I present to you the Holy Grail for trading.

[Matt Bowen]

I'm serious, this could be the most important post you read all year !

Hi Everyone,

I’ve been out of pocket for a few days... and with good reason, I’ve been working on a tool to help your trading. Yes, you read this correct: “Your Trading”.

You see, I already understand the benefits of Position Sizing, Expectancy and R-Multiples, but it does me know good if you do not understand these tools.

For months now, I’ve been speaking about Position Sizing, Expectancy and R-Multiples, but with the exception of a few people...I’ve been talking to the wall because most people just don’t care, don’t want to listen or don’t want to be bothered.

It’s unfortunate for these people because they are missing out on what could change their lives forever. What I’m about to reveal to you is the “Missing Link” to your trading.

Almost every trader out there is on a quest to be “Right” and "Win" on most of their trades. Well, I’m about to show you why that is the WRONG WAY TO TRADE and it’s certainly not necessary to even think you need to win on most of your trades.

There is the fundamental problem with 95% of all traders out there today and it’s this “Damn need to be right" or win on most of their trades that causes them to lose in the first place.

Remember, trading is about making money... not being right. Here is a quote from professional trader Marshall Sass:

“In trading you’re not paid for analyzing charts. You’re not paid for calling in the order. What you are paid for is successfully managing the position while it’s on”

Most people can read and understand that quote, but they can’t accept it and therein lies the problem with 95% of all traders.

So, after 3 years... we have a solution: The Money Expert!

Here’s the deal... My very existence is about helping people learn how to trade profitably. There is no great thrill (for me) to take a losing trader and turn he or she into a consistently profitable trader.

Why?

Because when you turn someone into a profitable trader, you change that person’s life...

And hopefully that’s about what I’m going to do for you.

First, I want you to promise me one thing:

I want you to read Van Tharp’s book called: Trade Your way to Financial Freedom:

http://www.iitm.com/Trade-Your-Way-to-Financial-Freedom.htm

What I’m about to give you comes directly out of Van’s book and this tool you are about to use is going to accelerate your learning curve. However, you still need this book because you need to understand why it works so you condition your mind to accepting the fact that it does work. This is very important because if you do not condition the mind you will revert back to your old ways and that’s why you are not getting the success that you want... so read the book.

Ok, since we have a long weekend and no trading on Monday I thought this would be a perfect time to send you this new tool and give your plenty of time to learn it. Below is a video that I created to show you how to use it.

-----------------------------------------
MAKE SURE YOU WATCH THE VIDEO FIRST
-----------------------------------------

Here is the video: http://www.mtptrader.com/videos/MoneyExpert.html

----------------------------------------------
BELOW IS THE MONEY EXPERT EXCEL PROGRAM
----------------------------------------------

Here is the Money Expert: http://www.mtptrader.com/MoneyExpert.xls

---------------------------------------

Many people will wonder why I spent 3 years working on this and then give it away. First off, it didn’t take three years to build... it took a couple of days. What took so long was to find somebody who understood not only what Position Sizing was, but Expectancy as well as R-Multiples AND could program in Excel.

The second reason is once you learn how this works... I want you to do me the favor and go help someone else. Go send this to a friend who needs to learn this information. Reciprocity is a powerful law of the universe, but only if you are willing to do your part.

What you now have in front of you could very well change your life, but that’s up to you. It is my sincere hope that you use this tool and read Van Tharp’s book because if you do... I guarantee you this: You will become one of the top 5% of all traders who knows how the game is played and more importantly, knows how to profit from the rules or laws of professional trading. Now, go make it happen :-)


My very best to you,

Matt Bowen

[Matt Bowen]

After today there is no excuse for trading a negative expectancy system !


For most traders the last three weeks of trading the e-mini markets has been some of the worst action in months. However, that does not mean it has been unprofitable.

MTPredictor has done an excellent job of managing the choppy action and if you have been using position sizing, you were well rewarded today. In fact, the MTPredictor E-mini just hit new equity highs on the Automatic trading signals today.

If you notice we went into a 23.2% drawdown early last week and remember, we are trading 2% position size, so why am I pointing this out?
Very simple... because this is where most people BLOW IT!!!

You have to keep your "eyes open and focused when trading" I've been hammering away for days, weeks and months about calculating the expectancy of your system.

The reason you need to know the system's expectancy is so that you know what to expect down the road... or what the system is going to produce over a certain period of time.

All systems will go into drawdown modes (this is where you give back profits from a series of losing trades), it's natural... all systems have drawdowns because nothing works all the time.

Now, the reason you need to calculate expectancy is so that when you go into a drawdown you do not hit the "panic button" or "freak out" because you think the system is busted. If you want to know if a system is busted all you have to do is run the expectancy on the last 30 trades. If you get a negative number STOP TRADING and immediately look at the last 100 trades, if that produces a negative number then you better get yourself a new system because you are about to go broke.

