Tuesday 7th of December

I do not have anything on watch for today.

I’ve started my gold long position, will be looking to keep adding as the price evolves, in the meanwhile I’ll be patient.

Since there’s nothing on watch I’ll share interesting things

I’m in the process of updating all my backtest data, I want to make sure my trading remains on top of the game so might as well do that. Profesionnal basket players will still shoot hoops even tho they’re not in a competition, we have to practice.

What’s interesting in this data set is that my average return is lower than what I had in my previous backtest, in a quite drastic way if I am to be honest.

Here you can notice the importance of trading only full candles on the 4hour (top left) the average return is 8 times higher if the candle is “full” (meaning that the body is bigger than the wicks)

If we follow to the right, you can notice I’ve broken down the trade set-ups in different ways –> F / SL /SF are all providing extremely low returns, in my previous test the SF set-up was profitable, so that’s interesting as well. Further to the right is the same thing, only difference is that the 4hour entries are full while the one in the middle was full and not full

We can also notice that the scale in opportunities provide better returns when the original entry signal was based on a full candle.

Knowing this data, and having observed the results it’s tempting to me to switch from trading 4hour 50EMA entries and using the 4h 20 method to target smaller returns but with a higher strike rate.

I’m looking forward to having more data on the 20>50 to know wherever it’s worth keeping it or removing it, so far out of the 19 trades it appears it’s not really worthwhile.

You can also notice that so far the 4h entries (only full) have had two negative years, that being said, the dataset isn’t based on every single pair but it’s worth reminding ourselves that nothing is sure, even if we have a clear edge, we can have a losing year / month / quarter.

Here’s an equity sim calculator.

The win probability on full 4hour candles is of 36.2% (higher if I remove F / SL /SF yes that’s true but keeping it here to be conservative) – the will / loss relation is of 2.8 rather than 3 to take in account the impact of commission / slippage and carry

Even with a strategy that’s expected to provide positive returns and a hedge, we can observe two lines that end up with a negative return over 100 trades.

Let’s have a look at how the chart could look like if we slightly increase the win probability

By increasing the winning rate to 41% (removing F / SL and SF set-ups) we get a chart that’s a lot more interesting to me

All that to say,

Even if you have a positive strategy, keep in mind you can lose money with a profitable edge in the market so always try to improve it, going from a 36% strike rate to 41% has an extremely strong impact on your equity curve.

Anyway, that’s probably enough about backtesting, let’s have a look at things I’m trying out

The VWAP Boulevard (HT @ Team3dstocks (ADF — HE’S AN AMAZING FOLLOW)

Here’s a blog post diving into it

I’m also diving into Rektproof trading set-ups to take inspiration for potential changes for my own trading, the returns and strike rate he has are impressive to say the least.

Highly recommend going through his content and Telegram!

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