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With Amibroker, I have developed a VERY simple stop-and-reverse
futures trading systems where, if you traded it mechanically, it
would yield 40% winners but with a 3:1 avg win to loss ratio and a
15% to 20% drawdown. It has 55 to 85 trades per year and returns
around 10-15K per year per contract after transaction fees.
The better news though is that if you have two accounts, you can
trade one of them mechanically and the other one, you use the same
mechanical entries but derive a probability model based on the
maximum favorable and maximum adverse excursions (MFE and MAE) to
trade the exits by discretion. The reason for this is that a pure
target-based trading system where it's a winner or loser takes all,
you'll find quite a lot of trades in a swing system with this kind
of risk/reward ratio that were very profitable before getting
stopped out.
For example, my system only has 25% of its trades (this has worked
out for 3 years running so far) that don't at least reach 2 ER2 pts
before turning into a loser. Folks, if I have 80 trades a year,
that's around a $7200 net gain per contract just by scalping 2 pts
in a separte account every time I take the swing trade. I'll also
use that scalping account to take advantage of other statistics
derived from the original mechanical approach.
The point I'm trying make to those of you who are trying to trade
the futures with some kind of swing system is that you're probably
not fully exploiting the wealth of MFE/MAE data that your trade
entries are generating.
I want to leave you with one last though when designing a swing
trading system based on futures markets. Think of the timeframes
over 15 mins as the big money moving in and out of the market. The
daytraders are playing the 15 min and under timeframes. The
serious, big money is looking at the 30 min and higher charts. A 60
min timeframe is excellent at spotting where big money is on the
move. By the time you get there, price is either going to stay
contained within the intraday ranges or your going to get spillover
into the interday timeframes.
I believe in using a tool like Amibroker to find optimium entry
points when I've identified the kind of trading edge I want. I
believe in using my brain to trade that information in the most
appropriate manner.
If you think you're divorcing yourself from fear by mechanically
trading a system and that's the key to you being a better trader,
then your mind is in a place that I have nevered been able to
venture. It's real money on the line whether you witness yourself
gaining or losing it in real-time or not. It's how you cope with
the series of wins and losses as they mount up over time. Are they
matching the probability model you thought you were working under or
not? THAT is a key concept that contributes to your eventual
success or failure.
Good luck to you all. It's not that hard to develop a profitable
futures trading system on something like the Russell 2K e-mini.
What is hard is having the confidence in your research and yourself
to stick to it and apply strict stop losses and disciplined exit
strategies in the face of fear, greed and euphoria.
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