When you have calculated the expectancy of your system, you know that over the long run the system will deliver profits. Therefore, you can relax and continue trading knowing that in due time the system return to profitability once the drawdown cycle has run its course.

Day trading drawdowns can run anywhere from a week to four weeks. I have rarely seen a day trading system (that has a positive expectancy) run more than 4 weeks of losses in a row. Usually, the cycles last about 2.5 weeks and then you start an accelerating equity curve.

----------------------------
How to calculate expectancy
----------------------------

Please click here: http://www.mtptrader.com/ExpectancyMSA.pdf

Ok, many of you have asked me how do you calculate expectancy using MSA (Market System Analyzer)...because MSA does not list total profit and total loss figures. No worries, there is a another way to calculate the expectancy from your MSA metrics.

Well, I was going to shoot a video tonight, but then I though, most people are going to want something tangible so they can shoot it to their printer and study for future reference. So, I made a word file... I took the calculation from tonight's MSA report and I just went through the math "step by step". To show you how I did it, please click on the link here: http://www.mtptrader.com/ExpectancyMSA.pdf

My very best to you,

Matt Bowen

[Angel]

Bonjour Matt,

First of all, pardon for my English level because this is not my mother tongue


ALL the best words in the world wouldn't be so strong to tell you how my gratitude is.

For many years, I have been reading and studying carefuly all the stuff you give us and each time, it's like a wonderfull gift !!

All the support team at MTP (You, Steve, Tony) have been changing my life. I trade for a living now using exclusively the MTP method. This is the main core of my trading because of the consistency, discipline and trust it give me each trading day.

As a very satisfied MTP client for some years, the KISS method is really easy to undertand and apply even for a French guy like me.

Many months ago, I dropped some lines to Mike from MSA because of my strong desire to get statistics in R/R translated and not in pure money, and now with the money expert Christmas is back

Thank you, thank you again for your patience and your sincere desire to share.

My best to you and your familly

Take care

Happy week end for all

Cheers

Angel

[AlanD]

Matt,

I concur with Angel's comments regarding the level of effort you have provided with helping MTP followers learn the "Real Holy Grail" to trading. Don't worry if you don't always have feedback to the information you put out as there are a whole lot of us who look forward to the information you have to provide on a regular basis.

As for me, I won't be trading for the next year as I am currently training in preparation for a one year tour in Iraq but I will be following the forum site from my location in Baghdad and will be looking forward to not only the information Team MTP puts out but to the postings of fellow MTP users. Hopefully I'll be able to reengage in my trading activities upon my return next year.

Again, much thanks goes to you and others for putting out such great information.

On another note, a few weeks back you eluded to a new version of NinjaTrader which would impress the heck out of us. Can you provide any hints?

R,
Alan

[Eddo]

Please add my thanks as well - great job Matt.

I managed to a get a $5,000 account with a 2% position size to $1,360,000 in just seventeen months (17 runs of 100 trades) ........... I also noted that a starting account of $5,000 BLEW OUT 20% of the time over a test of 50 starting runs. A starting account of $10,000 with a 2% position size DID NOT BLOW OUT once over a test of 50 starting runs.

So what that confirms to me is that if your starting capital is less than $10,000 DO NOT attempt to trade with a 2% position size - you could make over a $million in a very short time but you also have a 20% chance of going broke !!

Reduce your position size (until you have a least $10,000 of capital to trade) to 1% and the chances of blowing out over a test of 50 runs was Nil.

Thanks again Matt

Best wishes

Chris

[tombtrader]

Thanks for this. You are right, its hugely important.

There is a reason that people find it difficult, if not impossible for some, to follow a methodology where there is 1/3 win rate. You yourself have vigorously complained that traders ignore what you are showing them.

The problem, it seems to me, is that the combination of drawdown and only 1/3 winrate "forces" traders to try and avoid losers because the drawdown or losses are too meaningful to them. If we trade using a sim account, its easy. The only reason that not trading live is easy and real money is hard is that the consequence of the losses is more than the trader can bear.

So, the solution is that it is important that the drawdown be inconsequential to the trader.

How is this done?

Either by risking less than 1% so that the drawdown in the beginning is inconsequential - knowing that therefore it takes much longer to build up an account, or to find a RELIABLE filter that increases the win rate. I can see you shuddering as you read this last statement.

I ran the spreadsheet 10 times always adding the previous results and took a $20,000 account to over $140,000. However, the run started with a 33% drawdown.

Thanks again for shining more light.

[Steve Griffiths]

Hi TomBTrader.

