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cunparis

Is Optimizing Profit Target & Stop Loss Curve Fitting?

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It didn't work. :evil tongue:

 

The answer is yes optimizing profit target & stop loss is curve fitting, at least to an extent. If the stop and target are just random numbers that are optimized then it's curve fitting.

 

I'm now working on a semi-automated strategy. I put in my levels and the basic idea and my strategy picks entries & stop loss. Since it uses my levels which are done manually, there is no backtesting and so no optimization. I've only been doing it for a few weeks and I'm working out little bugs but so far I'm encouraged. Market action wasn't great the past few weeks and I only run it the last 3 hours of the trading session so it'll take a while longer to get enough data.

 

So if anyone is interested in automation.. I do not believe it's possible. The markets change. high volatility, low volatility, trend days, balanced days, etc. I've never seen anyone have a successful automated strategy long term, at least without massive drawdowns that would cause most to pull the plug. I think the best route is to give up trading, but if that's not an option, it's best to learn to trade manually and then look to automate parts of the trading slowly.

 

That's a too pessimistic point of view, IMHO. I think that a better question would be: have you realized WHY your strategy didn't work? You just generically mentioned market changes, volatility and so on. Did you quantify the overall and range-specific reactions of your algorithm to market windows and regimes? Did you take note (with your metrics at hand) of every single interaction between the market and the results you've got?

Very often automation is abandoned only because of lack of a proper analysis.

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That's a too pessimistic point of view, IMHO. I think that a better question would be: have you realized WHY your strategy didn't work? You just generically mentioned market changes, volatility and so on. Did you quantify the overall and range-specific reactions of your algorithm to market windows and regimes? Did you take note (with your metrics at hand) of every single interaction between the market and the results you've got?

Very often automation is abandoned only because of lack of a proper analysis.

 

I think it's a very realistic view, and the very few profitable traders I have known have agreed with it.

 

I've learned to trade profitably (not insanely so, but positive) manually using my brain. Modeling everything I do into an automated strategy would be way too complex. There are so many inputs and factors and they're constantly changing. And if it could be done, then one could slowly work up to 1000 contracts and make millions. Wouldn't every fund in the world be working on such a thing?

 

But I don't want to argue this point because people coming into trading are chasing their dream and they don't want to believe it's not possible. So when someone tells them the odds of succeeding are 1 in 10,000 they either believe that's not true or they believe they'll be the one who will make it.

 

In my case I went back to consulting which I was doing before trading full time. And my trading improved. So now I get a steady paycheck and I focus on getting one good trade in the last 2-3 hours of the US session.

 

I'm kind of rambling. My main advice for someone who doesn't believe what I say is this: Trade on sim until consistently profitable for 6 months. That will remove the possibility of financial losses. The remaining risk will be time loss. There is no easy way to remove that one. When a strategy (manual or automated) works and you're sure it works, run it real time on sim for 6 months to make sure it doesn't stop working. I'm sure you'll find it does stop working but at least you won't lose any money finding that out.

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Trade on sim until consistently profitable for 6 months. That will remove the possibility of financial losses. The remaining risk will be time loss. There is no easy way to remove that one. When a strategy (manual or automated) works and you're sure it works, run it real time on sim for 6 months to make sure it doesn't stop working.

 

I can easily show that your 6 months won't demonstrate anything, my friend. And won't give you any certainty about not losing money, that's for sure.

 

I think it's a very realistic view, and the very few profitable traders I have known have agreed with it.

 

I've learned to trade profitably (not insanely so, but positive) manually using my brain. Modeling everything I do into an automated strategy would be way too complex. There are so many inputs and factors and they're constantly changing. And if it could be done, then one could slowly work up to 1000 contracts and make millions. Wouldn't every fund in the world be working on such a thing?

 

But I don't want to argue this point because people coming into trading are chasing their dream and they don't want to believe it's not possible. So when someone tells them the odds of succeeding are 1 in 10,000 they either believe that's not true or they believe they'll be the one who will make it.

 

This is WAY too simplistic.

 

On a statistical basis, saying that 95% of trader will fail (no matter what method they follow) would be much more realistic. But what's the point of stressing that?

 

(Serious) automatic trading may involve the use of "your brain" much more than manual do. Maybe you were not aware of this, and are now projecting your experience onto a wider spectrum of "general" experiences. You're not supposed to generalize your conclusions simply because this approach didn't work for you.

 

Once again (you didn't reply to that): have you performed all the required tests before and after your trading activity? Were all the calculations made in a statistically reliable way?

 

P.S. FYI, I'm a 10-year pure mechanical trader, and I'm profitable. And I'm not a genius. So, what's the catch?

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Once again (you didn't reply to that): have you performed all the required tests before and after your trading activity? Were all the calculations made in a statistically reliable way?

 

P.S. FYI, I'm a 10-year pure mechanical trader, and I'm profitable. And I'm not a genius. So, what's the catch?

 

I thought I answered it, indirectly.. in that I gave up the automation and learned to trade manually. So I stopped doing analysis. To me it made sense to learn how to trade manually before learning how to automate. Before I was shooting in the dark and curve fitting and then hoping it'd work real time. it didn't.

 

I don't have the time or desire to have a lengthy debate about anything I said as I simply don't care enough and I'm too busy. I've settled into my routine, I come home from work, make my levels, set my audio alerts, and configure my automated strategies and I go have dinner and spend time with the family. When the audio alert goes off I come to my PC and look to time an entry for my trade. I'm hoping to automate this last step so that I can avoid missing trades (not hearing audio alert) and avoid waiting for the timing trigger at my PC. I take 0-2 trades per session, and I'm done. This works for me. In Oct - Dec of 2012 I averaged 1 pt per day traded (for 1 lot), but I didn't take trades every day. That was better than I did trading full time. In January I traded full time and was breakeven. so now I'm back to what I did in 2012 and will be happy with that.

 

Lots of people claim to be profitable, and I'm not saying you're not. I just quit listening to all that. I quit forums totally actually, but once in a while I get an email about an update in a thread from a long time ago.. :)

 

I don't expect anyone to believe me, but I sleep better knowing I've recommended people trade on simulator until profitable 6 months (consecutive). I never said that one would be profitable trading real money after that 6 months, but it will at least prevent people from blindly throwing their money away.

 

If anyone wants to read more about my story, you can read a lot including real trades and real performance results that showed the ups & downs of my trading over the past several years, on my blog.

 

I wish everyone the best of luck in whatever they do and good trading. Cheers. :2c:

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Lots of people claim to be profitable, and I'm not saying you're not. I just quit listening to all that. I quit forums totally actually, but once in a while I get an email about an update in a thread from a long time ago.. :)

 

I don't expect anyone to believe me, but I sleep better knowing I've recommended people trade on simulator until profitable 6 months (consecutive). I never said that one would be profitable trading real money after that 6 months, but it will at least prevent people from blindly throwing their money away.

 

Two points that should not be overlooked.

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