If there are active futures traders on this forum who are willing to share what type of metrics measure they use for their trading, it would be appreciated. The performance measure of our trading is not just an increase in equity or decrease but also the risk we put on with every single trade. My goal is to decrease the volatility in my account, and I am trying to find reliable ways to achieve this.
@AltT,
Interesting question.
There are so many ways to measure performance but I think the best way is to understand
the mechanics of the approach, system or method one uses and go from there.
I agree that using the equity (with presumably lowest margins like $500) is a sure sign for suicide for newer traders but I like for example;
- to track my own performance using excel against my demo account which I run side by side and where I tend to “play and experiment” with size and trading ideas. It’s always a nice surprise when the demo goes crazy while the actual account trades more conservative.
- I also like to impose a simple moving average on top of my own actual performance equity curve and tend to minimize the trading size if the account is trading below the MA and increase the size when the account is above the MA. Rewarding good trading periods pays off statistically, while minimizing the choppy/volatile performance protects the capital. It actually works imho.
What metrics do you use?
Best,
- P11
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We have written an article about how to measure automated trading systems performance, but this will help you guys with discretionary trading as well.
Ratios Used in Evaluating Automated Trading Systems
Thank you,
Matt Z
Optimus Futures
There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.
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@Project11 I never tried this technique of trading real and demo simultaneously. This type of trading is unusual, but I would be curious to know how you follow each one and yet make a fast decision on the live account?
My method does not have fancy analytics, but I do have a moving average (like you 
), and I do adjust my lots size accordingly. I use the time factor to determine what is the average time for my trade to be profitable, and if it exceeds this time, I typically get out. Most of the time it is the right decision.
I also measure my avg win and ave loss against one another. Slight adjustments are made based on VIX and ATR to the profit and loss taken.
I started in the managed futures investments, and still hold CTA accounts in my portfolio. While I was watching my reports daily, I started getting curious about futures markets. Over time I read over and over how money managers succeed in the long run, and I try to mimic their way of thinking.
I saw your posts on Gain Trader…nice job!
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Hi @AltT,
I like your time based approach as part of one of my strategy is to capitalize on a positive trade momentum (if the trade is moving in my direction in a relatively a short period of time I like to raise my wager).
I also found out that limiting the exposure to the market (less time in the markets, spend time on demo if you must playing on the keyboard lol) risk is a simple yet very powerful method to protect from the ongoing risk of being always in the market. Not to say that there aren’t decent strategies that hang in there trying to capture each and every move. But the costs of these method is higher in many forms and one must be a really good market timer to make it work imho.
Interesting, I also run constant analytics of each and every trade, per time horizon, time of the day, per day session, week, month etc… and keep ATR and other vol values for bunch of intervals to try to paint the vol environment at the time of the trade. It seems that vol based adjustments are important to us.
I am terrible at following other peoples styles, I always seemed to try to create my own methods not to say I didn’t read 100’s of books and combed through many strategies and lightly programmed some approaches. It seems that we all take or borrow a little pieces from one another to create building blocks of what we feel comfortable with.
But finally back to the side by side of Demo vs Real trading. To be honest it is one of the best moves I’ve done along the way. It became second nature and it’s not to say that I try to rush and place each and every order on both accounts. I rather place my more conservative strats on live and leave the; more size, more “exotic” strats, more aggressive approaches or new ideas for the demo. I trade 25-35% of the time on real and the rest of the time during the entire open session trade my demos. After a while it became second nature and the best feeling in the world is when you make money on real and you lost “a bunch” on demo.
Why? Because 80% of the time you knew it’s too big size, or the trade is radical and in your gut you feel like trade live because you already have live positions side by side. So you eat your own conviction. But no money is lost. So you hopefully stay in the game longer.
Honestly, these days the difference between live and demo shrinks to a minimum, its so subtle for me.
So, say after you are done with live trading (it doesn’t matter whether positive or negative) but you still trade on demo, you very effectively anneal your trading skills and keep your trading muscle hot and ready.
I call it screen time. You can’t keep getting lucky for long. Statistics will and do catch up with weak strategies or traders.
I lost a lot and made a bunch so I keep live and demo side by side to keep training of my brain to washout the difference between live money and demo money. The power comes from being able to shuffle odds and not wager human emotion. So much easier said then done…
Long post, I feel like we could start a new Category “Psychology of Trading” 
Would love to hear more of your experiences @AltT,
Best Regards,
- P11
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@Project11 I appreciate your feedback on my metrics. I would be happy if you started a discussion on psychology! I would add some unusual perspective as I read probably thousands of forums thread addressing what market traders consider “psychology.”
I understand the screentime element and how important it is to improve our trading. But, I can not do two things at the same time, and I keep on improving on my method to get it to the point where it matches my temper, so I do not become emotional. To my benefit or detriment, I do it in a live account.
As for the managed accounts, maybe I should be more specific. The CTAs do not reveal how they trade, and you can’t pick up a method from watching the end of day statements. But, what I learned is how to overcome drawdowns. If you think of a CTA than think of all expenses he has to overcome: Incentive fees, management fees, and commissions, some have enough talent to overcome all that and generate new highs. We as self-directed traders, do not have these limitations.
What I have learned most from my managed futures accounts is how painful drawdowns could be, and the length of time that they last. Most cannot endure this pain and change their methods because of this specific reason. This is why I keep on improving one method, and I feel that every six months I make significant progress. If I did not have a managed account first, I would not last as a trader. Watching a successful trader is priceless, not to mention that it gives you the confidence that you can overcome bad days and bad periods. They give you a good window into realistic trading and what it entails.
If all traders were looking at a real P&L of successful traders, they would understand the level of pain involved in trading and realize that 90% of the time you are in a drawdown.
Have a good weekend!
@AltT
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@AltT,
I couldn’t agree with you more on the majority of time in trading being the management of the drawdowns.
Also I especially agree with you on the reality of the hardship and the ability to withstand the approach without losing the light at the end of the tunnel before abandoning a strategy.
It is so true that watching or studying a positively performing strategy over a longer period of time would clarify and wake up a lot of newer traders to the reality of this business. Drawdowns are a big part of it.
Best Regards,
- P11
P.S. Delivering excess of alpha returns on the capital, net of all fees on top of the challenges of constantly recovering from drawdowns makes it a very hard game in town. Gotta love it, respect the risk and keep at it.
As they say “Traders never leave the market - The market leaves them”.
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