Yep, you have hit the nail on the head here, why most traders fail, in that they are always looking to win more times rather than accepting that this is just the way trading is in the “real world” and then getting on with the business of making profits.

I guess this inability for most traders to accept that most professional traders have a 40-50% win rate and as such accepting that this is the way it is, is why 97% of amateurs lose, because they continually are more interested in getting a higher win rate rather than making money. Why they do this is beyond me. It is like going up to Tiger Woods and then telling him that you (as an amateur) “known” how to play Golf better than him.

So the moral of the story, and the reason for Matt posting this, is to “show you all” about expectancy and why it works.

So (yet again) we say to all who read this, you better accept that professional traders win 40-50% of the time, BUT because their profits are much larger than their loses, this is what makes money over time in the real-world as a trader, or (as most amateurs) continue to “think” that you know more than the professionals and keep on looking for a high % of winners (which does not exist) and as such end up a failure.

The choice is yours…… accept 40-50% wining trades (like a professional) or end up a loser…

Steve

PS, a good tread here and good discussions

[Steve Griffiths]

As a PS.

The 1/3, 1/3, 1/3 guideline is a good one to bear in mind here as well

Basically because markets only make big moves about 1/3 of the time (the rest is in choppy sideways action), the typical trading account will have big profit about 1/3 of the time, then small losses about 1/3 of the time and be flat (small losses and small profits) about 1/3 of the time.

So expecting to have a higher number of winning trades is simply expecting the market to give you something it cannot by the way it unfolds itself. In other words, most amateurs simply have the wrong anticipation of what to expect when trading.

They “expect” to have a high number of winning trades, but the market does not unfold that way. So until the amateur changes their “perception” of what they “think” they want from the markets to be in line with what the markets really can give, they will always be disappointed and as such end up losing in the long run..

I hope this helps ?

Steve

PS, please remember that between the top 4 people at MTPredictor we have over 90 experience in the markets….

[dctommy]

Steve:

I would love to get 40 - 50% as pro traders do, but my extensive experience with MTP is that we are at 32-33% win rates.

MTP is a very aggressive system, assuming reversals at key points.

I find that using a filter brings the rate up to better that 40%. I am OK
with that as it is making money, IF money management & risk control is
strictly practiced. :)

Thanks,

dctommy :cool:

[Steve Griffiths]

That is a little low, you should be nearer 40-50% winners

Steve

[scooper]

Steve:

I would love to get 40 - 50% as pro traders do, but my extensive experience with MTP is that we are at 32-33% win rates.

MTP is a very aggressive system, assuming reversals at key points.

I find that using a filter brings the rate up to better that 40%. I am OK
with that as it is making money, IF money management & risk control is
strictly practiced. :)

Thanks,

dctommy :cool:

Hi

I have not posted for ages as I have been sim trading myself with Tharps course (2nd time through it) to get ready again for live trading.

Up to last week I had a 35% win rate and results that averaged 4.7R per week with one week being nearer 10R and one being 1.1R. Biggest drawdown was right at the start (which is the worst time to get it as at that point no matter anyone tells you the faith that it will work is not in your head). I had 4 weeks of sideways profits with just a couple of trades making a good 6-8R which is what put my sim account into profit. Over the past 2 weeks I have been using the ATR stop only as Matt has suggested and its done a little better. All in all MTP works with risk control and when the big winners come making sure you get them in the bank.

I'll be trading live again in the next 2 weeks, no mentor (except maybe Matt via email) and I'm not expecting to make a fortune unless I get lucky and have a good R distribution and get multiple many R winners in a short run.

The realities of trading for me also necessitate to trade at 1% as I have been down up to 50% of my account before whilst keeping to the ruies at 2% risk. At that point everyone shouted stop trading you must be doing it wrong. OK so I tried to get clever on some posters advice with some MTP forum posters oscillating fib retracement supply and demand swing analyser studies but quite simply you are better taking the next trade and letting the expectancy realise itself. Also, my personal calibration is only 40% (up from about 25%) now. That means that 40% of the time I 'guess' if a trade will work or not. Does that mean I won't take it. Absolutely not. Because if I don't take it then it may be a big R winner. This I have learned through 'bitter' experience and from chopping an account in half by the ruies and then stopping to trade at the most cructial time. In hindsight it was classic, follow the rules, get scared at the drawdown and post to other people to see if they have the same. At the time, everyone else claimed to have reasons why they were not in the same boat. I have my own thoughts on that one - even had some MTPers claiming they could put a trailling stop in a CMC spreadbet account to take profits whilst they sleep. Well, its a fact that you cannot do with a CMC spreadbet account but hey ho and all that.

Back to the plot.....I noticed Russell Stagg had a massively good R distribution in his first few weeks. Nice one, lady luck could have given a bad R distribution as well. Results over time should even out as Steve and Matt will tell you and after my simulated time I can say that is very true.

