In stock futures, you can exit only one or two lots at your desired price. Better split your capital into multiple stocks to avoid slippage and reduce impact cost.
Today is actually the very first day I have started betting on what I have reason to believe is my holy grail. So avoiding details. Let the data accumulate for at least 200 trades.
But donât mind sharing the route I took to arrive at it. The process should have the following features:
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All data you consider must be accurate and authentic.
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You must have your own insights about the data, and those insights must be unique and original.
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About your insight, ask the following four questions:
â is it unusual? [unusual, lesser known set up is unlikely to be targeted by a rival algorithm, if such trade-killers really exist, I personally donât know if they do)
â is it happening fairly often? (You donât want 60 trades an hour, but you also donât want to sit without action for days together. Very few have the patience of a sniper in hiding)
â is it reasonably consistent in its consequences? Like, if event A happens, event B (on which you bet) must have a very high probability of happening as a consequence.
â is it profitable? The reward-to-risk ratio must be more than 3 times [(1/p) - 1], where p is the probability of event B happening. -
Create your own indicator (write code to identify the set up based on your insight) to track the entry point, stop loss level and optimum exit point.
Note: This post is written by someone who has less than 3 yearsâ experience in this field, and until now, is a NET loser, but the total loss so far is very small.
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So essentially, you are creating an edge for yourself. And as time passes and this edge gets cemented, gets better, and kind of becomes a Holy Grail, your Holy Grail.
I take this is the holy grail. In absolute sense yeah, just making sure losses are less make gives a good edge. There are plenty of discretionary traders out there, the problem is the position size and losses that eat away the gains. Just by reducing the losses returns become better.
Not necessary if the strategy remains the same. Only if the strategy becomes better, minimal losses will turn into break even, then comes small profits, big profits.
A quotation exists on these lines - âwe cannot expect a different outcome if what we do does not changeâ.
Of course, one who has clarity, discipline along with a strategy will obviously better his game.
Strategy comes third after money management and psychology.
Consider this example
1 - win
2- win
3- win
4- loss
5 - win
6- loss
7- loss
8- loss
9- win
10- loss
11- win
So you have 6 wins and 5 losses , now letâs see
win rate = (6wins/ 11 total trades) *100 = 54.54% win rate.
Now say you found out that it doesnât makes sense to trade all time discretionary as volume & volatility exists mainly from 9 to 9:15 and 3:10 to 3:15 and restrict only 2 trades a day. There by now
1- win
2- win
3- win
4- loss
5- win (eliminated because of new rule)
6- loss
7- loss (eliminated because of new rule )
8 -loss (eliminated because of new rule)
9- win
10- loss
11- win
5 wins and 3 losses . Total 8 trades
Win rate = (5 wins/total 8 trades)* 100 = 62.5% win rate .
Thatâs kinda the idea here, it is to make sure losses are reduced so that they donât leach away wins.
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For some questions, we give answers w.r.t our own experience. So I too was saying about strategy from that perspective.
I have already been managing money for a few years now and I guess I am good with the psychology aspect of the trading, so that leaves the knowledge part, the strategy part, and I am looking to get better at this bit by bit.
It is all but natural to wander around when one is young, but when one starts to grow old, he starts to accept things, knows himself, so psychology is no big deal 
Of course, when one is pig-headed even as he matures with age, then nothing happens 
3R+ will always be solid considering we have to pay back commissions.
The thing about 3R+ is the mind starts playing tricks once 2R hits, and starts a reversal. Obviously, I am talking about myself. So, honestly I canât seem to push beyond 2R. Though the uncertain market teases 7R -10R couple of times a month.
It always amazes me with regards to trading, people always give valuable ideas/nuggets. Hmm, I have so much to learn. Seems, this will go on forever.
It does not go on forever, eventually it slows down and we relax, only but natural.
Until then, keep sharing, and if there is anything new, keep learning.
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you think soâŚ
What I feel, we literally never arrive.
Trading is one thing that I feel I cannot put a concrete full stop, and say, well, this is it.
