Average Weekly Earnings

This is a discussion on Average Weekly Earnings within the General Trading Chat forums, part of the Reception category; I thought I would give an overview of my system. It took me a while to settle into my system ...

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Old Feb 9, 2011, 8:08pm   #61
Joined Oct 2006
Re: Average Weekly Earnings

I thought I would give an overview of my system. It took me a while to settle into my system but it is founded off what works for me. Iíve had some help along the way from people who helped solidify my thinking and beliefs. But most importantly 3 books have been the foundation to my success (and none of them give you a trading system to use :-)

Market Wizards Ė Jack Schwager
Trade Your Way To Financial Freedom Ė Van Tharp
Trading In The Zone Ė Mark Douglas

I believe it is important for someone to devise their own system and what works for them as opposed to trading someone elses off the shelf system (did that, and it didnít work for me).

My belief is that pretty much most systems will have a positive expectancy over time that are founded on sound money management and respect for risk. I believe most people think success is based off the right magical system (aka something that is external to them). When in reality this is not the case, success is something that resides within us, and in most cases we end up self sabotaging ourselves and blame it on external things such as the system without addressing the real problem, ourselves and our beliefs. Look at any successful person Ė NONE of them do the same thing, they do their own thing. Which means success is based of the person, NOT what they do.

With that being said, what did I want out of a system? I wanted a simple entry that was visual. I am able to pull up a chart in the required time frame, and be able to instantly know whether I would have traded it and how without using any indicators or price manipulation. The Keep It Simple Stupid (KISS) principle.

Once in a trade I wanted an exit system that was automatic. I did not want to have to monitor trades once entered. This is where my biggest ďah momentĒ came when I read about website from someone that introduced me to ďOne Cancels AllĒ grouping of trades. That really put me on the right path to an automated exit strategy. I was also introduced to the Futures Market, and I instantly gravitated to this and away from Stocks.

I wanted a day trading system. I liked closing out the trades by the end of day and updating my books so to speak. I liked the cleanliness of starting fresh each day, it gave me a mental seperation of the previous day to the current day. Prior to that I was trading a trend system I bought from someone. As much as I learnt from it (I didnít make any money from it due following someone elses rules which didnít suit me, I believed in the system but it wasnít my own, I needed to own it for it to work). It could takes weeks for a trade to pan out, I wanted quicker results. In day trading itís minutes or hours. That works better for me.

I also wanted a time frame for my entry. I didnít want to have to spend all day trading or looking for trades.

With that being said, this is what I came down to.

When the market opens up, I give myself 30 minutes to find a trade. I use 5 strict patterns that are visually easy to see. If no pattern is found, I shut down and try again the next day. In general 1 of the 5 patterns is found about 50% of the time. So 50% of the time I find no trade and do not trade that contract that day (not trading is something to get used to, as itís hard in the beginning to sit on the side lines, you always want to be in the action).

I follow the trend, I enter the market on STOP orders either Long or Short and only at a new High/Low for that day within the required 30 minute time frame.

Once in a position, my Stop Point (which drives my position size) is based off a visual from the chart. I always know my stop point BEFORE entering a position.

I use a fixed reward of 2 times my STOP amount. So if my stop amount is 40 cents from my entry on an Oil Contract, my profit point will be 80 cents from the entry.

Once entered into a position, I must now protect my position. 3 orders are necessary.

1) STOP order to keep my loss at my predefined amount
2) LIMIT order, which will be my profit taking point
3) MKT on close order. If my stop or limit order donít trigger, I have an order set that triggers 1 minute before the market closes, and will sell immediately at MKT price.

These 3 orders are grouped together as an OCA group (One Cancels All). If either order fires, then the others are automatically cancelled or adjusted for a partial fill (happens once in a while on the LMT order if price just touches it and bounces off).

Once my 3 exit orders are in place, I can walk away, there is nothing left for me to do.

I risk 1% of capital per trade, and will trade upto 3 different contracts a day.

The system is now fully programmed and automatic with no human intervention necessary. It runs from a server in my house.