My approach is sit back put the trade on, avoid trying to weed out losers unless you can historically prove that it will make a difference or you will beat yourself up like I did. If if wins, great, if not then you know your down a little and ready to put the next one on.

To conclude.....I have high hopes for my next live trading run but I'm not expecting more than 35% win ratio (but I know it could be more) and I understand it could drop lower than that over a small number of trades (eg, 50 trades could have 10 winners and 40 losers). But now I understand this more maybe this time I'll deal with it like a pro instead of losing my head.

Take care and if you have a proven method that improves the expectancy Steve should incorporate in to the software as it will only make the system better for us all.

S

[Steve Griffiths]

Hi S

Wow, do you realise what % return you "could" get after a year "if" you averaged 4.7R per week ?

Even at your 1% risk this is approx 200% return per year. Now that is a brilliant return that will put you in the top 1-3% of traders.

This is why I find it so hard to understand why people cannot grasp what "real" trading is all about, and yes it is difficult and yes there will be losses and yes it will be hard dealing with them. But these are all mental battles that each traders has to win "within" themselves.

We all know what it possible if we can get over our own psychological short comings.

Technical analysis is the easy part, beating the games our own mind plays on ourselves is the hard part....

Steve

[stevej]

That is a little low, you should be nearer 40-50% winners

Steve

Steve

If I could use MTP to get between 40 - 50% winners I could retire to my island in the sun and trade EOD from my laptop while swinging in my hammock. Whatever I do (and I have been doing for some years) I cannot get to better than about 32 - 35% which, with good money and trade management, makes me a reasonable profit but with some gut wrenching drawdowns.

Not a criticism, as you know I have been a satisfied MTP user for quite a while but how on earth do you get your winning %age that high?

Regards

Steve

[scooper]

Hi S

Wow, do you realise what % return you "could" get after a year "if" you averaged 4.7R per week ?

Even at your 1% risk this is approx 200% return per year. Steve

Yes, you are right on the 200% return side. For my own reasons I have a plan which means I will take a 'salary' each month (if profits are made) so I will not be increasing risk in line with profits so I won't get any compounding to accelerate this but my first goal is an actual profitable month with cash drawn out of the account.

I should also point out that I am able not trade all day every day - the average stated includes missing that trading time. Certain issues mean that 2 out 5 days I will be out for 2 and half hours during the main session. Also, I will want a holiday (profits permitting or else I'll be camping in the back garden).:)

If I manage the 200% on my account (which is a $20K acct) then it won't be a massive payout but it will be a start. $40K outright profit = approx 20K in GBP. Hence, I would technically earn more sweeping the streets but then again I may manage more R per week and that's the opportunity (you won't get that as a street sweep). Of course, once I have made it for a few months I'll increase risk to 2% after I have battled and survived some drawdowns. But for now thats the plan and I will be just be glad of making my first goal stated above. One step at a time. Bit like a recovering alcoholic eh?:D

S

[stevej]

If it helps anyone here are the results of 251 stock trades expressed in terms of risk / reward sorted from highest to lowest. Highest about 11.

Steve

[Steve Griffiths]

Hi Guys

Let’s put this into context………… It is said that approx. 97% of traders lose in this industry. So showing a profit from these results already puts you in the top 3% of traders. As an analogy, it is like a free pass into Top Gun….

So what we are talking about here is moving you up into the top 1% of traders…. I.e. the “best of the best”.

This is where some additional work comes in. Look at the more successful traders who post in this Forum, like Chris and David (to name just 2 of the many very good traders we have). They all have “moved up the techniques curve” buy applying their own analysis above and beyond the standard and automatic set-ups. Davis’s trading yesterday on the USA minis was a brilliant example of this.

As I have said all along, The standard and automatic trade set-ups are just the “start”, there is far more that can be achieved with MTPredictor. MTP, is not “just” a black box system to be followed blindly, it is also a set of tools that will allow you to move from the top 3% of traders (which is already brilliant) into the top 1%.

Steve

[Steve Griffiths]

Hi Guys

As a PS, here are the results from the last year at the Robbins Trading Competition for e-minis

World Cup Championship of CME Group E-mini® Index Trading
(fourth quarter competition)
1) R. Sorota 61%
2) H. Browning 18%
3) Scalper Inc. 1%

So SteveC, looking for a 200% return would put hin in 1st place by a long long way.

Interesting how only 3 people here (approx) out of the 1,000's of entrants could make any money (above 1% return).

So again, this proves my point that the MTP traders who are making good money are already the best of the best in this industry. So you need to all please remember this............

Steve

[Steve Griffiths]

If it helps anyone here are the results of 251 stock trades expressed in terms of risk / reward sorted from highest to lowest. Highest about 11.