The only different thing years will add is, I understand the mechanics better. I know when and where to tweak as requires. But this thing ainât static.
Doesnât necessarily mean it is chaotic. Only thing is I know how to make a living, without totally being arrived.
You just have to love the game. Else there is no way, you ll stick to this in the next 10 years. My pov.
I know that.
I am talking about relaxing after reaching a particular position, a number both by age, and by corpus. I am not there yet, but I guess once we get a good corpus, we will not be reckless with it, not just because we have acquired much knowledge and experience, also because how precious such a corpus becomes, the kind of role such a corpus plays at the point of time in life.
Of course, we progress with time, get to learn a lot, experience a lot, both with an activity, and with life in general. So the outcomes will obviously be better.
And of course again, if we want to leave more for our next of kin, a lasting legacy, we may still think, act the same as we do now, irrespective of our age, even after a few decades later.
I am loving the game. The game is interesting, exciting, rewarding and surprising 
you went so much ahead. Jst kidding.
I wasnât really directing at you when I spoke, you just have to love the game. I hate when I feel I am suggesting, directing someone.
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No you should not feel like that, unless you are deliberately misdirecting someone, for some gain 
Even if what you have experienced may not apply to all of us, you can share them, as you do, because everything helps when one is learning. To be able to look at the same thing when someones provides a different perspective helps.
And what else these online forums exist for, if not for sharing?
Thatâs interesting! If you noticed something usually your trade decision is by one method or indicator rest everything else happens to be loss avoiding indicator. Trading only during market close and market open to have volatility, you are avoiding losses that can happen in intra day with no volume. Avoiding weekend overnight positions, again your avoiding losses than to get more wins.
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Yes, cutting loss is very important. I have learnt that.
Even Mark Minervini said that.
I guess this requires clarification. I am talking about probability here, not R.
You are talking in terms of R which, I presume, is risk on each trade, right? If so, then let me explain the same concept in terms of R, by taking a numeric example.
Suppose your long term winning probability is 70%, or 0.7.
Using the formula [(1/p) - 1]
[(1/0.7) - 1] = [1.4286 - 1] = 0.4286
3 times this figure is
3 *0.4286 = 1.2858 = 1.3
So in terms of the risk R on every trade, you need, on the average, to make more than 1.3 R on each winning trade (not 3 R, as you have interpreted).
By similar calculation, you will find that for a 60% method, you will need to maintain the average of 2 R+ on winning trades, and for a 50% set up, the average gain on a winning trade must be over 3 R.
Needless to say, the requirement for a 40% method will be 4.5 R+, and if you are winning only 1 out of 3 trades (33%), then you need 6 R+ average on your winning trades to grow your bankroll in an optimum way, and thatâs like trying to take a canoe in stormy seas to cross a continent. Not impossible, but highly improbable.
Hope it is clear now. The point is your long term success is inextricably linked to the winning probability of your system (or method or set up, whatever you choose to call it).
Note: This requirement of R multiple is ON THE AVERAGE, and not on EACH winning trade. It means if you total up the profits on all your winning trades and divide the figure by the number of winning trades, then it should be above the R multiple mentioned.
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Over long term it usually is not much more than 50% for most successful traders. 2R is a good place.
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Of course, one can settle for 2R for a 50% system, nothing wrong with that.
My personal preference is 3R for 50%, because that way you get very close to the Kelly Criterion which, without doubt, is theoretically the best formula to maximize your wealth over time.
Even better, if itâs possible, is to first research for a 70% system, because it will have two great advantages. First, at 1.3 R you require lesser luck because the contest is between crossing the +1.3R level first before you cross the -1R level. Second, and perhaps most important, is that your drawdowns (and the emotional upheaval they create) are kept in check. The main problems with a low percentage winning system is that you are more at the mercy of luck and may encounter violent drawdowns which can shatter your confidence. A high percentage winning system thus also creates a safe zone for you to operate in.
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When I see such, I usually suspect inexperience 
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I mentioned it already in the footnote of my first response on this topic. Less than 3 years. 