This Turtle Ain't Movin'

Decided to give this Turtle trading method a miss. After further tests, I found out that this is a rather long-term in nature......

........and I hate to be a long-term trader!

So far my intraday strategy is working well. I need to complement it with short-term & medium-term strategies, which I am putting together now.

Why multiple strategies?

That's because markets have various phases, and each of the strategy is designed to capture a certain part of the market phase. I try to have a collection of tools that I can use to tackle different market conditions.

"Turtle" On....

I am currently testing out a variation of the Turtle trading strategy, which is basically a Channel Breakout. There's nothing fancy about this strategy, really simple stuff.

Since I like simple stuff, I thought.....hey, why not take a look at it and see if I can get it to work on FOREX? I may need to tweak a bit here and there.........nonetheless, it should be an interesting piece of research work, no?

Realigning my Trading Focus

July marks the month where I finally transformed myself from discretionary trading into 100% mechanical approach........

........and I have not looked back since then!

Not only that, I have also decided to ditch stocks trading and simply focus 100% into forex, as I'm getting better results from the currency market compared to equities.

Looking back, I find myself more at ease as a trader. I am no longer excited about placing and closing trades. The only excitement comes when I'm researching & testing new trading ideas. The tried and tested ones.....well, they're getting pretty boring.

Is this a positive development, as I continue to evolve as a trader?

I think so, as my trading account continues to grow. Trading is no longer stressful, boring in fact. Heck, I now have a lot of free time that I end up yakking more on Facebook (a great way to waste time).

I am now in the middle of research into another medium-term trend trading strategy. And yes, it's 100% mechanical. I wouldn't have it any other way!

More Math!

I received a few questions regarding Risk-of-ruin & Expectancy. Well, the math is as follows:

Risk-of-Ruin
-------------
{[1-(W-L)]/[1+(W-L)]}power of U

where

W= probability of winning
L= probability of losing
U= number of units of money in trading account

The objective is to get r-o-r = 0%

Expectancy
------------
[probability of winning x (avg win/avg loss)]-[probability of losing x (avg loss/avg loss)]

The objective is to get a positive expectancy number. Obviously the higher, the better.

So, there you go! For more info, go read Dr Van Tharp's books (e.g. Trade Your Way to Financial Freedom).

In God I Trust, All Others Must Show Me Data!

Carrying out engineering evaluations were part & parcel of my job when I was working as an Engineer not too long ago. Whatever new things, system, materials, process.......anything new that I want to implement, I had to present hard data to my management as proof of project viability, before I can implement any of them.

Well, it's the same with trading. Whenever I'm looking at a new trading system, I will need to test it out first, before I start putting real money trading it.

I have just completed a forward-test on the new strategy on demo that I am looking at. The summary of result is as follows:

# of Win	28
# of Loss	15
Accuracy	65%
$ Win	$18,065
$ Loss	-$7,266
Avg Win	$645.18
Avg Loss	-$484.40
Avg W:L	1.33
% Exp	52%
# of units	40
W prob	0.65
L prob	0.35
Sub r-o-r	0.54
% r-o-r	0%

Over the test period, this system yielded 52% Expectancy with 0% risk-of-ruin. No real money involved, as the test was done on a demo platform. I am comfortable with these statistical figures, so I will trade live with this system starting this week onwards.

For those who are curious on these calculations, they're all based on Dr Van Tharp's work. Google 'em for more info.

This system is basically daytrading off daily timeframe, so it's a pretty active trading. Since I'll be trading practically everyday, I will not put live charts on each of the new trades that I'm taking.......just feels like a lot of work to me.

I'm BAAAAAAAAAAACK!

To all of you who have dropped by, only to discover that I've not posted any new posts - well, what can I say..........blame it on the world cup that is going on now?

Pretty darn lame excuse, I know......

The truth is, I have been really, really busy exploring new trading concepts and techniques. I am now more leaning towards mechanical trading approach, where's there's absolutely no room for ambiguity.

In other words, either a setup is there, or it isn't. Simple as that, no?

But that's not what I want to talk about here.

Along the way of my research, I have also explored two very important subjects which I have ignored before in the past (and probably to the detriment of my trading account)......

......these two were actually discussed in detail by Dr Van Tharp in his book "Trade Your Way To Financial Freedom".

And no, I actually did not read the book - but the info was distilled by one of my mentor, and he had summarized all the crucial ones and handed it to me. How convenient!

Yes sir, here are the two things that I have been enlightened to. They are:

1) % Risk of Ruin
2) % Expectancy

Risk-of-ruin is simply a statistical calculation for the probability of getting into financial ruin, or getting blown trading accounts.

Expectancy refers to what you can expect to earn, on average, for every dollar you risk in a trade.

Yep, I know.......boring statistics! But I have found out that these are crucial info that I need to know, when I'm assessing viability of new trading concepts.

And it is because of these statistical studies that have made me depart from discretionary trading towards something that is more mechanical, or rule-based strategies.

Why?

Because I find it difficult to do objective back-testing when there are discretionary elements in any of the trading systems that I had attempted to evaluate.

Mechanical systems are easier in this respect, because they are:

1) 100% objective
2) Verifiable

I have just extensively back-tested a system that gave 0% r-o-r and positive expectancy. I am now "forward-testing" the system.

Taking a Break.....

Had a rare opportunity to sit down and listen to a professional Futures trader talking about what he does in his everyday trades. Pretty interesting stuff, and he sure did light up a few light bulbs in my head.

I am going to take a break from FOREX trading for a while, and re-strategize my approach. No, I'm not going into Futures, but a lot of the stuff that he talked about is applicable to most financial markets. After all, a chart is a chart is a chart.........only the title is different.