Steve

Hi SteveJ

Very interesting......... If I have counted this correctly then you had 88 winners (35%) and 36 break-even (14%) form your 251 trades.

Now me personally (as I am a glass half full person) would see this is as 49% winners (including break-even trades )... This is how most people view statistics, in that a break-even should be included as a winner (as it is not a losing trade).

So I see this as proving from your sample that MTP is 49% correct ..............

I hope this helps ?

Thanks

Steve

[stevej]

Hi SteveJ

... a break-even should be included as a winner (as it is not a losing trade).

So I see this as proving from your sample that MTP is 49% correct ..............

I hope this helps ?

Thanks

Steve

Mmmmmmmmmm! I prefer the pessimist's 1/2 empty approach - I think it's the better way to avoid the fully empty wallet?

[rosow]

Can't resist!!! I'll throw my 2 cents in : >)

Throw out the break even trades. They are for lack of a better word...wash trades.

That leaves 215 up or down trades:

88 Winners or 40.93%
127 Losers or 59.07%

Right back to MTP's 40-45% window.

I rest my case!!

Lenny

Mmmmmmmmmm! I prefer the pessimist's 1/2 empty approach - I think it's the better way to avoid the fully empty wallet?

[stevej]

Can't resist!!! I'll throw my 2 cents in : >)

Throw out the break even trades. They are for lack of a better word...wash trades.

That leaves 215 up or down trades:

88 Winners or 40.93%
127 Losers or 59.07%

Right back to MTP's 40-45% window.

I rest my case!!

Lenny

But none of the trades account for commission. Deduct that and all break even trades and (I think) some of the more modest up trades become losers, albeit modest losers. Right back to my low 30% window.:( Still makes money though.:D

[Eddo]

But none of the trades account for commission. Deduct that and all break even trades and (I think) some of the more modest up trades become losers, albeit modest losers. Right back to my low 30% window.:( Still makes money though.:D

I think it was a couple of years ago (ish) that I started a thred on Expectancy in the Money Management section. In that I posted my actual trading results and it showed I had an Expectancy of 0.22 and a win loss ratio of just under 40/60.

That expectancy figure (which incidently is still at 0.22 and the win loss is now spot on 40/60) and win loss ratio was on real money trades and AFTER trading costs had been taken into account - i.e. my figures in terms of expectancy, R's etc are all NET after trading costs have been deducted. A breakeven trade really is break even (costs have been covered).

My trading is executed on a spreadbet account and those costs are very high - i.e. 2 full points on the FTSE for example - which clearly punches a hole in the 'raw' R figures but even with those costs I still get the 0.22 and 40/60 by using MTP setups combined with a bit of hard gained (and expensive) experience :)

[stevej]

That expectancy figure (which incidently is still at 0.22 and the win loss is now spot on 40/60) and win loss ratio was on real money trades and AFTER trading costs had been taken into account - i.e. my figures in terms of expectancy, R's etc are all NET after trading costs have been deducted. A breakeven trade really is break even (costs have been covered).:)

Eddo

Good results but are they from intraday trading or (like mine) EOD?

I have found intraday results consistently better than EOD but I no longer (wish to) day trade. I cannot sit for hours each day in front of a screen while life passes by.

Steve

[Steve Griffiths]

Hi SteveJ

Eddo has given his results, that should be enough.

This is what I was talking about on another thread, if we "pester" the better traders on this Forum with continual questions and integration, then they will no longer post.

Eddo has posted his "actual" results with Real Money. That is enough.

Steve Griffiths

PS, Eddo, no need to respond to this, we know that you are a good trader and doing well with MTPredictor, so I thank you for your post.

Steve

[Eddo]

Hi SteveJ

Eddo has given his results, that should be enough.

This is what I was talking about on another thread, if we "pester" the better traders on this Forum with continual questions and integration, then they will no longer post.

Eddo has posted his "actual" results with Real Money. That is enough.

Steve Griffiths

PS, Eddo, no need to respond to this, we know that you are a good trader and doing well with MTPredictor, so I thank you for your post.

Steve

Thats Ok Steve, I don't mind questions on the board, its the constant Private Messages from people who keep on an on asking more and more questions which got on my wick!

Anyway in answer - my figures are based on 99% daytrading - hope that helps

Chris

[Matt Bowen]

I'm not sure why some people have their panties in a knot over this issue because as I've always said: "Trading is a GIVE and TAKE experience". Why is this so difficult for people to accept?

What you give up in percentage winners you will get back in Expectancy or your win/loss average.

A perfect example of this is two years ago when I did the Commodity Newsletter and by the time I stopped the report we had 99 trades with and expectancy of .42 and my win percentage was 27%

Now, most people start throwing a fit and start fuming all over the place saying the win percentage sucks, blah, blah blah.

