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That's the point my friend. Statistical arbitrage is the domain of the big boys. We are not equipped to compete against them. The further you are out in terms of tenor, the less you compete with the algos and hfts , because your trading will not be as execution intensive. It will also be more scalable because you won'be trading as often, so it won't be as commission intensive.
I don't CARE why they are doing it. I AM interested in When they are doing so I can get a crumb off the floor. Compete? never. Ride their hand made suit coat tails. Indeed.
Good luck...fool's errand and then some. You will need to be co-located and your software will cost about $20,000 per month to lease, if you want to do algo driven stat arb, plus good luck trying to negotiate goldman's commission structure. Of course, I'm not even speaking to the fact that every possible mis-pricing that temporarily exists is instantaneously exploited, by some algo that was programmed by some russian kid with an IQ of about a zillion.
Didn't mean it that way TT. Just that they can't hide what there doing in the volume. OR can they? I don't know.
Edit: I also understood part of this thread to say that trading size Ie. 10-100 contracts or whatever is the best way to compound $$ of a trade. Most retail traders get jammed up on this the way I understand the economic of it. Not a big enough account balance to trade what they think they can trade. Is this correct? Let alone improper MM.
5% when the trade progresses? That means you consider the paper profits as real $ and treat them accordingly or you are adding to the position at certain points?
I am asking because I have bad experience with moving SL (though I still do that - I need to unlearn and accept the risk).
So far I am unable to mix the risk correctly, so the help is welcome.
I use fixed ratio. Works very well. I like fact as your account grows your risk on a per contract basis decreases. I suggest incorporating position sizing into your backtesting as it will reveal some interesting things.
"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
I don't think he means he's moving his stop in the wrong direction. It's possible to increase risk as you go on side, buy 1 contract with a 4 tick stop, when 4 ticks onside buy another with the same stop, your risk is now 3x your initial risk, but your 1R onside.
In regards to risk/trade. I think that traders who just use x%/trade across all their setups are missing a trick. If you have multiple methods, then it's likely that some have a greater edge than others. So surely they deserve to have greater amounts risked on them (or if you're risk averse, those methods with a lower edge should have less risked on them). I really think that traders don't think enough about risk and just go "1%, I read somewhere that that's a safe amount, that's my MM sorted", everyone I've met who's said that 1% is a good amount, nobody has explained why that particular amount (I'm not saying it's bad, just that many never question it, and that people should).
You make a good point. I think every strategy is different and to apply a 1% across the board may not always work. I think every setup must be evaluated by looking at stop to target ratio and what profit that ratio will give relative to draw downs etc. Setting at 1% could be to much or to little depending on how a particular strategy behaves. I typically have very different stops and targets for my shorts and longs for example because they behave differently.
You can go broke losing 1% at a time if your stops are always being hit.
"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."