I do monitor it to make sure nothing bad happens. I have an application on my iPhone that allows me to remote connect to my server and keep an eye on it for safety. Take today for example, I was having breakfast at a cafť with a friend as the markets opened up. I glanced over at my phone twice just to make sure everything looked fine. Took me less than 5 seconds to do without having to mention what I was doing.

Over hundreds of trades, my win rate is 42.9% with a 2:1 risk:reward. Enough to stay ahead of the game with slippage and commisions. Iíve attached 2 screen shots (in USD), 1 shows an all losing day, and an all winning day. These types of days are rare, but they do happen (none have happened yet this year). People like to hear about winners, but need to know losing happens a lot more than winning. But when an all winning day comes, it could be 60% of my profits for the whole month sometimes much more. It is often that my profits for a whole month happen in 2 to 3 days. The rest of the month is just break even, win a bit here, lose a bit here, no trading this day etcÖ

Thatís about it. Pretty simple really, and works for me. I hope this helps.
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Old Feb 9, 2011, 8:40pm   #62
 
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Joined May 2008
Re: Average Weekly Earnings

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Originally Posted by LiveTradingZone View Post
Add the Automatic Program silver trades below the 2011 records. That is something I designed myself and run it everyday.
This is live (real money) trading, right?
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Old Feb 9, 2011, 9:03pm   #63
 
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Re: Average Weekly Earnings

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Originally Posted by montmorencyt2w View Post
This is live (real money) trading, right?
And..you make more than £73 per week profit after losses ?
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Old Feb 9, 2011, 9:40pm   #64
 
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Joined May 2008
Re: Average Weekly Earnings

Tdrtw,

Thanks for explaining all that.

Have I got this right: that first 30 minutes where you talk about looking for patterns visually, that part is manual? But then the rest is automated?

I had previously imagined it as a system you just switched on and watched the results.

Not a criticism, just an observation.

I too have come to realise the value in closing down for the day, or evening, or morning, and walking away without having to worry too much what you are going to be faced with when you next switch on your trading platform.

On a slightly different tack, touching on the whole principle of automation: I have a long-held tenet that you should never just take a manual system and automate it as is, and think this will deliver efficiency because it's automated. I'm talking about systems in general, which could be office procedures, manufacturing, accounting....it doesn't have to be anything to do with trading.

If you automate an inefficient manual system, you will end up with an inefficient automated system, albeit it will be faster, but it will waste resources.


But extended to trading, before you automate your system, you have to be really satisfied that it works manually (leaving aside for the moment the emotional/psychological issues).

Although I was interested in the idea of automated trading from the early days (especially coming from an IT background, where programming was part of the job and the part I most enjoyed) I was very tempted to get stuck in. However, I soon realised that I didn't know enough about the basics of the market or of trading to make this worth even starting. So I went off to try and learn as much as possible, and turned my back on the idea of attempting any automation (beyond elementary things like using the various sorts of orders of course). At first I thought at least I'd probably be writing a few indicators and such like, but as it turned out (completely unexpected on my part), I ended up trading using the absolute bare minimum of indicators, and I had no reason to start writing them for myself. After that I also began to go more towards fundamentals and the idea of automation seemed (to me) even less likely to be a starter.

However, just as the markets go in cycles, I think your trading education does as well, and I have come around to the idea that at least in some cases, indicators can be very useful. (Such as the ones that NVP uses on his Correlation thread, which are some of the most useful ones I have ever seen). I may even dredge up what is left of my programming skills and try to write some before they silt up permanently. However, I doubt if I will get as far as fully automating my trading, as I still have reservations about that in principle.

One thing that would always worry me would be if there were subtle bugs in the code (and software always has bug, always....if there is one thing that my former life taught me, it is that) that under certain conditions might allow a trade to run away from you in a big way (and for whatever reason the stop wasn't in place, or it couldn't be acted on ... worst case scenario), and you lost a bomb in a very short time.

This reminds me of the story of the IBM utility, IEFBR14. There are various apocryphal versions of the story, plus one that I think is true, but it's slightly less fun than the first one I heard. I can't find that on the web at the moment, but basically, this "do nothing" program was put out with the 1st version of OS/360 that IBM wrote in the 1960s. It was good to have a nice safe program that you could run as part of your "job" (in the OS/360 sense of the word) that didn't do anything, but allowed you to allocate or deallocate file space used by another part (step) of the job. Piece of cake. Give it to the work-experience student to do in his lunchbreak. This was duly done, checked over by the senior programmer in his coffee break, and applied to the system that evening.