Meanwhile they are forgetting the Account started out with 50k and finished the year up over 155k

This is what blows me away... you end up with a 210% return and the guy is standing there pissing and moaning about only being right 27% of the time.

This reminds me of one of my last clients as a broker. The client started out with $25000. and we ran the account up over $62000. (in a couple of months) So, what do you think happens next? We go in to a drawdown-$14,400 and the guy calls me up screamming because I lost him 15k.

I'm sittting there thinking: "Is this guy a box of rocks or am I missing something?" The guy's account is at $47,600. and he started with 25k and he says to me: "You lost me money." I said, we just had a 24% drawdown, this is part of the game. Meanwhile he's still screaming: "You lost me money!"

Two weeks later I quit... I told the boss these people will never make money because they will sabotage the managements efforts by withdrawing funds and all of this is because they don't understand their own risk tolerance.

I still say the best line from a trader was Ed Seykota's comment to Jack Schwager's Interview:

"Everybody gets what they want out of the market"

Schwager said: When Ed made that comment I thought he was merely being cute. But I soon realized he was deadly serious. My reflexive response to this premise was disbelief: It implies that all losers want to lose and all winners who fall short of their goals are fulfilling some inner need for a constrained threshold of success - a difficult proposition to swallow. Although my rigidly logical mind would normally dismiss this idea, my respect for Seykota's knowledge about the markets and people forces me to consider the potential truth of the statement that: "Everybody gets what they want out of the market" - a most provocative concept.

[stevej]

Thats Ok Steve, I don't mind questions on the board, its the constant Private Messages from people who keep on an on asking more and more questions which got on my wick!

Anyway in answer - my figures are based on 99% daytrading - hope that helps

Chris

Chris,

Thank you, very helpful.

I did reply earlier but it has disappeared.

[tonis]

I have been experimenting extensively with the MoneyExpert spreadsheet, and have several comments.


Why does it sometimes give you a -2R or even a -3R trade? I absolutely NEVER go beyond -1R. Can this be changed?
It sometimes also gives +14R, which I have never had. Actually, my best so far is +5R! Having seen this, I guess this spreadsheet does not follow my trading experience at all...
Expectancy seems to be fixed at +0.33. Can this value be changed to follow my particular trading habits?


In any case, results from the spreadsheet are far from *logical*. Let me give you the results of running 5 times the spreadsheet with 3 different settings:

Initial trading capital = 16,000 USD


With 1% Risk, I obtain 4 winning scenarios and 1 loser
With 2% risk (my current setting in real life) I obtain 2 winning scenarios and 3 losers (just LIKE real life!)
With 5% risk, I obtain 5 winning scenarios, all of them with SPECTACULAR profits.


I am confused!!!! :confused:

[Steve Griffiths]

Hi Tony,

This was a free tool, and as such we do not support it or able to answer any questions on it....

Steve

[Steve Griffiths]

As a PS,

MTP does find great trades, for example this +14R on the Dax just yesterday.

Steve

PS, the biggest R I have seen recently was the +34R (yes 34R !) on the Dax that one user reported on the Forum earlier in the year.....

Steve

[tonis]

Hi Tony,

This was a free tool, and as such we do not support it or able to answer any questions on it....

Steve

Surely you can comment on the implications that 5% risk is best, can't you?

Cheers

[Steve Griffiths]

no..............

all these results are just random, as that is all the spreadsheet does, generate random trades, so gives random results, just to show different distributions of tardes over a peroid of time, it is not to "test" which %risk is better.

Steve

[tonis]

OK, thanks Steve, I thought the idea was to fine tune my position sizing settings in a random environment, which statistically mimics my trading.

Thanks anyway!

[grose]

I think it was a couple of years ago (ish) that I started a thred on Expectancy in the Money Management section. In that I posted my actual trading results and it showed I had an Expectancy of 0.22 and a win loss ratio of just under 40/60.


Hi Eddo,

Thank you for sharing the results you've achieved using real money. I purchased MTPRedictor primarily for intra-day trading. To date I have not had as many days as I anticipated I would where I am in the office all day and can intra-day trade (unfortunately). Nonetheless, I am very encouraged by what I've seen myself and what I've read here in the forums. To get a frame of reference for where I have to get to to achieve similar results, I'm curious about to what extent you use manual DPs and other techniques above and beyond standard setups in your trading. I believe you mentioned in another post a two month return above 80%! That's really fantastic -- congratulations.

I'm also curious as to whether you use 1% or 2% risk on what time frame, and if you take signals in more than one index future at a time (I've seen instances where you have signals on, say, ES and ER2 at the same time in the same n-minute chart). My concern would be a multiplication of risk. I believe Matt addressed it in an email once, and suggested taking the one that had the best R:R at the time of setup.

