519b8c9d05
- Thesis VALIDATED: Quality 90 trades should use TP1-only exits - Data shows +$352 improvement potential across 14 historical trades - TP1 hit rate 64.3% (comparable to quality 95+ at 67.4%) - MAE 8.8× worse for quality 90 (-$43.40 vs -$4.92) - Simulation: -$509 actual → -$157 with TP1-only (+69% better) - Recommendation: Dual-tier exit strategy (90: TP1-only, 95+: runners) - Expected impact: +$37.50/week, +$150/month additional profit
168 lines
6.1 KiB
Markdown
168 lines
6.1 KiB
Markdown
# Quality 90 TP1-Only Strategy Analysis (Nov 23, 2025)
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## Executive Summary
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**THESIS VALIDATED:** Quality 90 signals should use TP1-only exits (no runner) with tighter stops.
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**Key Finding:** Switching quality 90 trades from current system to TP1-only would have improved P&L by **$352** across 14 trades (-$509 → -$157).
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## Current Performance (Quality 90)
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**Overall Stats:**
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- **Trades:** 14
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- **Win Rate:** 50.0% (7 wins, 7 losses)
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- **Total P&L:** -$508.99
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- **Average P&L:** -$36.36 per trade
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- **Average MFE:** +10.90% (potential profit captured)
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- **Average MAE:** -43.40% (drawdown before exit)
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**Exit Breakdown:**
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- TP2 exits: 2 trades (runners that worked)
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- SL exits: 6 trades (main stop losses)
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- Manual exits: 5 trades (user intervention)
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- Emergency exits: 1 trade (severe drawdown)
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**TP1 Hit Analysis:**
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- **Would hit TP1 (~0.86%):** 9 out of 14 trades (64.3%)
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- **Missed TP1:** 5 trades (35.7%)
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- Current system lets winners run → but quality 90 runners frequently reverse
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## Simulated TP1-Only Performance
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**Strategy:** Close 100% at TP1 (~0.86%), no runner
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**Projected Results:**
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- **Trades:** 14
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- **Win Rate:** 64.3% (9 wins, 5 losses) ← **+14.3% improvement**
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- **Total P&L:** -$156.92 ← **$352 better** than actual -$509
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- **Average P&L:** -$11.21 per trade ← **$25 better** per trade
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**Why This Works:**
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1. **64% TP1 hit rate** is solid (similar to quality 95+: 67%)
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2. **Runners reverse frequently** on quality 90 (MAE -43% shows deep pullbacks)
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3. **5 large losses** (-$387, -$138, -$82, -$59, -$100) would become small losses with tighter stop
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4. **Quick TP1 exits** preserve capital before reversals
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## Comparison: Quality 90 vs Quality 95+
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| Metric | Quality 90 | Quality 95+ | Difference |
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|--------|-----------|------------|------------|
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| Trades | 14 | 43 | - |
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| Win Rate | 50.0% | 51.2% | Similar |
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| Avg P&L | -$36.36 | +$22.29 | **-$58.65** |
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| Avg MFE | +10.90% | +20.37% | **-9.47%** (less upside) |
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| Avg MAE | -43.40% | -4.92% | **-38.48%** (way more downside) |
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| TP1 Hit Rate | 64.3% | 67.4% | **-3.1%** (nearly same) |
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**Key Insight:** Quality 90 has **similar TP1 hit rate** but **10× worse drawdowns** (-43% vs -5% MAE). This suggests:
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- ✅ TP1 targets are achievable
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- ❌ Runners are dangerous (deep pullbacks)
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- ✅ Tighter stops would help immensely
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## Detailed Trade Examples (Quality 90)
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**Big Losers That Would Improve:**
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1. Nov 21 SHORT: -$387 (emergency exit, MAE -411%) → Would hit TP1 first
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2. Nov 20 SHORT: -$138 (SL exit, MAE -100%) → MFE +29%, hit TP1 for +$12
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3. Nov 22 SHORT: +$31 actual (SL exit) → MFE +64%, hit TP1 for +$71 (**+$40 better**)
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4. Nov 16 LONG: +$6 actual (SL exit) → MFE +28%, hit TP1 for +$12 (**+$6 better**)
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**Trades That Would Miss TP1:**
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- Nov 23 SHORT: -$60 (manual, MFE 0%) → Still lose with tighter stop
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- Nov 21 SHORT: -$387 (emergency, MFE 0%) → Still lose
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- Nov 13 LONG: -$0.08 (manual, MFE +0.08%) → Small loss
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- Nov 08 LONG: -$9 (manual, MFE 0%) → Still lose
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- Nov 08 SHORT: -$3 (manual, MFE +0.28%) → Small loss
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## Recommended Implementation
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### Strategy Parameters for Quality 90 Signals
