Trading Psychology : How long does it take to judge whether a system is working?

Trading is often about how to take the appropriate risk without exposing yourself to very human flaws.
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FrogThimble
Posts: 124
Joined: Mon Dec 11, 2017 6:26 pm

Sun Apr 15, 2018 1:31 pm

Saturday was brutal... My system showed its flaws at around the 100 trades point when something I hadn't anticipated happened and the previous day's profits got wiped out. Back to the drawing board for me again. :D

xitian
Posts: 441
Joined: Fri Jul 08, 2011 2:08 pm

Sun Apr 15, 2018 4:17 pm

"Back to the drawing board" sounds a bit drastic. There could still be legs in your strategy if you can account for the "unanticipated" situation that caused the losses. If you can prevent those without minimising the amounts of all the previous wins then you could potentially still be quite positive overall.

If you plot a chart of cumulative total P&L for all the markets (or trades) what does it look like?

Re: the £400 of losses testing previous strategies - consider it the start up expense like any business. Commit as much as you are happy to a start up fund and use it sensibly. It needs to be money you can lose and not worry about, since there's likelihood any/most businesses don't get off the ground. But don't be afraid of using it. Just be sensible. Even better - learn the skills to collect data and backtest stuff without risking money. Admittedly this is a bit harder with in-play strategies.

FrogThimble
Posts: 124
Joined: Mon Dec 11, 2017 6:26 pm

Sun Apr 15, 2018 10:41 pm

xitian wrote:
Sun Apr 15, 2018 4:17 pm
"Back to the drawing board" sounds a bit drastic. There could still be legs in your strategy if you can account for the "unanticipated" situation that caused the losses. If you can prevent those without minimising the amounts of all the previous wins then you could potentially still be quite positive overall.

If you plot a chart of cumulative total P&L for all the markets (or trades) what does it look like?
The chart is this:
graph.jpg
It would only have taken one more bad trade to wipe out all profit. I have a few ideas about ammending the method to try to reduce the risks - which is what I mean about the drawing board really. Major tinkering rather than a total rethink. I'll try that from tomorrow going back to minimal stakes.
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ShaunWhite
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Sun Apr 15, 2018 11:14 pm

It's obviously a high strike rate strategy and that usually goes hand in hand with larger losses. If you can stop the big ones then all well and good but you still have a positive trend.

What was the thing that happened that you didn't expect? Technical failure? Or a genuinely very unusual event?

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marksmeets302
Posts: 505
Joined: Thu Dec 10, 2009 4:37 pm

Mon Apr 16, 2018 10:53 am

Shaun is right, you have a strategy that has the occasional big loss, and they determine how well you do. After about 30 to 40 of these big losses you will have a good idea if your system is worth the effort. Right now there is no telling if they occur too frequently.

You might want to trade in some of the upside to lower the risk, As is this will be very hard to trade emotionally. You *will* encounter multiple back to back big losses en you're almost guaranteed to throw in the towel at that point. Another option is to trade this with low stakes in a portfolio of strategies.

FrogThimble
Posts: 124
Joined: Mon Dec 11, 2017 6:26 pm

Mon Apr 16, 2018 2:52 pm

ShaunWhite wrote:
Sun Apr 15, 2018 11:14 pm
It's obviously a high strike rate strategy and that usually goes hand in hand with larger losses. If you can stop the big ones then all well and good but you still have a positive trend.

What was the thing that happened that you didn't expect? Technical failure? Or a genuinely very unusual event?
I attempted a trade on a horse at a very short price which then fell the second after I'd backed it before I could get a chance to hedge it. Obviously this can and will happen but I was already exposed in that race due to the poor performance of the first horse I'd tried to trade on and I should have just let the original loss ride - even though it would have broken my then rule to do so. That's one of the rules I'm changing... I have to be willing to accept medium sized losses to cut the risk of huge losses even if it means fewer wins.

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ShaunWhite
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Mon Apr 16, 2018 3:09 pm

FrogThimble wrote:
Mon Apr 16, 2018 2:52 pm
I attempted a trade on a horse....... which then fell the second
Perhaps the strategy isn't suitable for situations with a high degree of jeopardy, like fences, or sprints or amateur riders. Or maybe that's what's driving your gains? It's so easy to just say weed out the losers, but you really have to mind you don't throw the baby out with the bath water.

FrogThimble
Posts: 124
Joined: Mon Dec 11, 2017 6:26 pm

Mon Apr 16, 2018 3:33 pm

ShaunWhite wrote:
Mon Apr 16, 2018 3:09 pm

Perhaps the strategy isn't suitable for situations with a high degree of jeopardy, like fences, or sprints or amateur riders. Or maybe that's what's driving your gains? It's so easy to just say weed out the losers, but you really have to mind you don't throw the baby out with the bath water.
All these things are possible. Today I'm playing all of the UK and Irish races regardless of distance or format. One day won't give me much insight but it's certainly possible I've been choosing some of the wrong races and missing some of the ones I ought to have played.

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ShaunWhite
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Mon Apr 16, 2018 4:22 pm

FrogThimble wrote:
Mon Apr 16, 2018 3:33 pm
All these things are possible.
I once heard the Sage of Hook say that it's not enough to know that something is working in case A but not in case B, you also need to understand why it's working. Or maybe I got that from a fortune cookie, I can't remember.

FrogThimble
Posts: 124
Joined: Mon Dec 11, 2017 6:26 pm

Mon Apr 16, 2018 5:46 pm

ShaunWhite wrote:
Mon Apr 16, 2018 4:22 pm

I once heard the Sage of Hook say that it's not enough to know that something is working in case A but not in case B, you also need to understand why it's working. Or maybe I got that from a fortune cookie, I can't remember.
I'm not doing too well today in terms of net results. Across the first 20 races my bank is down to 90.7% on the start of the day.

However... if I'd only played the races of 10 furlongs or longer my bank would be at 102.8% of the start of the day.

On the 12 races of 10 furlongs or greater I've won on 11/12 with an average 23p profit
On the 8 races of less than 10 furlongs I've won on just 2/6 with an average loss of -£1.63

Very small sample but I can see why it's happening that way and it's enough to persuade me to give the short races a miss.

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