I hope it's OK to ask so many questions :)

Regards,

Gordon

[Eddo]

Hi Eddo,

Thank you for sharing the results you've achieved using real money. I purchased MTPRedictor primarily for intra-day trading. To date I have not had as many days as I anticipated I would where I am in the office all day and can intra-day trade (unfortunately). Nonetheless, I am very encouraged by what I've seen myself and what I've read here in the forums. To get a frame of reference for where I have to get to to achieve similar results, I'm curious about to what extent you use manual DPs and other techniques above and beyond standard setups in your trading. I believe you mentioned in another post a two month return above 80%! That's really fantastic -- congratulations.

I'm also curious as to whether you use 1% or 2% risk on what time frame, and if you take signals in more than one index future at a time (I've seen instances where you have signals on, say, ES and ER2 at the same time in the same n-minute chart). My concern would be a multiplication of risk. I believe Matt addressed it in an email once, and suggested taking the one that had the best R:R at the time of setup.

I hope it's OK to ask so many questions :)

Regards,

Gordon

Hi Gordon

I use all the standard MTP setups and manual DP's and my risk is 2% of capital. When Intra day trading I track 3 min, 5 min & 15 min and I have the Daily, 15 min and 3 min DP's drawn onto my eSignal charts (to keep me focused on the long term support and resistance areas).

I only EVER have one position in play at any one time on my daytrade account, and usually trade the AB - because on my spreadbet account I gets lots of bang for my buck in terms of the margin required -

Hope that helps - Chris

[Matt Bowen]

First of all, 5% risk is like playing Russian roulette, it’s only a matter of time before you end up with a bullet in the chamber or the hammer hits you over the head... and it's GAME OVER because you now have a margin call.

http://www.mtptrader.com/Hammer.gif

You can Risk 1 percent of your capital, you can risk 5 percent, or you can risk 10 percent, but you better realize that the more you risk, the more volatile the results are going to be.
-Ed Seykota

Another way of saying this is: “The more you risk the closer you are to Risk of Ruin”.

OK, thanks Steve, I thought the idea was to fine tune my position sizing settings in a random environment, which statistically mimics my trading.

I’m not sure what you are trying to do here, but you need to understand risk tolerance. Sure, using 3% position size produces more than using 2% position size, but you need to understand risk tolerance.

Most traders should start off with 1% position size and after they are comfortable with the system they can move up to 2% position size. However, the maximum anyone can use is 3% position size.

Why?

Because the drawdowns are huge and I’ll be willing to bet you don’t have the stomach for them. I personally have never used 3% because I trade family money and I don’t want to take family members on a roller coaster ride. I’m serious, trading with 3% position sizing and the drawdowns will scare the hell out of almost anybody.

At 5% position size you will eventually get a margin call after a series of losses. Trust me, I’m a former broker, I saw it happen and it’s not pretty. At 5% position risk and a couple of really bad slippage fills or even limit up or limit down moves and you will get hit over the head with a hammer.

Plus, consider the fact that you have to deal with the drawdown to recovery ratio. If you loss 50% of your trading capital it requires a 100% gain just to get back to even.

http://www.mtptrader.com/Draw.gif

Van Tharp illustrates this in his Excerpt from Dr. Tharp's Report on Money Management: http://www.iitm.com/tips/Tips-MM.htm (Please don’t read this article the wrong way, Van is talking about position trading, not day trading that’s why he says $10,000 is a small account).

Here is what I have found that works for most people. Most people start off with say a $10,000 or $20,000 account using 1% position sizing and then once they get comfortable trading the system they then move up to 2% position sizing and then once they get past $150,000 to $200,000 they drop back to 1% position sizing because the numbers start to play with their head, they are not used to seeing big numbers added and subtracted and it’s starts to play a psychological game with them.

So, to help slow down and feel more in control they drop back to 1% position sizing and some of them even drop to half of one percent because now they are not trying to GROW the portfolio fast, but rather they are trying to maintain and bring in income smaller amounts through controlled risk.

Now, before I say what I’m about to say... understand this. There are some excellent hedge fund managers out there and they deserve the fees the charge clients because they are good traders and deliver great results to their investors. However, the vast majority of hedge fund managers are clowns.

Why do you think Hedge Fund close their doors when the go past a 50% drawdown year. Well, most hedge funds bank between 9% and 12% per year, so if this guy is down 50% in one year, than means he’s working the next 4 years for free. He’s not going to do that...he’ll simply close the fund down and start up under another name.

