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Hello All,
I have had quite a few questions and comments regarding the
trading competition that I took part in. To save some bandwidth,
I'll try to answer those questions and comments in this post.
First of all, I did not win the competition, I came in second place.
I had a return of 255.6 % and the winner had a return of 406%
I was leading the contest up until the last few days. At that time,
the eventual winner was not in the top three. In this case it does
appear likely that the winner "bet the farm", so it is true that the
first place finishers are often "one trade wonders" in contests.
In a limited time contest, the proper approach is more one of
gaming theory than trading. Play tight, looking for good trades
in the early stages, and then "bet the farm" near the end if you
aren't currently in the top three. Remember though, that while
this approach might work for one individual, there were 20 or
30 individuals that "blew out" in the attempt.
I wasn't there to win the contest, I was there to test
some system, indicator and trading ideas. In this regard,
it was very important that the trading be no different from the
trading I do every day. This meant detail to money management
and staying within reasonable risk and reward parameters.
Many of the trading rules I applied were no different than what I
and many others have posted to this list many times. It really comes
down to finding a methodology that suits you, testing it to make
sure it gives you a statistical "edge", and then trading the methodology
*consistently*. As far as I can tell, these are the only qualities that
separate the professional trader from those who must eventually
leave the game. The point being that I might *never* win a contest,
but I'll *always* be in the top 10 or so.
It isn't unusual at all to be able to take money from the markets. The
talent lies in not giving it back. O.k., how does one take money and
keep it? Thinking about all that's been said on the list in the past,
I've tried to boil it down to a few tenets of my trading:
No edge? NO TRADE
Can't get your price? WALK AWAY
Everybody agrees with me? TAKE PROFIT
Everybody disagrees with me? DOUBLE THE POSITION.
System says trade? I TAKE THE TRADE.
System says exit? EXIT THE TRADE.
ALL TRADES AT ALL TIMES ARE TAKEN ONLY IN ACCORDANCE
WITH TOLERANCE TO RISK. (capitalization, risk vs. reward etc.)
I guess that's it. It's not aesthetically pleasing or brilliant, but it
does pay the bills. Acually for me, analysis and trading theory
are much more fun than the trading itself. Trading is just the
final result in which one quietly collects the monetary proceeds of
correct research.
In answer to a question on Maximum drawdowns, there are two
popular definitions. The first is the amount lost by a string of
consecutive losing trades before a winning trade is experienced.
The second is a subtraction of the highest equity level in your
account minus the lowest equity level in your account, the difference
being the max dd. In the case of the contest, the largest peak to
trough equity drawdown on the account was 14,000 dollars. The
account was already in the black when this DD occured.
In answer to a question of which systems were used: They were my
own systems indicators and methodologies (one of these
methodologies was NMP, (New Market Paradigm) and is fully
disclosed in this months issue of TASC magazine.) The rest
were based on psychological matrixes built off of mathematical
representations of fear and greed in the market. An article on this
subject is due out in the August issue of TASC magazine.
Find what works for you, prove it gives you an edge, and follow
tenets similar to what I stated above, and it should help out your
equity.
Walt Downs
CIS Trading
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