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

Sat May 05, 2018 11:25 pm

Final update:

Day 13... 19 trades today and I totally messed up.
Day 13.jpg
The big drop was due to another stupid intervention on my part rather than the system... but the system can't possibly work if I can't make myself play by my own rules. So I'll go and think about my self-discipline (or lack thereof)...

Anyway, that's the public part of my experiment over with. :)
You do not have the required permissions to view the files attached to this post.

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

Sun May 06, 2018 12:25 pm

Can't you automate it somehow? A system isn't really a system if there's discretion involved. At the same time if discretion is not require for it to work then in theory you should be able to convert it to a set of rules which you can try to automate?

Even if it needs a bit of configuration at the start of the day or whatever, if at least the execution can be automated then that would be worth it.

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

Thu May 10, 2018 5:34 pm

xitian wrote:
Sun May 06, 2018 12:25 pm
Can't you automate it somehow? A system isn't really a system if there's discretion involved. At the same time if discretion is not require for it to work then in theory you should be able to convert it to a set of rules which you can try to automate?

Even if it needs a bit of configuration at the start of the day or whatever, if at least the execution can be automated then that would be worth it.
It was automated... but... that didn't stop me interferring. Even though the system was (mostly) producing a slight profit I couldn't stop myself from sometimes making manual interventions if I felt something was going against me. All of the biggest dips and biggest leaps in my graph were due to interventions. All of the small upwards and downwards movements were due to the automation doing what it should have done.

The problem was with me rather than with the system. It's no big deal with a £10 bank but image how I'd have got on with a bigger bank that I actually cared about? More interventions and more significant losses, I think.

Anyway, over the last few days I've mostly been studying the movements of the markets and I think I've noticed another huge pitfall to my approach... the biggest flaw possible (one so big that I'm amazed I didn't spot it before) really so I'm rather glad I didn't persue this any further. I'm looking at the strengths and weaknesses of a totally different in-play idea now but just in the early stages of testing it.

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

Thu May 10, 2018 5:36 pm

FrogThimble wrote:
Thu May 10, 2018 5:34 pm
xitian wrote:
Sun May 06, 2018 12:25 pm
Can't you automate it somehow? A system isn't really a system if there's discretion involved. At the same time if discretion is not require for it to work then in theory you should be able to convert it to a set of rules which you can try to automate?

Even if it needs a bit of configuration at the start of the day or whatever, if at least the execution can be automated then that would be worth it.
It was automated... but... that didn't stop me interferring. Even though the system was (mostly) producing a slight profit I couldn't stop myself from sometimes making manual interventions if I felt something was going against me. All of the biggest dips and biggest leaps in my graph were due to interventions. All of the small upwards and downwards movements were due to the automation doing what it should have done.

The problem was with me rather than with the system (up to a point... as the system itself has a major flaw that I spotted today). It's no big deal with a £10 bank but image how I'd have got on with a bigger bank that I actually cared about? More interventions and more significant losses, I think.

Anyway, over the last few days I've mostly been studying the movements of the markets and I think I've noticed another huge pitfall to my approach... (alluded to in my previous paragraph) the biggest flaw possible (one so big that I'm amazed I didn't spot it before) really so I'm rather glad I didn't persue this any further. I'm looking at the strengths and weaknesses of a totally different in-play idea now but just in the early stages of testing it.

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

Thu May 10, 2018 5:45 pm

Apologies for duplicate posts above due to poor editing of my reply to xitian.

dragontrades
Posts: 939
Joined: Wed Oct 19, 2016 11:22 pm

Thu Jul 26, 2018 10:56 pm

I have been testing a straight betting strategy in practice mode for a while now so a few days ago I started running it for real on small stakes.
It had a bad day today which has got me worried.
I know you need to run these things for a long, long time to get a good big enough sample but when is the right time to stop and adjust some parameters or kill of the strategy?
And how large does the sample size need to be before making a judgement?
The strike rate is around 1in10 and I am staking by book % so how many races would be enough to draw some conclusions? Is there a formula for figuring the sample size out?
Hopefully someone can point me in the right direction
You do not have the required permissions to view the files attached to this post.

Derek27
Posts: 2785
Joined: Wed Aug 30, 2017 11:44 am
Location: UK

Thu Jul 26, 2018 11:50 pm

dragontrades wrote:
Thu Jul 26, 2018 10:56 pm
...so a few days ago I started running it for real on small stakes.
It had a bad day today which has got me worried.
Personally, if I was moving a strategy from practice mode to live, I would start my P/L records afresh, as it's very much a different ball game, and it goes without saying that a few days isn't enough (especially if it's a straight betting strategy), and risking small stakes is nothing to get worried about.

In the absence of any obvious reason why practice mode would be an inappropriate testing platform (for example, large stakes) I think any strategy that succeeds in practice mode deserves a go in real mode, to small stakes.

User avatar
mcgoo
Posts: 313
Joined: Thu Jul 18, 2013 12:30 pm

Fri Jul 27, 2018 1:31 am

If it helps I have run automation and seen returns of 10+% for 95 bets(punting system) over 2 weeks before seeing it all return to nothing in 4 days :( A trading system I have going now is doing 7% ROI over 32 trades (29% on exposure though) but I wouldn't be confident(after years of me trying this stuff) until I saw those returns over a much larger sample set(perhaps 1000 trades) but that's me -Not got a great maths brain :geek:

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

Fri Jul 27, 2018 9:27 am

dragontrades wrote:
Thu Jul 26, 2018 10:56 pm
The strike rate is around 1in10 and I am staking by book % so how many races would be enough to draw some conclusions? Is there a formula for figuring the sample size out?
Hopefully someone can point me in the right direction
The required sample size depends on how sure you want to be of an edge. Start recording the returns, and every time calculate the mean and standard deviation. Excel will do this for you. You will see that with more samples the standard deviation will tend to become lower: most returns will resemble the mean and you will have relatively fewer outliers. If you are aiming to be 95% sure of an edge, that translates to 2 standard deviations. If you deduct 2 standard deviations from the mean and this is a positive number then you can be 95% sure that you have an edge (a positive expectancy). This is under the assumption your returns are normally distributed, which they usually are. Unless you consider really long time periods where the market starts to change. If you only want to be 68% sure (that's one standard deviation) you deduct only 1 standard deviation from the mean. Of course for this you need much less samples. 3 standard deviations is like 99.7% and you will need a lot more samples for this.
Note that you can never be 100% sure.

User avatar
Euler
Posts: 16078
Joined: Wed Nov 10, 2010 1:39 pm
Location: Bet Angel HQ
Contact:

Fri Jul 27, 2018 11:25 am

mcgoo wrote:
Fri Jul 27, 2018 1:31 am
If it helps I have run automation and seen returns of 10+% for 95 bets(punting system) over 2 weeks before seeing it all return to nothing in 4 days :( A trading system I have going now is doing 7% ROI over 32 trades (29% on exposure though) but I wouldn't be confident(after years of me trying this stuff) until I saw those returns over a much larger sample set(perhaps 1000 trades) but that's me -Not got a great maths brain :geek:
I'd add that you should cut the data in a number of different ways. I've found niches in very tiny cross sections of the market that if I lumped it all together would have just averaged out and lost due to the commission.

Post Reply

Return to “Trading Psychology”

  • Information
  • Who is online

    Users browsing this forum: No registered users and 1 guest