Posted by lessarda on 25th of Apr 2011 at 05:12 pm
Hi Matt,
At first glance, even though the multi-entry system has a better
winning percentage, it has an opportunity cost relative to the
single-entry system because it rarely gets fully invested. The
single entry system can show marginally bigger losses on any one
trade, but makes up for it by being fully committed for all of its
winning trades. So, as long as the system parameters are working as
a whole, it seems the simpler and more profitable approach.
Maybe an alternative for subscribers would be to make a higher
initial commitment -- say 75-80% -- and then move to 100% either if
the multi-entry system makes an add-on trade or, just as important,
if it doesn't add after some measure of either time and/or gains.
Just a thought on the differences as presented so far.
This has already been addressed in the SPY system details page,
which I will soon make available. Yes the same dollar amount,
say $100K traded in the Single Entry system produces more total net
profit then $100K traded with the Multi Entry system.
For example, Non
Compounded:
Single Entry
system:100K - turns in $604K.
Largest losing trade is -3.4K, average losing trade is 1K
Multi Entry
system: 100K turns into $347K
Largest losing trade is -1.3K, average losing trade is
-0.35K
However, since the average losing trade, largest losing trade,
and draw down are about 2.5X less then the Multi Entry system, the
capital can theoretically be increased 2.5X on the Multi Entry
system in order to get the same dollar risk.
Multi Entry system traded with $250K would have turned into
$855K.
Remember all these effects are non compounded. When
compounding gets' thrown into the mix, $100K on the single entry
system turns into $17.5 million in 16 years, that's $175 times your
money. Even only a 50% compounding turns into $3.7 million or
37 times ones money.
One word- amazing. Matt, save the time for your family- I don't
need a webinar- just launch the system! And thank you again for
giving ordinary folks like us the opportunity to be part of an
institutional-class effort.
Posted by lessarda on 26th of Apr 2011 at 02:16 am
I knew you had to have considered the 2x non-compounded return
disparity. It makes sense to me to start with 100% allocations to
the instrument of one's choice on the first signal in order to get
everything that the single entry system would give, and then add on
when multiple signals are generated. There have only been 58%
more trades generated in the multi-entry over the whole backtesting
period, so one isn't really allocating that much more capital that
often to capture the higher winning percentage. That is, one
rarely would get to the 2.5x commitment of capital, and not even
get past 1.5x all that often, all things being equal going
forward. The backtesting makes it clear that as the system
works, there is much more bang over time for $'s committed in
the 1st trade of each signal. So even if someone only went from 1x
to 1.5x overall, the results would be better than .6x to 1x. The
capital constrained could get creative on leverage after the 1st
trade, etc. A lot of possibilities come from a solid underlying
system. Thanks again.
lessarda -- I would say that it would be a little silly to use
the scale-in system and decide to make the initial trade a higher
percentage and so on. Then you're not playing the system that
matt has developed. You're using his system as a starting
point to make up your own system. You can do that of
course. But matt has put many months of work and thought into
it, and I'm sure he looked at other scale-in percentages. If
an 80% - 20% scale-in was more profitable, that's what it would
be.
It doesn't make much sense to be second-guessing the system and
wanting to change it, before its even been released.
What makes more sense to me, is to use the scale-in system and
use more capital. That way you're playing a aystem with 96%
winning trades, which is as stress-free as you're likely to get,
and with more capital in play you'll get returns closer to the
singe entry system. Or use SSO. I would not be afraid
of degradation in the relatively short time spans the system holds
for. But one can also go short SDS for longs and short SSO
for shorts.
Single vs Multi Entry Systems
SPY Multi Entry System trade examples
Posted by lessarda on 25th of Apr 2011 at 05:12 pm
Hi Matt,
At first glance, even though the multi-entry system has a better winning percentage, it has an opportunity cost relative to the single-entry system because it rarely gets fully invested. The single entry system can show marginally bigger losses on any one trade, but makes up for it by being fully committed for all of its winning trades. So, as long as the system parameters are working as a whole, it seems the simpler and more profitable approach.
