Recently I just start doing my manual best testing for the signal by applying stop loss and profit target level with discipline. Before I going review the result of my back testing, I would like to share a bit the strategy that I was using all the time.
Actually I was using moving average to trade the market, and I allocate 5k for trading 1 lot. I start to put myself in trading in the early of august and my initial capital was around 9k. I did suffer some draw down from the day I start trading and once my capital had grow till 10k, I start to trade 2 lots whereas start trading 3 lots once hit 15k plus using some flexible trading style. With such a method, I achieved 70-80% of capital growth around 1st of December, and for me it is quite impressive return which I don’t think there is any kind of investment can realized such a great return. So this are the ways how I trade futures in the past. Though I did success for some period in futures trading, however I still can’t go through greatest sideways that happen in April 2010. I am very disciplined trader in following every signal, but in the end disaster still approaching me, so I start to thinking how will be the result if I put my per-determined cut loss and profit taking level before I go in any trade.
In the past, I let the market to decide my cut loss and profit taking, but now I wish to have my own game plan before I going into any trade so that I know what I need to do when I right as well as what I need to do when I wrong. As a result, I adopting 1:3 risks to reward ratio which are 9 points cut loss and 31 points profit taking for every signal I going to trade together with miscellaneous rules to follow. I was doing the back testing from early August to December and I allocating 10k for trading 1 lot so that I can compare the return on different of trading method. Once I finished the testing, the result was quite disappointing…..For this 4 months of trading using new approach, I able to achieve 900 of profit only which is too much different from what I get in the past. As I looking back the at those trade, I had noticed I being stopped out a lot by the noise so the frequency of losing trade was higher than what I expected.
8000 vs 900….. 1 method that can increase my capital in faster way but more risk involves, whereas another method can allow me to survive in the market in long run, but the return was not promising as compare to 1st method. After this back testing, it raise up some question to me.
1.Is it our market volume too sluggish, so it is not effective in using predetermined trading plan?
2.Do I have to widen my stop loss so that to avoid those noises?
3.How I suppose to get in to the trend if the signal can give me 100 pts of profit since I setting up 31 pts profit target?
It is easy to set up a trading plan but it is not easy to follow it exactly. I think I have to work harder to come out some trading plan that really suitable to apply in our market. There is no perfect ways to beat the market. The only way to beat the market is finding some method that suit to our trading style and it is valid to survive in long run then it consider as ultimate trading plan. Guess what, my first trading plan was failed, but is ok, if I not giving up keep trying and trying again, I believe I can discover something in 1 day!!!
No comments:
Post a Comment