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CompoundTrader

When to Go Live?

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I have started live simulation trading this January, but the results are not good enough yet. I am looking for some guidance on how to use maths and statistics to identify when I am ready to go live.

 

The statistics I am tracking so far:

-profit factor (ratio of gross loss to gross profit)

-ratio of net profit to maximum drawdown

-gross losses

 

The reason I am choosing these statistics is that I want to focus on keeping my losses as small as possible in order to use leverage effectively and compound my account. I believe if I prepare properly, total risk can be kept small, so I plan on starting with a $4,000 futures account and staking $10/tick.

 

Profit factor tells me how many dollars I earn for each dollar lost, and I would like this to be 3 or more. Also, in any rolling 5 day period, I want to have made at least 4x my maximum drawdown in that period. Both of these together will ensure that time to recovery after drawdown is as quick as possible.

 

Total gross losses are still far too high. There are various improvements I can make to my method to eliminate some of these losses. This will take time - the question is, when am I successful enough to begin live trading?

 

 

I am always paying the spread on my simulation account and these results include the commissions and fees I will pay when live.

 

I don't plan on going live until I know with high probability I can compound without ever drawing down more than 50% of total account equity.

 

How do traders here approach statistics and position sizing?

 

Sample size.

The above doesn't tell you how many trades I took. I do 6-10 per day, so am I right in thinking that 20 trading days would be a sufficient sample size (120-200 trades) for a short term day trading strategy?

 

Here is the stats produced directly by my order entry software for this week. I made some improvements last weekend, so profit factor for this week above 2. I know that I need at least 4 weeks of good stats without making changes to the method in order to go live - but can I be more scientific?

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Hey compound trader, another statistic I would look at is expectancy: your (avg w x win rate) - (avg loser x loss rate) less commission.

 

One thing I like to do as well is analyze my trades in groups of 20. This helps me see the bigger picture with a larger data set.

 

As for when to go live, when I started I knew that my results would be a lot better on SIM compared to live. Looking back that was certainly the case as live adds the emotional element you just can't replace when SIM trading.

 

That being said I learned a lot my first few months going live. I stated trading day trading on the YM and while sim trading I waited until I was consistently profitable on a monthly bases for 3 months. Then I switched to live with $1000 trading 1 contract. When I grew the account to $2000 I went to 2 contract and expanded form there.

 

-Tim

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