Wednesday, October 05, 2005

Trading Tactics

You sit there, asking yourself:

Is Globetrader now over the edge? This whole autotrading business is just nuts, it can’t work. And even if it works on past data, my own system is a lot better having a Win% : Loss% Ratio of 73% : 27%.

Actually I’m not yet turning my business over to the computer.
And I’m not yet abandoning everything I learned for the last 3 years reading my charts.

BUT: What this autotrading module gives me, and might give you, if you start using it:

It can give you optimized Trade Management Rules.

When do I exit a profitable trade.

Where do I place a Stop as chances that the trade comes back are slim, if the trade goes this far against you.

You will tell me, that the autotrading system in Futures-Trader does not match the one you trade.

Sure. But it offers you something even better. It gives you a trading system, which has reproducable results. Meaning, if you enter the same data, using the same dataset, you will get after each and every run the same results. So even if the system is sometimes not a lot better than 50% : 50% compared to flipping a coin, you will get every time the same result. And if a change of the trade management parameters changes the results to the better, this will work in your real trading as well.

Why? Because I assume that the chances of every trade are the same in the beginning.

Prices might go up or down from where you entered regardless what your indicators tell you.

I just remained in a trade, where my indicator started to tell me: Hey Chris, I’m about to shamu down, better take the -4 exit I offer you now, than remaining in the trade. Entry was 1.1993 2 bars prior to the one I marked with an <x>. But my Stop was not hit, I know for certain now, that profitable trades might wiggle 6 ticks against me on average, so an 8 tick stop is it for now. I stayed with the trade and was rewarded.