Shock horror, jobs were falling-over all over the place. The student had forgotten to set the exit code to 0 meaning "success". Quick re-write, re-assemble, re-linkedit, and install. Great. Everything works. Oh dear though, if anyone takes a system dump with this in, it fails to identify itself, as the conventions hadn't been obeyed. Senior programmer tries a bit harder, and it is soon fixed. However, under certain conditions, jobs are Abending with program interrupts....addressing errors, because certain other conventions were not followed.

And so it went. Finally, it evolved into the reliable IEFBR14 that we all now know and love, but it was about 5 times the size of the original, had been through half a dozen maintenance releases and was now documented. The moral of the story (I have forgotten some of it) included:

1. All programs need testing
2. All programs need maintenance
3. All programming estimates are out by at least 500%
4. Never give an important job to a work-experience student!
....
...and no doubt several others.
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Old Feb 10, 2011, 12:42am   #65
Joined Oct 2006
Re: Average Weekly Earnings

>> Have I got this right: that first 30 minutes where you talk about looking for patterns visually, that part is manual? But then the rest is automated?

The entry is automated. It’s just that it’s so simple, I can look at a chart and know exactly what I would do. The simpler it is, the more it appeals to me.

>>I had previously imagined it as a system you just switched on and watched the results.

That’s exactly how it is.

>>I have a long-held tenet that you should never just take a manual system and automate it as is, and think this will deliver efficiency because it's automated. I'm talking about systems in general, which could be office procedures, manufacturing, accounting....it doesn't have to be anything to do with trading.

I have a long held tenet that automation is the key to freeing up time so that people can pursue more interesting and fun things! I’m talking about systems in general too. Take for example 2 families working a farm. Each family slaves all day on the farm to make their food. Then 1 family says, lets buy a machine to automate this instead of busting our backs all day. So they do. The other family looks at them and says, look at them with the machine, now most of them are out of a job! I feel sorry for them.

But the ones that were “out of a job”. They were thinking – finally I don’t have to do this crap work. I’ve always wanted to be a painter/chef/seamstress. So a few months later this family eats better, have better clothing and their house is full of beautiful art. Oh, and they are really happy doing things they love. The other family still slave away on their farm, still resisting automation :-)

>> One thing that would always worry me would be if there were subtle bugs in the code

That is why I monitor it, and have Interactive Brokers on Speed Dial. Takes me about 5 seconds to know everything is ok from my iPhone.

>> (hat under certain conditions might allow a trade to run away from you in a big way (and for whatever reason the stop wasn't in place, or it couldn't be acted on ... worst case scenario), and you lost a bomb in a very short time.

Even worse, it runs away in your direction and you make a crap load of money !! Darn it, now you can’t claim that as part of your system gain… shoot….

Seriously, that is why I monitor it.

I trust a program over a human anytime. Human’s make mistakes, but when a program does, it usually does the same mistake under the same circumstances, and can be easily corrected. Human’s seem to make them erractically, and it’s darn hard to debug or fix them.
The hard part for the Human is to just let the program run. I traded my system manually for a long long time before automating it.

As long as I start it up each morning, my program has never hestiated putting on a trade, even if the last 3 in the row were losers. It never said “I know this STOP is too big, this is not right, let me change it”.

If it could say anything, I bet it would say “just leave me alone to do my thing, check on me once in a while, but go enjoy yourself you have better things to do than look over my shoulder”.

If you believe it will work, then you stand a chance of making it work. If you believe it won’t, then you will never even begin.

I believe, and I truly enjoyed all the time I spent writing and debugging the code.
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Old Feb 10, 2011, 12:28pm   #66
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Re: Average Weekly Earnings

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Originally Posted by montmorencyt2w View Post
This is live (real money) trading, right?
yes, real money is being traded. I have used this program for a while and designed it all on my own. Several people run this already on their systems. That is only based on 2 contracts, and I know a few run 4-10 contracts at a time.
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