I have spent a lot of time developing some strategies. One question I have is, is there anyone out there who can say they have consistently made money with a strat they wrote?
If so, I'd love to know about it. Right now I feel like the only fish in the ocean.
Thanks ... Ed

Hi Ed,

The short answer is yes it is entirely possible to make money using automated NinjaTrader strategies. You just have to understand that there is a built in house edge against you in the market, but there are ways around this. Here are some of the key elements that create the house edge.

1. Commissions: Even a winning strategy will have to overcome the round trip fees of 3 to 5 bucks depending. This makes you have to not only win by 51% but actually win by an even larger margin.
2. Market orders: Getting a bad entry one to three ticks against you will make it more likely to hit a stop loss vs. a profit target if they are set to the same value. So a 5 tick profit target vs. a 5 tick stop loss will hit the 5 tick stop loss easier since you end up on the wrong side right off the bat. There are obvious ways to overcome this, but in general this is part of the house edge.
3. Slippage: This is the other side of the trade (The exits) Some times in some markets you can lose a tick or two or three when existing. So add this to the house edge as well.

Now once you consider the factors that are naturally against you in the market let me give you some tips that can give you back some edge from the house:

1. Trading is essentially gambling, but unlike Vegas there is no table maximum, only how much you are willing to bet on each trade. All trade setups and bets are not even, so knowing when to bet high and how high can give you a huge advantage.
2. Unlike Vegas where you will only have at best a 49% chance of winning on an even odds game you can increase the likelyhood of a positive outcome by virtue of setting the betting margin. If you set your profit target at 5 and your stop loss at 10 for example in a closed simulation of 100 trials you would naturally achieve a higher likely-hood of hitting your profit target than your stop loss. There is no other gambling game where you can literally dictate the betting line on the game like you can in trading. I am not advocating scalping with high leverage as a silver bullet by any means, but there may be a time and place to deliberately stack the odds in your favor more. And unlike games in Vegas you can increase the probability of positive outcomes with techniques like this. You an also do it the other way, and get an interesting outcome as well.
3. Different order types: Limit orders and stop orders with various settings can give you back an edge and take away your 1-3 tick loss that you typically get with market orders.


There is plenty more I would be willing to share, but you could start by checking out my trading journal. I have posted some helpful information there that may be of use: If you have any specific questions you would like me to help you with let me know:

Outside the Box and then some.... First let me say that I am not a day trader, I am a programmer, statistician and mathematician by trade. I started analyzing the futures markets about 10 years ago as more of a hobby / gag just to bust on a friend that though he could predict the market …

Happy Trading

Ian

Hi,
Thanks so much for the intelligent response.
Just to clarify something. You said:

If you set your profit target at 5 and your stop loss at 10 for example in a closed simulation of 100 trials you would naturally achieve a higher likely-hood of hitting your profit target than your stop loss.

Yes, I suppose I agree, but you are also taking twice the risk. Wouldn't a better bet be target=10, stop=5?
Thanks ... Ed

Ed,

I am not advocating always setting your profit target at twice your stop loss, but merely pointing out that this tactic is not available to gamblers in Vegas. In theory you would hit your profit target twice as much but also lose twice as much so it would be a wash all other things even. But if used in the right time and right place, a tactic such as this can provide you with an edge. This is only one of many things that you can do with trading that you can not do in other forms of gambling.

Ian