Thursday, May 08, 2008

Ready to trade real

How do you determine that you are ready, that your system will stand the test of at least the next months, that you have an edge.

You will know for sure only in hindsight. But that doesn't help you in your decision to go live or not
or in your decision to stop for a while and get back on track by demotrading for a while.

There is a tool available at http://www.enthios.com/simulator.htm to help you in your decision process

Globetrader_23

As I have more than 4 years of data available I took the test using my own trading results to determine whether something has changed, whether my odds improved over time. You need to do a bit of math to get the values you need out of your data, but Excel can do all of the necessary calculations.

Globetrader_24

2004
Globetrader_22

2005
Globetrader_21

2006
Globetrader_20

2007
Globetrader_19 

2008
Globetrader_18

What do these lines tell you? We start with a starting capital of 100 and look how it develops over 453 random events. That calculation is done 50 times and you get a bundle of lines. The closer together these lines are, the clearer the direction the better, as long as that direction is up.

Looking at the previous article, where I posted my trading results I would have guessed that 2006 should have been a good year, but actually it wasn't. All years showed me at least a chance to profit, but the cones of the lines were fairly wide and not exceeding the 200 lines usually. So over 453 trades I have had just a slim chance to double my initial capital. In 2008 that looks obviously different. I'm doing something right I did not do correctly in the previous years. Of course I have just 4 months of data so far in 2008 and the results may look different in December. But if you trade demo and you get that picture I see in 2008 then you are ready to trade real. It's all just a chance to win, there are no guarantees in this business, but that's all you get in trading.

1 comment:

markus said...

Hi Christian,

check this one: http://www.adaptrade.com

It is a nice tool for position sizing and other money mgmt. issues (includes a Monte Carlo simulator). They offer a 30 days or 30 uses free trial.

Cheers,
Markus