Slightly changed my NYSE Day Trader Level Table, which was written back in 2009 year for beginners with gradual and slow growth. Now I decided to make it more aggressive for experienced traders. The rules have hardly changed, but the position size changes faster for those who have already traded large volumes.
Let me explain with an example, why is the return of accumulated profit from above for trend-following systems is normal, which, certainly, difficult at first, but with an understanding of the processes taking place, addiction gradually occurs. To make it clearer — for example, opened a position, she went in our direction, accumulated profit 100 rubles, then the price went against us until 70 rubles, where we closed the position. That is, given from above 30 rubles, eventually earning 70.
Let's take a daily Copper futures chart as an example. , since last summer. Two simple systems on Donchian channels will act as average traders. One trader is a Donchian channel with a period 40 — that is, this is the one, who does not close all positions at the slightest hint of a reversal, but patiently waits for correction, if a, of course it will work out, that is, it will not touch a relatively long trailing stop. The second trader is the Donchian channel with a period 10 — that is, the one that, at every hint of correction, closes positions in a panic, and then opens again according to the trend — that is, it fusses and twitches.
Here are the positions of the first trader. Apparently she was only one. Opened a position last summer, waited all the corrections and only recently closed the position, Earning 24 000 Dollars.
The second trader fussed about, then opened positions, then at the slightest danger closed. As a result, there were many deals, but it turned out to be of little use. Interestingly, even on such an uptrend, as a result, I managed to get a loss. And even more interesting, that despite the fact that he has four times less risk, the drawdown was more than twice that of the first trader. Also, slippage costs were not taken into account here., which will add even more negativity.
Certainly, I agree, what if the trader has a psychic ability to guess peaks and troughs, then he does not need any trend tracking systems and he will never have drawdowns. Therefore, this example does not apply to them.. In fact, this is just an illustration of the rationale for the inevitability of drawdowns., and for any systems, not necessarily trend following.
Yes, and this example is exclusively for American futures only. Promotions (American, Russians) and RTS have completely different characteristics.
I think that in real trading, even in forex, even on stocks and futures, the probability of getting a drawdown in 25% over a period of two to four years is quite large and tests of various systems on history also confirm this. For example, in 2008 year, the total drawdown of my systems reached 30%. Yes, you can just look at the systems on Collective, where you can see that the drawdown 25% almost all relatively long existing systems have.
К чему я это?
And besides, what if playing with shoulder 1:4, then in case of drawdown 25% losing all capital. At the shoulder 1:20 we lose all capital in case of drawdown 5%.
I, certainly, understand, what “real trader” drawdown is not recognized at all when playing with the risk / reward ratio 1/10 or 1/20 — that is, it seems to think that the risk is minimal or absent at all. Therefore, this my remark only to those who, due to their non-exclusiveness, drawdowns are still allowed.
True, there is another way to avoid the above risks. — I read that in certain circles day traders make money, not interest, since their (interest) you can't smear it on bread. To them this warning too, Fortunately, не относится. :)
I wrote a table of the level of the day trader on the NYSE. This is how you need to gain experience for trading on the NYSE for beginners and experienced traders.. It's my personal opinion. *Standard stock position for trading ** Daily loss limit on the day after which trading stops *** Total profit for the week, to go to the next level **** Total minus amount for the week, to go to the previous level For beginners, the transition is carried out after two or three weeks, for more experienced traders a week is enough.
Have you ever had a time getting into a situation?, when losing trades follow one another? You suddenly start to panic., and think, that it never ends? But how strong is this drawdown? Maybe, you just panic for no reason? Maybe, you turn statistical drawdown, which can always happen, into the psychological, what not to do? Statistical drawdowns need to be predicted. If you are using a reliable trading system, then the law of large numbers is on your side. From the point of view of statistics, there is nothing to worry about in a series of losing trades.. Since a large number of trades gives you a statistical probability of making a total profit. It's okay, to get a series of losses. It's just a matter of probability. If you don't take it personally, and just keep on lying to the system (managing risks), sooner or later everything will change, and the system will return to profitability. However, some traders turn statistical drawdowns into psychological ones.. They indulge in despair and pessimism., start thinking about failure. And thoughts have the ability to materialize. Reality can change, if you think, that ended up in a financial hole. Psychological drawdown is able to make you think, that you are stumped.
