Daily Profit Limit, Daily Loss Limit

Very early in the blog I spoke about a guy I knew in Los Angeles. He lived near Malibu and traded T-Bonds, the hot market of the mid 1980s. The S and P was just getting going and a 2 handle move was big.


The guy had a simple philosophy; he made 8 ticks in the T-Bond every day and then hopped into his Porsche and drove down to the beach. That was it. He increased size as he wanted to make more money.


I always thought there was something clever about this but my own work ethic always got in the way and I think/thought that you should keep on working while the market pays you to do it.


But maybe not. The stats below are taken from a TradeStation optimisation that we ran testing what daily profit and daily loss limit is the best. So many of my students have TradeStation, I opened a TS account again so I can duplicate their trading with the same data. BTW, I'm using what TradeStation calls "Momentum Bars" using the range I want constructed out of 1 tick data. These are most like the Range Bars I am used to in MarketDelta and other charting software.


The stats are quite interesting. The algo, periodicity (3 tick momentum (range) bars) and date range (6 months) and time traded, gave a daily profit limit ($750/contract) more than twice the daily loss limit ($350/contract), a very logical result.


What is even more interesting, I can use this to decide which are the best times of the day to trade in order to get the best stats. In this case, Flo trades from 9.30am NY time (the beginning of RTH) until 12.10pm NY time (2 hours and 49 minutes later). She trades limit orders so if she gets filled and she mostly has, then there is no slippage.


The more I use my FloBot to trade and test, the more I like it as it provides so much information and in fact makes me more money. Using a 'bot can not only bring CP to more people but it can do it much, much more quickly. I can override the exits and make even more by scaling out and using trailing stops. I've programmed that into Flo too and I'll share some ideas about that in later posts.
 

Summary

Monthly Profitability

Equity Curve

 

I was trading the ES today. It was an obvious gap day and I was short into the number and picked up a couple of points. I looked to re-short but Flo would have none of it. She just wanted the long side going into RTH. She enforced my discipline. Go Flo!