Monday, 22 August 2011

Doubling Down Can Turn A Loser Into A Winner - It's The Math

Info about the upcoming November Trading and Algo Workshop can be found in the TABs above this post. 

The video below shows one of the many Flo trading systems. Everyone's requirements are different in terms of what sort of move they want to capture in a trade and what type of risk tolerance they have. 

In formulating an algo's logic, we start with what move we want to capture. We then choose one of the specific EL trading pictures that align with the entry to capture that type of trade and design the logic to capture it. We do this in simple English on a pad, maybe using a flow chart if it helps. We then look at the toolbox of EL filters and see which one(s) would filter the entries most effectively. Now remember, this is an algo to mirror a particular type of trading style. The algo is like a pair of shoes: it has to fit the wearer, and that is what we will do in the workshop.

The video below talks about algo design, shows the statistical profitability report for a particular algo and then goes to show how you can take that same algo and turn a potential losing trade into a profitable one using a doubling down technique. The trades in the report cover the period from April until the close of the ES on Friday.

I then take the last trade of the day and show how, using hybrid trading, a potential loser can be turned into a winning trade. These types of money management and trade management rules can be included in an algo and back tested.


  1. Hi EL,

    Do you have profitable algos with a high win percentage (e.g., 70%)?


  2. Anon 17:45, yes. When creating an algo, I tailor it to what I need.There are trade offs between win rate, drawdown, MAE, average trade size etc. You can't have it all unless you hybrid trade. If you manually manage the algo entered trades then you have the best of all worlds. But trade logic must all be based on market based activity, not over optimised squiggly lines.