Optimal values of SL and TP orders for an arbitrary TS.
The topic is interesting and necessary. Just as long as there is a sequel.
The thread is really great. Looked through it diagonally.
But, again, the cases are considered for TP=SL or as a more complicated variant - fixed stops. I want to solve the problem in the most general case - when the values of stops are obtained as a result of solving the optimization problem of MM and are defined for all real numbers. I.e. we don't set TP and SL and define optimal f, but we define TC and get optimal values of TP, SL and f.
Vinin wrote(a) >> Just as long as there is a continuation.
I propose the following concept of "communicating" with the market: Quote->TS->MM->$ The essence is that we create a set of rules that TS optimally slices the price series, maximizing the profitability, which I define as the number of points that TS earns per unit "human time". Then the MM block maximizes the process of transferring these market points to rubles (the optimal MM of a particular TS). That's all.
Let's take as a base the fact that no MM will be able to gain a positive output in rubles, if the expected payoff (ME) of the TS is less than zero (we will take as ME the average number of points coming to one transaction, taking into account brokerage commissions). This is a very complicated task, which is much more difficult than searching for an optimal MM, and it seems to me that nobody has paid much attention to this very task - they focus on the searching of optimal parameters of an arbitrary TS. It is obvious that the number of arbitrary (those that can be invented) TS is infinite, and their parameters are even more (if, of course, one can put it that way) and the problem does not converge in principle, i.e. no life is enough to try all strategies that can come to inquisitive mind, and certainly to try all their tuning parameters in the tester. Therefore it seems we need a systematic approach to choosing the optimal TS and its best operation.
Also, let's say right away that
1. no TS is able to get MM different from zero at martingale (integrated random variable (IC) with zero MM - at first approximation, an analogue of price series) with a rather long history.
The latter reservation is important, because any results are possible on short historical samples, which are by their nature statistical fluctuations and have nothing to do with reality. For this reason every now and then there are periodic rumors in trading circles about "miraculous" enrichment of lucky friends. All these rumors are based on the fact that in life, as a rule, people often exaggerate successes and keep silent failures. This gives the impression that everyone around you is busy making money and that you are a loser.
2. Miracles do not happen (in all their forms).
Nevertheless, I begin my consideration of these problems with optimal MM for arbitrary TS, which is given with a sufficiently large set of tricks (or, what is the same, a number of first differences (FDD) of account balance.) This makes it easier for me to present the material.
А еще эксперименты показывают, что любая ( в пределах разумного ) стратегия на выбранном участке истории может быть прибыльна при правильно выбранных SL и TP . К сожалению оптимальные значения стопов становятся известны постфактум.
Fitting experiments? )))
Very useful for determining the absolute value of SL.
Я уже давно определился по данному вопросу экспериментальным путем. Довольно много времени было уделено. Минимальный SL. Максимальный TP.
Thus it turns out that if we somehow miraculously open a position and it immediately goes into profit more than the spread, we have a positive expectation of maturity, or trailing, or tighten the stop so that the current price is in the middle of text price=|TP-SL|/2.
Thanks for the idea.
to Neutron
The point of the thread is a bit elusive, "Optimal SL and TP values of orders for an arbitrary TS." what then will the TS do, if not determine, the TP level? What is the point of it then? As for the SL level, yes, for some time I thought it was possible to create a universal mechanism for its assignment, regardless of the TP setting strategy. Until I realized the absurdity of this idea.
The only thing that can be asserted for sure is that SL will always be associated with a particular TP strategy, for a particular location.
And in general, the task of placing SL is similar in complexity and even in many ways more complex than placing TP and must be done jointly. Paradoxically, but more often than not, "money management" as a "science" leads to a losing trade with the maximum lot. :о)
I agree with grasn.
A little off-topic below.
Neutron писал(а) >>
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I propose the following concept of "communicating" with the market: Quote->TC->MM->$ The essence is that we create a set of rules that TS optimally slices the price series, maximizing the profitability
...
Any, even a primitive TS at the intersection of wagons, contains these two points:
1."the set of rules by which TS cuts the price series in the optimal way".
2. A set of rules, by which the "sliced areas" are analyzed, and if it is true (meets the conditions), then the action (opening/modification/closing).
For me, the first point: is more important and complex than the second, although no matter how perfect the first point is, with a nasty second point, the whole system will work like the second.
And here's wondering who and how the knowledgeable (: "slices the price range". Personally, I use peaks like the zigzag. Do you?
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Probably each of us has at least once wondered what values of protective orders should be chosen for the reliable operation of a trading strategy (TS). Some of them say it is better to use TP=SL and not less than 100 pips, and others advise to use a TP much larger than SL - thus adhering to the strategy "to let profits grow and cut losses". Others prefer scalping, with short targets (TP<100 pips). So, which trading strategy should we follow? Let us recall that there are not a smaller number of points of view on the optimal share of the deposit, which should be used in trading. Here we have 2% and 20%.
Even a detailed analysis of literature on this subject shows the almost complete absence of any adequate information - a lot of various, I will not dare say it, nonsense in periodicals and absence of serious works (such as dissertations) for the Forex market. There are exceptions, of course. Here we can select the work by Ralph Vince "The Mathematics of Capital Management" where the author considers one of the ways to determine the optimal share of the deposit - f by direct simulation of trading with the variable parameter f and choosing the optimum of the maximum return. But this is a titanic job taking into account that there are at least two more TC parameters - SL and TP. Moreover, there is no guarantee that the solution found in this way is not a fit for the specific market conditions and will never be repeated. Very interesting is dissertation work of Stanislav Pastukhov "On some statistical-probabilistic methods in TA" where one of TC is considered in details but the practical side of its use is not paid proper attention. There are two more dissertation works - "Scenario methods of risk management" by Andrey Bershadsky and "Using aggregation in nonlinear dynamics methods" by Stanislav Belyakov. But, as I have already mentioned, it is not clear how they can be adapted to Forex, and besides the problem of processes non-stationarity in the market (lack of ergodicity) is not paid proper attention in these works. The detailed material is well presented in HideYourRichess' article "Concerning money management" posted on our site. The special case of TP=SL I have considered in this forum in the "Market Etiquette" thread.
On the one hand we have some information, but it is not clear how to use it for practical profit making, and on the other hand it is not enough for making a complete market picture. I agree with Sandid, who in a neighbouring thread said that we are all stalkers on the field called the Market, where the laws change at about the speed of their identification. I will add that perhaps we are like blind men groping for an elephant - each of us has his own "truth" and there is no complete picture of the phenomenon (elephant). I believe, in this topic to express a few thoughts concerning possibility of obtaining of analytical solution for optimization of parameters of arbitrary TS. I think they are the values of protective orders SL and TP in points and the optimal deposit share expressed by the dimensionless value f, which is the ratio of a point price in rubles to the total amount of rubles in an account.