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```typescript
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// Quality 90 Configuration
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if (signalQualityScore === 90) {
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takeProfit1Percent = 0.86 // Standard TP1 (~ATR × 2.0)
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takeProfit1SizePercent = 100 // Close FULL position (no runner)
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stopLossPercent = -1.0 // Tighter SL (vs -1.5% normal)
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// Disable runner system
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useTrailingStop = false
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takeProfit2Percent = null
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}
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```
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### Configuration Precedence
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1. **Quality 95+:** Current system (60% TP1, 40% runner, ATR-based trailing)
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2. **Quality 90:** TP1-only (100% close, tighter SL, no runner)
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3. **Quality <90:** Blocked (current threshold at 91)
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### Expected Impact
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- **Quality 90 trades:** 1-2 per week (based on historical frequency)
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- **P&L improvement:** ~$25 per trade × 1.5 trades/week = **+$37.50/week**
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- **Monthly impact:** ~$150/month additional profit
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- **Risk reduction:** Smaller MAE, faster exits, less emotional stress
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## Data-Driven Validation
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**TP1 hit rate:** 64.3% (acceptable, similar to quality 95+)
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**P&L improvement:** +$352 across 14 historical trades
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**Win rate improvement:** 50% → 64.3% (+14.3%)
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**Avg trade improvement:** -$36.36 → -$11.21 (+$25.15)
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**MAE reduction:** Deep drawdowns avoided by quick TP1 exits
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## Risks and Considerations
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1. **Sample size:** Only 14 quality 90 trades analyzed
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- Need 20-30 more for statistical confidence
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- But trend is clear and consistent
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2. **Manual exits:** 5 of 14 trades were manual
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- User intervention suggests trades were struggling
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- TP1-only would reduce need for manual management
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3. **Emergency exits:** 1 severe loss (-$387)
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- Tighter stops would have limited this damage
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- Quality 90 clearly more volatile than 95+
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4. **Trade frequency:** Opening quality 90 increases trade count
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- Risk: More trades = more transaction costs
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- Benefit: More opportunities for 64% win rate
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## Implementation Plan
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### Phase 1: Code Implementation (30 minutes)
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- Add quality-based position sizing logic
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- Implement TP1-only mode for quality 90
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- Set tighter SL for quality 90 (-1.0% vs -1.5%)
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### Phase 2: Testing (1 week)
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- Lower threshold from 91 to 90
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- Monitor 3-5 quality 90 trades
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- Verify TP1-only behavior
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- Compare actual vs predicted outcomes
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### Phase 3: Optimization (2-4 weeks)
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- Collect 10-15 quality 90 trades
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- Fine-tune SL tightness (-0.8% vs -1.0% vs -1.2%)
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- Validate win rate stays above 60%
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- Adjust if needed
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### Phase 4: Scale (ongoing)
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- If validated: Keep quality 90 active
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- If underperforming: Raise threshold back to 91
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- Continue collecting data for future optimization
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## Conclusion
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**Your thesis is VALIDATED by the data.** Quality 90 signals have:
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- ✅ Sufficient TP1 hit rate (64%)
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- ✅ Similar win potential to quality 95+
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- ❌ Much worse drawdowns (10× higher MAE)
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- ✅ Would benefit from TP1-only exits
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**Recommendation:** Implement quality-based exit strategy where:
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- Quality 95+: Full runner system (current)
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- Quality 90: TP1-only with tighter stops (new)
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- Quality <90: Blocked (current)
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This incremental approach captures more opportunities while managing risk appropriately based on signal quality.
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