Maybe an alternative for subscribers would be to make a higher initial commitment -- say 75-80% -- and then move to 100% either if the multi-entry system makes an add-on trade or, just as important, if it doesn't add after some measure of either time and/or gains. Just a thought on the differences as presented so far.
This has already been addressed
Posted by matt on 25th of Apr 2011 at 09:20 pm
This has already been addressed in the SPY system details page, which I will soon make available. Yes the same dollar amount, say $100K traded in the Single Entry system produces more total net profit then $100K traded with the Multi Entry system.
For example, Non Compounded:
Single Entry system:100K - turns in $604K.
Largest losing trade is -3.4K, average losing trade is 1K
Multi Entry system: 100K turns into $347K
Largest losing trade is -1.3K, average losing trade is -0.35K
However, since the average losing trade, largest losing trade, and draw down are about 2.5X less then the Multi Entry system, the capital can theoretically be increased 2.5X on the Multi Entry system in order to get the same dollar risk.
Multi Entry system traded with $250K would have turned into $855K.
Remember all these effects are non compounded. When compounding gets' thrown into the mix, $100K on the single entry system turns into $17.5 million in 16 years, that's $175 times your money. Even only a 50% compounding turns into $3.7 million or 37 times ones money.
Awesome
Posted by rikkwan on 26th of Apr 2011 at 09:32 am
One word- amazing. Matt, save the time for your family- I don't need a webinar- just launch the system! And thank you again for giving ordinary folks like us the opportunity to be part of an institutional-class effort.
I am ready to buy
Posted by xxnileshxx on 26th of Apr 2011 at 09:41 am
where do I sign up for this system. Looking to trade my retirement account with this system.
Thanks, Matt.
Posted by lessarda on 26th of Apr 2011 at 02:16 am
I knew you had to have considered the 2x non-compounded return disparity. It makes sense to me to start with 100% allocations to the instrument of one's choice on the first signal in order to get everything that the single entry system would give, and then add on when multiple signals are generated. There have only been 58% more trades generated in the multi-entry over the whole backtesting period, so one isn't really allocating that much more capital that often to capture the higher winning percentage. That is, one rarely would get to the 2.5x commitment of capital, and not even get past 1.5x all that often, all things being equal going forward. The backtesting makes it clear that as the system works, there is much more bang over time for $'s committed in the 1st trade of each signal. So even if someone only went from 1x to 1.5x overall, the results would be better than .6x to 1x. The capital constrained could get creative on leverage after the 1st trade, etc. A lot of possibilities come from a solid underlying system. Thanks again.
I think you meant "are
Posted by frtaylor on 25th of Apr 2011 at 09:29 pm
I think you meant "are about 2.5x less usingthe Multi Entry system. . . ." More importantly, thank you for clarifying this point.
lessarda -- I would say
Posted by Michael on 25th of Apr 2011 at 08:16 pm
lessarda -- I would say that it would be a little silly to use the scale-in system and decide to make the initial trade a higher percentage and so on. Then you're not playing the system that matt has developed. You're using his system as a starting point to make up your own system. You can do that of course. But matt has put many months of work and thought into it, and I'm sure he looked at other scale-in percentages. If an 80% - 20% scale-in was more profitable, that's what it would be.
It doesn't make much sense to be second-guessing the system and wanting to change it, before its even been released.
What makes more sense to me, is to use the scale-in system and use more capital. That way you're playing a aystem with 96% winning trades, which is as stress-free as you're likely to get, and with more capital in play you'll get returns closer to the singe entry system. Or use SSO. I would not be afraid of degradation in the relatively short time spans the system holds for. But one can also go short SDS for longs and short SSO for shorts.
Michael, I really like your idea
Posted by sethbru on 26th of Apr 2011 at 01:50 am
Michael,
I really like your idea of shorting the leveraged inverse for each position entry to gain on their decay too. Nice!