspective the "risk of ruin" does not remain constant, if you are calling ruin an actual blowout and not falling below margin. There is no way that if I have $5,500 in my account and running 4 contracts that I am as close to blowout as I am now at $1,500 with one contract. I suppose that if you don't know your average stop, or you let your losers run all the down to $0, then yes in those instances it could remain constant. So in that respect maybe it depends on your system. However, I know my average loss is slightly above 10 points. If I have a few losers in a row running 4 contracts, which again is expected at times, I simply move back to running 2 or increase my account balance through my established reserve. Perhaps an inconvenience, but not a ruin.

[daedalus 10]

I discovered a logic error in my strategy late friday when I automated some of the entries and its put me back on my heels a bit so I won't be jumping in to the race this week as planned. Keep at it gents!

[enochbenjamin 10]

Hi enoch,

 

You're still in so long as you post screen captures of your last two statements and PM me your closing equity by 12 noon EDT Sunday. I will be posting the Week One summary tomorrow after we get home from church, unless you get your stuff in sooner. I have the data from the other seven participants, and you are the last hold out for the week. If you do not post by then, you will be out of the official tally. You can rejoin whenever you wish, but you will be starting from the starting line by doing so.

 

If you decide you do want to stay in, you must post screen captures of your statements every morning like the rest of us. I will allow some excessive slippage this week as it was the inaugural week and it is a new addition to our routines, but going forward, we must all abide by the same standard. Sounds fair enough, right?

 

Best Wishes,

 

Thales

 

I'm still in... this is a good exercise in discipline for me!

 

Thanks!

[snowbird 10]

 

The system I cobbled together uses one set of MA's to define the trend. If those MA's are aligned in a downtrend, then I only take short signals, and vice versa for longs. I use another set of MA's to provide the signal.

 

I have three questions I believe relate to money management which is a key part of this thread.

 

It appears that your RR is on average 3x for trades that go to target. How did you select the 30 tic target when putting this particular system together, and did you create a rule that passes on trades where the initial risk is too large? When your account grows so that you can trade multiple contracts, have you developed additional money management rules you will be able to employ?

 

snowbird

[thalestrader 14]

The Race - Week One

 

The following shows the miles completed as of the end of week one by each of the declared racers. I also thought it would be interesting if we tracked the total miles of the participants combined, just to see what effect a small band of Pikers can have on the money flow over the next twenty weeks.

 

 

A good week all around, with none of the Racers who actively traded during Week One finishing the first week in a draw down.

 

Best Wishes,

 

Thales

 

PS If any Racer notices that I have made a mistake in calculating his or her miles completed, send me a PM, and I will correct and post a correction Monday evening, should it be necessary.

Edited May 2, 2010 by thalestrader

[thalestrader 14]

I have three questions I believe relate to money management which is a key part of this thread.

 

It appears that your RR is on average 3x for trades that go to target. How did you select the 30 tic target when putting this particular system together, and did you create a rule that passes on trades where the initial risk is too large? When your account grows so that you can trade multiple contracts, have you developed additional money management rules you will be able to employ?

 

snowbird

 

1) Targets are a function of current volatility, and they can and will change over the course of The Race with changes in volatility.

 

2) Currently, the initial stop must be 14 ticks or less, though this too can change, e.g. if volatility increases, I will go to a max 16 tick initial stop loss, if volatility decreases, max stop loss may decrease to 12 ticks. I believe that my largest initial stop loss this week was 12 ticks, and that happened to be a loss. My average initial stop loss this week was 8 ticks. My average profit was fractionally below 16 ticks, so for the week, on an admittedly too small sample to tell us anything, I ran a +1.9R average profit. I am optimistic that as the sample size grows, that should increase to about +2.5R.

 

3) This is very much a work-in-progress. Unlike sicko, who has been through this exercise before, this is my first whack at making a purposeful effort to trade a small account to a million in 20 weeks. Additional money management rules, guidelines, etc. and so on may or may not develop as I move forward. Sicko and has the benefit of approaching this task as it ought to be approached, i.e. he approaches it from a gambler's perspective; and that perspective is lacking on my part, at least to the degree that sicko is able to muster. I would suggest that there is likely much more to be learned in this regard by aiming some questions at sick, as I am a rookie in this venue.

 

Best Wishes,

 

Thales

[forrestang 10]

 

........I have been hoping to see more of the gang from the Reading Charts in Real Time thread throw their hats into the ring. There is certainly room for you here, forrest. But Yoda's wisdom aside, a proper race is about having fun, and it needs both Racers and Spectators, so pick the seat that's most comfortable for you, and have some fun!

 

I will probably join in the next two weeks or so.

 

If nobody hits the mark in the time period, do you plan on extending the race a set amount of weeks, or turning it into how ever long it takes for someone to hit the mark, or if nobody hits the mark in 20 weeks, is the highest earner the winner?

