The reason why most players lose tournaments is not because they lack good ideas; it is because they execute many mediocre ideas. One trade a day tournament strategy reverses that failure – you wait for just one featured idea you are highly convinced about, trade it with the idea of deliberately sizing your position, and then you leave it there. It limits variance; observes drawdown requirements and according to 48 completed tournaments at BuyCrypt – reflect the mentality that allows players regular spots on that leaderboard rather than bursting on day one. Note that it is not an exchange – BuyCrypt is a simulation game that requires skill – there is no guarantee of profit here.
Every time you enter into a trade, you extract a new outcome from probability distribution. In reality, even the most successful trading plan will generate losing streaks of five, six seven in some instances. Therefore, with higher numbers of trades in a fixed period, you become exposed to losing streaks and experience variance of possible winners and losers between your highest and lowest point. What does the term variance denote? Essentially, in any competition where drawdowns represent a limit, variance is the silent killer.
Using a one trade a day strategy eliminates the problem right at its root. Lesser trades equal fewer outcomes drawn from a distribution and hence a narrower scope of possible outcomes for you to cover. In addition, you trade a higher minimum for a significantly lower maximum which matters a lot in scenarios with drawdown limits because one violation disqualifies you from the competition.
There is also an unknown cost related to overtrading itself. Typically, your tenth trade performed throughout a day would be worse compared to the first trade executed at the beginning of your trading session. This means that the tenth trade is either motivated by revenge, boredom, or hope of making money out of vicious circle of gambling. Limiting yourself to just one trade ensures that you shall not trade due to emotional motivations.
If you are allowed to make just a single trade, then your bar needs to be set high. Three filters would ensure that most of your efforts come from right selection. Filter number one relates to liquidity. Conduct your trades exclusively with underlying instruments which provide sufficient liquidity in order to ensure your order filling happens according to your plan. Lack of liquidity brings unfortunate slippages. Remember that buycrypt has modeled everything but gets you accustomed to honoring your trading rules with respect to liquidity.
Filter number two relates to well defined invalidation. In other words, prior to entering into a trade – one must be able to identify a level beyond which the validity of initiating this position shall not apply anymore.
Filter number three is asymmetric risk-to-reward proposition. Any trade that you make should imply that upside is much greater than downside. For instance, if your deal gives you THREE times greater payoff opportunity than risk involved – then you can afford being wrong many times. High conviction trading needs to be understood in a correct way by combining all three filters.
Tournament drawdown requirement represents the only opponent that you have got to deal with here. Hence, position sizing needs to be calculated from the drawdown limits specified by the tournament and not other way around. Risk management should always begin from aforementioned regulations as opposed to profit motives. Risk management must comply with given number because if maximum allowable drawdown stands at 10%, then you need to know how much capital you are ready to lose by entering one idea.
Also, remember that position sizing has nothing to do with your stop loss position, therefore; use stop loss to determine position size.
Due to this approach, you will find it difficult to operate because risk appetite must be strictly lower than margin.
Once you finished making your trade and established your first stop loss position, from there on what follows is that most difficult thing to do – sit and do nothing. There will be multiple temptations getting you back into market. Do not fall into those traps as any attempt will dilute upside value from initial trade and diversity returns once again.
The association with funded relevance is straightforward. A $5 (or $0 through an entry into The Ladder trial) route to a $5,000 funded account with an 80% profit share is simply a test of the temperament. Funded tests exist to sift through candidates who are capable of sticking to a drawdown guideline — and 127 accounts on all 384k played on chain show that the candidates have achieved that. The one trader doing one disciplined trade a day has practiced his trade using exactly the criteria of a funded test.
If your game plan does not get replicated under pressure, it is not a game plan at all. Put together a small standard routine. Identify the instrument and level you are interested in before the trading day, write down what invalidates it and what your target is in advance. Then, watch and, if the level trades and you have your reward/risk ratio, execute the plan, and if you don’t, then you did nothing that day though you had a successful day. The day shall have an entry written down.
That is what compounds. After only a few weeks, that routine shall provide you with a history of all your best ideas and the results to make your judgment much better than randomly firing trades. Fewer trades yield better results.
Look to the discipline itself. Anyone can find a chart. Very few will find a setup, put on their size, and actually walk away. That temperament moves from free tournaments to funded tests and real capital.
If you have zero trades on any given day, that day has been a success! That is the whole point! If you miss a setup and don’t act, then nothing has changed for you! These are just tournament events and you will have tons of opportunities.
Yes, it can! Tournaments actually reward equity shape not just raw counts. Equity shape is simply defined as winning at least three times the amount of winnings. A consistent winning strategy with this statistic allows you to attain successful ROI.
Yes! When the tournaments are short, they tend to have very high volatility associated with them, thereby allowing overt trading to do the most amount of damage. One approach will allow you to control your drawdown risk at the same time.
That’s not random, it’s deliberate. Thank you for reading!
It means exactly what I said at the beginning. Funded tests are designed to test whether you can respect a drawdown rule during testing and that is exactly what the one trade a day is designed to teach.
