The Importance of Building Scalable Trading Strategies

Today we are going to take a look at the importance of building scalable trading strategies.

In particular, we take a look at the trading statistics of our tenth place, who is sitting on an incredible return of 20.79%.

But first, let's recap the top ten leaderboard.

The quality of our top traders continues to build, with the top 5 above 95% and tenth place sitting above 20%.

Only Stage 1 has been stronger, with tenth place finishing June above 50%.

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Zhen Guo Zhang – Tenth place on 20.79% Trading Stats

To add a bit of variety to the trading statistics record of the top ten, today, I thought we’d take a look at Zhen Guo Zhang, who is sitting tenth in September.

I was expecting to see an equity curve that was less consistent.

My thinking was those at the bottom of the table might be taking more ‘long-shot’ opportunities and risking more than usual.

But as you can see from the equity curve and trading stats table below, nothing could be further from the truth.

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Zhen Guo Zhang trades the following instruments:

· XAUUSD (Gold) – 42.5% of trades

· HK50 (Hong Kong Index) – 26.4% of trades

· GER30 (Germany 30 Index) – 25.1% of trades

· DJ30 (Dow Jones Index)

· BTCUSD (Bitcoin)

Building a scaleable trading strategy

One of the goals of any serious trader should be to build a trading system or set of strategies that can be scaled up.

Scaling up means you can apply your strategy on a small capital base, like $2,000 in the example above, and when your bank account allows, you scale up to larger sums and execute the same strategy.

This is what has got me so interested in Zhen Guo Zhang’s equity curve.

As you can see, his strategy moved immediately into profit and has been steadily growing ever since his first trade.

Zhen is winning on 85% of his trades and his average win and average loss are from $4.72 for wins and -$6.02 for losses.

What is great to see is his biggest win is considerably larger than his biggest loss.

These are incredible trading statistics.

Minimising the large drawdowns helps to build confidence in your trading strategies

One of the challenges with all traders is when your confidence gets knocked around, following a larger than usual loss.

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This also takes away the shine from building a scalable trading strategy.

For example, imagine making a 50 percent return on your funds in a set amount of time but having a 70% drawdown during that period.

This means on a $2,000 account you would be losing $1,400 of your $2,000 account.

Now $1,400 doesn’t sound like a lot of money in the greater scheme of things, but how would that look if you had a $100,000 account, Ie, to scale up your trading?

A 70 percent drawdown on $100,000 is now $70,000.

Now I’m not sure about you, but losing $70,000 is not something anyone on the desk here at ACY Securities is willing to do, even if it meant the potential of making 50 percent.

Confidence in your trading numbers

As you can see from our trading blogs, I’m very keen to highlight the real trading numbers behind all the traders.

The numbers never lie.

But the numbers also paint a powerful trading story.

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So let me ask you this question…would you be willing to trade Zhen Guo Zheng’s trading strategy based on the equity curve and statistics above?

Hopefully, you would be interested in employing it as he has several excellent points.

His win rate is relatively high, so it is never long before he moves out of any losing streak.

He isn’t making 1,000+ trades in a short space of time. As of the 21st of September, he’s made 155 trades in total.

This means he is making approximately ten trades per day.

For most traders, this is achievable.

Having confidence in your numbers is the best way to start scaling up.

Would you be willing to scale up this trading strategy to $10,000 or even $50,000 account size?

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Based on the numbers you see above, would you be willing to scale up to $10k or more if the trading capital allowed?

The truth is, we have no idea how any strategy will perform in the future. There are no guarantees.

But at some stage, the likes of Ray Dalio, Warren Buffet, and Paul Tudor Jones all had to make a move to trading larger sums of money.

To do this, they had to have confidence in their trading numbers.

If you are serious about your trading, you must have the goal of being able to scale up your account when you have proof your trading strategies have a positive expectancy over a big enough length of time.

Why entering a trading contest is so powerful

This is one of the most potent ideas behind entering a trading contest.

Your goal isn’t to WIN it.

But instead, your goal is to trade your best trading system in such a manner on a small amount of capital, that you can build enough confidence to scale up.

A trading contest like the Trading Cup allows you to test your account in a live trading situation and see how it performs in the real world.

Imagine if your strategy not only performed well but met your trading goals of returns versus drawdown.

In other words, through testing in a live environment, you gained enough confidence to scale up your methodologies to the next level, whatever that amount is for you.

Traders like Larry Williams built their entire career off the base of winning a trading competition.

Larry managed to make 11,000% in a futures trading competition on a $10,000 account. Yes, he turned $10,000 into $1.1million.

Example of building automated strategies that can scale

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Another example of using a trading contest to build scalable strategies is from Gustavo Correa. Click here to view an interview with Gustavo about his thinking and trading strategies.

Gustavo is a ‘serial winner’ in our trading contests and has a passion for algorithmic trading. Click here to see an interview we did with him in the 2019 Grand Final.

Not only that, but Gustavo is continuously thinking about building strategies he can scale.

The statistics of his strategies are everything.

This has meant he consistently placed well in all trading challenges, but more importantly, he is always designing, testing, and implementing new trading ideas and position sizing strategies.

Now it is your turn.

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Are you ready to join the next Stage? Click here to register an account.

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Ashley Jessen // Author of CFDs Made Simple, Head of Marketing at ACY Securities

Ashley Jessen is the author of CFDs Made Simple and Head of Marketing at ACY Securities. He has been in the financial services industry since the year 2000 and worked for some of the leading companies in the CFD, Forex and Online Trading space.