thread: Do you still believe in the perfect trading system?

90201

, your probability is away.

The probabilities I quoted are founded in easy, bulletproof mathematics.

But, based on the info in your initial post, I wrongly assumed one trade per session, and easy TP vs SL type exits. And, as I said everything else being equal, i.e. it can not possibly factor in anything advantage is being provided your analysis/intuition.

MM in itself may not provide you an advantage; the latter can only come from your analysis, and your skill in managing your own exits. Your returns will be optimized by using Kelly relative to risk, but it will not tackle the'special' consideration a trader must give to wipeout.

Anyway, fantastic fortune, I seriously want you all the very best.

90201

Everything else being equal, 5.5:1 RR equates to ~ 15% win rate

Just how in the world do you get a win / loss% from a risk reward ratio? There is no correlation between both of these figures. Please explain.

Smoke

90201

The probabilities I quoted are founded in simple, bulletproof mathematics.

However, based on the info in your original post, I wrongly assumed one trade per session, and simple TP vs SL kind exits. And, as I mentioned everything else being equal, i.e. it can not possibly factor in whatever advantage is being provided your analysis/intuition.

MM in itself may not provide you an advantage; the latter could only come in the analysis, and your ability in handling your own exits. Using Kelly will optimize your returns relative to risk, but it does not address the'special'...

No, that's right...I didn't understand what you meant with things being equal, but there have been some assumptions there that were not perfect. And in my view consideration getting consistent and is only just practicing. There's not any consideration that is particular that is mathematical, it is a phantasm to exchange than optimally in regards to yields relative to risk. The money management rules are pure mathematics, and any trading approach should be built upon in my view should be a foundation.

The choice is just to use a smaller account, as well as to take profits from this account when certain goals are met, not to warp the perfect money management rules to match a few thought. That's the fantastic thing about Foreign Exchange, it allows for flexible leverage.

We agree that the egy, or strategy, is your key. Then optimal MM should be used if we presume it is consistent. It is about enhancing egy to match optimum MM, not reducing egy that is inconsistent to be match by ideal MM. At least that's the way I see it. Anyway, good trading.

90201

To me, trading is 10% egy, 10% money direction and 80% emotional self-control.

IMO it is 100 percent egy, 100 percent MM, and 100% emotional self-control. Because if any of these factors is missing you'll lose.

If feelings were the major problem, then more EAs would be long-term profitable. EAs trade with with area that is perfect, and can adhere to MM principles. Hence any failure must be egy associated.

90201

Just how in the world can you obtain a win / loss% from a risk benefit ratio? There is no correlation between both of these figures. Please clarify.

Smoke

Everything else being equal gets the (albeit slightly wrong) assumption that price has just a 50/50 probability of rising or falling 1 pip, at some point.

If you run a kind of MonteCarlo simulation above a really high number of trials, using this 50/50 value, then you're able to show that the probability of price reaching an NX pip target in one direction before it reaches a X pip target from the other, converges on 1/N. Then you'd eliminate N times for each win, if you were to create an N:1 RR commerce.

So for an N:1 RR commerce, win rate = 1 / (N 1)

From the aforementioned example, the win rate = 1 / (5.5 1) = ~ 0.15 (really reduced, should we account for transaction costs).

Of course all this assumes a simple set-and-forget TP versus SL exit paradigm. Using trade direction that corrects TP or SL after entrance will invalidate this.

90201OK, I see it now, thanks to the clarifiion. A way of coming at it, but I will buy it. I say backwards as a small-time trader knows his/her approximate win% and then (or should) determine risk/reward predicated on that.

Thank you to the comprehensive'splantion

Smoke

90201

No, that's correct...

I enjoy your no-nonsense mathematical approach! And I agree that locating optimal MM, using its capacity is the determinant of eventual bottom line, and that egy/technique is your secret.

The distinctive consideration I referred to is account preservation. With every position sizing algorithm, there's the possibility of destroy (i.e. where my account balance reaches the point at which it lacks the capital needed to trade the smallest lot size permitted from my broker). The higher the sizing, the greater the likelihood of ruin. One individual might have the ability to sleep comfortably with a 10% likelihood; a hardy soul with 2%; that's a personal instead of consideration. Of course one can always pull the plug until this point, but it defeats the purpose of being a trader.

If I was to finance my account using a trivial amount that I am prepared to shed, so that destroy was a non-issue for me, then I would not have any issue with using Kelly. If my egy proves to be prosperous, and the account reaches a certain level (say $100K, yippee!) , then whether or not I choose to continue using Kelly - knowing that the risk of henceforth is what it was to start with - or ease off the sizing marginally to conserve my profit, is a personal choice. I guess it is somewhat like insurance in reverse: why insure one's house when the insurance company is favored by anticipation? For people, whether rightly or wrongly, their personal risk tolerance and financial situation override the factors that are mathematical.

Sure, I will withdraw money in my account. However, isn't that just another method of effectively lowering percent risk? By way of instance, if I withdraw $10k in my 100k account, then risking 10% of $90k will be taking the risk, dollar-wise, as risking 9 percent of $100k.

Anyhow, good discussion! I'd be interested to learn whether any folk who actually trade for a living use Kelly (or something approaching it). I guess that, in the vast majority of cases, they (whether rightly or wrongly) prioritize account preservation well above optimizing their recurrence. There needs to be a reason why the textbooks recommend position sizing, when it appears to disregard the obvious mathematics. I guess it's something to do with the idea that, however profitable one's egy is, long sequences of losses will occasionally happen, and also the real possibility that their plogical effect will cause the trader to doubt his egy, which makes it increasingly hard to keep discipline; large drawdowns can lead to fear and revenge trading. And possibly the impliions of this table in http://streetsmartoptions.com/drawdo...down-recovery/. All of which finally brings us back into that particular consideration

Many thanks to the thought-provoking contribution.

90201

I enjoy your no-nonsense mathematical approach! And I agree that locating optimal MM, using its ability to magnify or decrease the impact of an edge, is the determinant of bottom line, and that egy/technique is the key.

The distinctive consideration I called to is account preservation. With each position sizing algorithm, there's the possibility of destroy (i.e. where my account balance reaches the point at which it lacks the capital needed to exchange the smallest lot size permitted from my broker). The higher the money,...

Withdrawing money is a way, sure of lowering % risk, but personally I think that it helps me plogically to maintain my risk variables, my percent risk consistent whether I'm trading 1,000, 10,000 or 1 million. It is only a habit so that larger amounts aren't intimidated me and begin playing with safe for no reason. So what I do personally, when and if I reach 1500% is simply take 500% off. So a 10,000 account into 150,000k, I remove 50k, and exchange the 100k in the exact same way. Keeping that consistency helps me view money as a way of keeping score. That's only something that I found useful plogically irrational fears surfaced in and because when I started and started progressing I was intimidated by large amounts. I do not care what the account size is, I exchange in exactly the exact same way. I want to focus on trading and not allow size of account to impact my choices, that is key for me personally, and I've been doing that and taking that approach has helped me a little bit.

90201 The one and only true Grail'.

Your system is being sold by 90201the to someone else! Or Training! .
I don't think there is a grail unless you have some type of majical flip indior or some type of majical brain that says yes the market will keep going. I havent seen it. Picking tops and bottoms. . .good luck! .