 

I am just wondering...

[thalestrader 14]

I will probably join in the next two weeks or so.

 

If nobody hits the mark in the time period, do you plan on extending the race a set amount of weeks, or turning it into how ever long it takes for someone to hit the mark, or if nobody hits the mark in 20 weeks, is the highest earner the winner?

 

I am just wondering...

 

The finish line is one million dollars in profit. I think that we will at the very least give special recognition to whoever is closest to the finish line at the end of week 20. As to continuing after that point, that will be a function of the level of interest and participation by the still active racers at that point. We might continue this thread, or perhaps we'd call it quits at 20 weeks, and start a new thread (The Race II?) and do it all over again.

 

So, I guess the best answer is, "we'll see..."

 

But I definitely think that if no one hits the million mile mark by the end of week 20, we still give honor to whoever is sitting closest to the finish line at that time.

 

Best Wishes,

 

Thales

[snowbird 10]

Sicko and has the benefit of approaching this task as it ought to be approached, i.e. he approaches it from a gambler's perspective; and that perspective is lacking on my part, at least to the degree that sicko is able to muster. I would suggest that there is likely much more to be learned in this regard by aiming some questions at sick, as I am a rookie in this venue.

 

Sicktrader,

 

Thales poses an interesting question. From a gamblers perspective, are there techniques you are employing now that will change as your account grows (other than those you have already mentioned such as increasing contracts on a week by week basis... and decreasing during draw downs to avoid risk of ruin.)

 

Do the stakes get higher as the race progresses, or do you follow your plan be what it may, regardless of the end result.

 

snowbird

[thalestrader 14]

I suppose I look at the risk of ruin a bit differently. From my perspective the "risk of ruin" does not remain constant, if you are calling ruin an actual blowout and not falling below margin. There is no way that if I have $5,500 in my account and running 4 contracts that I am as close to blowout as I am now at $1,500 with one contract. I suppose that if you don't know your average stop, or you let your losers run all the down to $0, then yes in those instances it could remain constant. So in that respect maybe it depends on your system. However, I know my average loss is slightly above 10 points. If I have a few losers in a row running 4 contracts, which again is expected at times, I simply move back to running 2 or increase my account balance through my established reserve. Perhaps an inconvenience, but not a ruin.

 

I think you have a gambler's special perspective (and I do not mean anything disparaging by using the term "gambler"). I have always understood that trading is itself a form of gambling (hoping to profit by placing speculative bets on future outcomes). Despite that acknowledgment, and despite my suspicion that there were lessons for the trader to learn by watching the (successful) professional gambler, I have not, until now, actually applied much effort to puzzling these lesson out. My understanding of risk of ruin is that of Blowfish (though Blowfish understands the structure of RoR far better than I). I also agree that yours is somewhat different, and I am not ready to concede one or the other. I have more to say, but it will have to wait until later.

 

Best Wishes,

 

Thales

[sicktrader 10]

Sicktrader,

 

Thales poses an interesting question. From a gamblers perspective, are there techniques you are employing now that will change as your account grows (other than those you have already mentioned such as increasing contracts on a week by week basis... and decreasing during draw downs to avoid risk of ruin.)

 

Do the stakes get higher as the race progresses, or do you follow your plan be what it may, regardless of the end result.

 

snowbird

 

My current plan is to add contracts as I double, hope that I exceed 100K within the first ten weeks. If lucky enough to achieve that, then I will set 100K (or so) as my base, then cash out the 100k (or so) profits in each of the remaining weeks. If I have a drawdown then I'll post back up some of my winnings in order to stay on track. This will limit the amount of contracts I need to trade, and minimize the psychology aspect. If the plan above goes off track, then I have a backup system which I will utilize.

Edited May 2, 2010 by sicktrader

[sicktrader 10]

On another note, as far as I am concerned at this point all that I have to lose is $941. Anything above that I am playing with money that is not mine. Someone other than me is holding the money, money that I intend to gamble with and expect to turn into 1mil. The only losers that hurt are those that you need to take out of your bank account, which is why I never make bets on credit or make trades on margin. On the same note, I am quick to put trading profits into my bank account and ultimately other investments.

Edited May 2, 2010 by sicktrader

[BlowFish 10]

I suppose I look at the risk of ruin a bit differently....

 

Yes indeed it is a dynamic thing, knowing if (and when) to change back down to a lower gear is all part of the challenge. The race environment (the distance of the finish line and the time to get there) certainly adds to the pressure to risk a bit more than one might if it was a nice leisurely road trip .

[sicktrader 10]

No trades for me today, so I won't be posting a statement on Tuesday. I believe this Greece situation is reducing my trades. Hopefully tonight will be better. Good luck.

[yeaheah 10]

One trade today.

A little profit.

 

 

 

I'm not very pleased - missed too many good entries.

 

Maybe i trade later again.