Trade efficiency analysis for trade targeting is important to improve profits over time with any trading model. This series of posts discusses the methodology of maximizing effective profit targets when wanting to INCREASE the number of winning trades any trading plan or trading model can produce.
Some basic facts before I begin:
1) I WILL NOT show you my model. It is proprietary between myself and Bruce Linker, who coded and made some adjustments to it. I can even tell you that the basis of the model is not even really mine, though the refinements MOST DEFINITELY ARE, and the original coder knows nothing about how I achieved what I did.
2) The good news is that you DO NOT HAVE TO SEE MY MODEL TO GET SIMILAR RESULTS, as long as you have refined the model to produce winners of this magnitude in terms of percentage of winners and can minimize the losses with stops that are built into the model. What you should do is to write down your rules for trading entries and exits, both long and short, and then have someone code the trading model into a platform like TradeStation or NinjaTrader. You should be able to produce the chart on the right, which is a scatter plot of trades, calculated in terms of trade efficiency (% of target reached or maximum loss reached), and then begin the analysis. What you will find if you continuously work on tweaking the model is that you can identify places where your odds of success can approach 80 to 90%, and the worst that you can do is only to lose what you made the day before if you manage the analysis properly. The goal in this is to create an automated income generating machine that will produce consistent profits to the point that it can be readily scaled to hit mutliple units or contracts. Everytime you double your number of contracts, you double your income each day.
3) The other thing this analysis will do is show you some losers that can and indeed WILL LIKELY be WINNERS if targets are adjusted. It will also allow you to trade two units initially if you have the capital, one for an initial target, and the second for a long range target with a BREAKEVEN STOP.
4) To dispell rumors and hyperbole, lets get one thing clear. Will this model win every time? NO. If anyone tells you their’s will, let them show you the performance with statistics that I will show you. If they cannot, then you need to RUN and NOT WALK away from someone who is selling you such things. There is no fast highway to Happy Land in trading. All you can do is improve your consistency and accuracy, and then manage your account to maximize growth. All else is BS. This took the better part of 3 years to create, but I wanted it to work, and did not quit.
What I will do in the next post is show you the raw statistics of this model, with no filtration, and then add into the mix a discussion of what efficiency is, and what it is important. I can tell you this, these models were optimized with $200 stops and $200 targets, both long and short. The real moment of zen comes when one realizes that the most probable target is NOT $200, and that is the good news.
The even better news is that if you allow the scaling to run continuously per instrument (in this case E-mini NASDAQ futures) in roughly 200 trading days with little capital, you could easily earn $750/day for about 30 minutes work. Is that worth optimizing targets for?
You ain’t wrong there coach.
More will be coming in a couple of days or so.
As always, even as infrequently as I write now, THANK YOU FOR SUPPORTING THIS BLOG!