Why do you think running a hedge fund is so lucrative? Well do the math, if I guy starts up a small hedge fund and raises 20 million (and believe me this is a VERY small fund) he will most likely charge 2% management fees and 20% profits. Well let’s say this guy totally sucks at trading and he loses money right out of the gate the first year. Remember, he still charges clients 2% management fees, so he’s getting paid $400,000 to sit on his ass and play computer Nintendo all day with other people’s money. When the clients leave, he just goes out and starts another one.

Now you know why It’s a figgin circus act loaded with clowns! These are the same clowns who know nothing about money management, if they did they would not have to play this game of Charades and they could actually build up their business rather than screw people out of their money.

Yeah, I know, I’m rough around the edges, but I’ve also been doing this for 24 years and I’m not good a suppressing BS. I like to teach people and help them avoid the pit-falls in this business. I’m like a paramedic for traders, I have to constantly revive them.

The Money Expert tool generates random trades (just like the real world) because nobody knows if the next trade is going to be a winner, the point is you don’t need to know if the next trade is a winner to make a fortune in the trading business.

[tonis]

Couldn't agree more!

However, if a "simulator" generating random results says 5% is CONSISTENTLY better than 2%, then something is wrong with the simulator, or with the simulator operator (ie me).

That was all, in any case, needless to say not in a million years would I go for a higher risk than 2. In fact, I am thinking about reducing it to 1%, as my expectancy is VERY low (only just gone positive in my last 30 trades, still negative overall).

Thanks for your help, it's really useful to have someone supoorting you like you are!

[Matt Bowen]

Tonis,

Run the simulator at 5% it will blow-out...

I just ran the simulator on 5 series of test using 5% position sizing here are the results:

-66%
-72%
-91%
+321
-44%

There is nobody in their right mind that is going to invest with these kind of roller coster results...I rest my case.

[tonis]

Thanks, that's a relief!

I just couldn't believe, in my case 3 out of 3 BIG winners! Like yours at 300%.

Well, back to normal. :)

[Russell Stagg]

Hi


Back to the plot.....I noticed Russell Stagg had a massively good R distribution in his first few weeks. Nice one, lady luck could have given a bad R distribution as well. Results over time should even out as Steve and Matt will tell you and after my simulated time I can say that is very true.


S

Scooper - I suffered a 22% drawdown intraday during that phase and I have repeated that once since.

Yes expectancy always averages around .31 long term with MTP - this is now confirmed with over 1000 trades.

Think about my favourite place Vegas. It's ENTIRELY BUILT on a random outcome. The casinos DO NOT know what the outcome of the next spin of the wheel is - their ONLY job is to get turnover onto the table because they have a positive expectancy over time. More turnover & more spins of the wheel means more $$. It's a mathematical certainty as it says in a big yellow outlined box above this forum. Trading is not a certainty but this tips the odds.

Once you have read Van Tharp go ahead and read Ralph Vince's 2 books - esp The New Money Management. I did O level maths (High school for the USA?) so these books are going to push you but it's doable and he keeps the equations to an absolute minimum.
Ignore Optimal F but THINK about what he says and the light will come on. Beleive me, it will. A lot of people misunderstand what Vince is trying to say ( he got so incensed with the crap written about him he wrote the second book to explain how you can use Optimal F calculations to improve your trading results) - but he was the guy that was behind Larry Williams when he broke the Robbins record. Now that is real time independent audited trading with real money - no argument there.

You can't follow it blindly though ( I am repeating myself deliberately here)

Matt has done a fabulous job with this spreadsheet - I bought Van Tharps position sizing game for $200 so a freebie is just amazing. One word of advice though - don't hit the Run all Trials button. Use Run Next trial and feel each and every loss (doesn't come close to real money still but it's not far off). The good traders will keep a pen and paper handy and actually write down how they are feeling at each trade. It's eye opening let me tell you.

The extra bit to the holy grail?
Simple - increase your N.

Trade multiple instruments over multiple time frames and you increase what's called N (I call it no of trades).

Always check your expectancy because in my view expectancy itself cycles like an oscillator. I have had rolling expectancies of -.576 I( complete failure lets become a garbage collector) to a high of 2.146 ( master of the universe giving out lessons) but it almost always returns to a long term exp of .31.

Phew!, long post - hope you find it useful.

[radar]

Hi Matt,

I came across this calculator, http://www.60minutetrader.com/calculator.html (http://www.60minutetrader.com/calculator.html), that graphically shows how successfully you can grow your account equity by simply following the 2:1 reward to risk ratio guidelines taught by you, Steve and Tony.



I used the calculator with the following inputs and was blown away:

win/loss ratio of 2.0 (sound familiar?)
win probability of only 0.40 (40% winners using MTP - maybe a little too conservative, but check out the results)
Lines Qty of 5 (runs the calculator 5 times and shows each of the different results)
Now, imagine how successful one could be after really learning how to use MTP. :D

Thanks for all your help and forum inputs, over the years...

Ben