Should I limit the number of entries of an intraday trading system?

by Andrea Unger

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Well guys, this is a performance report, it's one of my systems, here it's off-line of course because I want to show you something.

The system is something I've been trading for a long while, it's a very good system, you can see the equity line, it's on the EminiS&P500 and apart from some troubles here or there or so, it has always been performing very well undoubtedly.

Also the trade analysis, you can see about $140 average trade and close to $100 on the short side, which is normally hard to achieve on Emini.

But what happened?

A big problem with a black swan!

On February the 28th, this is the trading day you see here.

We started well, a short entry which was reversed to a “long” here, with gain, but then stop, stop, stop, you see all these long entries here, after the short, and then here again, and here again, and here again, all stopped out.

In the end, a short entry stopped out as well.

So this was a real disaster day, these days are those that make you wonder, and if you look at the daily report you see, this is the night session, it was a disaster, a real disaster, but also the latter period was not that well, that nice.

When these things happen I think if there could be a solution to avoid them and if I look at this report, what I notice is that the system actually traded pretty often, you see the high number of trades compared to the standard, we had a number of trades definitely higher than normal.

You can see it from the chart as well.

A possible solution

So the question is: What if I limited the number of trades during the session?

So I took this, I created a test version of the same system and in this test version, I inserted the condition "Max entries" to limit the number of trades during the day.

The optimization of this input, the optimization is to study how it behaves, shows that actually, you probably cannot see it properly here but trust me, the numbers are very close, they are all about $180,000 in the trading period we analyzed with a single contract, but for the first, this is the best one with 4 entries limited, the only one where we lose some performance is the first one here, with only one entry we lose performance but we would have obviously avoided the disaster day, but the average trade, in this case, is about 10% better than all the others.

So actually shall I aim for a strong average trade which you know, I like very much, losing some performance, but also, and this is where we started from, avoiding days like February the 28th?

So this is the question.

So it's easy, we just take this input and we analyze the report more in-depth.

It takes a while because the report is...we are on the right one? Yes, it's weird that I see the trades on the chart but the report is not ready... ok here we go.

So now, this is the performance report, we still have a bad period of course here, but not as bad as the one we saw, as you know something less.

The equity line, apart from this period here, is nice, but now what I would like to do obviously, is to make a direct comparison with... this is February the 28th and you see it's definitely much better, it's not that bad.

Let's look at the report!

Here I want to compare it with the original report, the one where I had this disaster and which made a little bit more money, as I told you.

Here it is, it's about $10,000 more, yes this is it, sorry, here we go.

So you see a slight difference in net profit, it's about $10,000 more here on this side and if we look at the total trade analysis, I said we are increasing the average trade by about 10%, from $140 to $160 and also the short side is better, on the right it is the test report.

So actually it's promising, it's something that could be considered, but if we look anyway at the maximum drawdown of the system, we see that there is no real improvement, it's even worse, a bit worse really.

The close to close is worse.

So actually I don't have an overall benefit, I lose some performance, I do have a better average trade but the drawdown is not really better.

Remember that all this started from trying to avoid those crazy days.

If we look at the annual period of this system, we see that here it is, that, obviously in 2020 we do better or less bad.

We also do better in 2019, $39,000 against £35,000, but you see here, in 2018 we earned very small money compared to what we did with the original system.

It's about $1000 and something against $18,000 and this is something I don't like really.

Was it profitable?

Not because of greediness but just because I don't like it as a concept and in 2008 again, we make about $10,000 against $22,000, as if the volatility of 2008 was there to help systems that entered over and over again, even after stops, just trying to get the right move and they did it in the end, as you see from the performance here.

So if I look at this matrix, I am a bit puzzled.

I try to avoid a bad day and the only thing to do was to cut the number of entries.

I'm not trying to get rid of that day with some filter, I'm just trying to slightly change the concept.

I got the solution of course, but I see that this solution is not what I like most in other years.

Now I leave it up to you, please write in your comments about what you would do in this case.

I do this, if something big happens, like on February the 28th, a bad thing, in this case, I look into my system.

If I can improve it, if I could have avoided that, not avoid the day with some trick, but to avoid the situation, this is what I did.

A second option

We could actually even consider something different, because if you look at the optimization report, 1 was what we analyzed but with 2, we still have an improvement in the average trade and, obviously, we would have avoided the awful February the 28th to some extent, because we are we're still limiting the entries to 2 in this case and we would have avoided all raw of stops that we experienced, I experienced on my account.

So also here it takes a while, the system is a bit complex, so it takes a while to do.

Here you see there were 2 trades because we limited to 2.

2008 is not bad,2018 is good as well, 2020 is like so.

These are numbers I like more.

In conclusion

Now I've not yet made my decision about what I'm going to do, the equity line, of course, is nice.

Let me know, let me know your opinion!

I will probably put this condition in place, with limited 2 entries per day, but remember, the approach I run here is: I look if I could avoid the worst-case scenario that I experienced, not tricking my system and saying "if the date is February the 28th don't trade" no, but "what has caused the problem?" okay "can I get a workaround?" yes maybe, maybe it's this one.

Let me know, please comment!

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Andrea Unger

Andrea Unger here and I help retail traders to improve their trading, scientifically. I went from being a cog in the machine in a multinational company to the only 4-Time World Trading Champion in a little more than 10 years.

I've been a professional trader since 2001 and in 2008 I became World Champion using just 4 automated trading systems. 

In 2015 I founded Unger Academy, where I teach my method of developing effecting trading strategies: a scientific, replicable and universal method, based on numbers and statistics, not hunches, which led me and my students to become Champions again and again.

Now I'm here to help you learn how to develop your own strategies, autonomously. This channel will help you improve your trading, know the markets better, and apply the scientific method to financial markets.

Becoming a trader is harder than you think, but if you have passion, will, and sufficient capital, you'll learn how to code and develop effective strategies, manage risk, and diversify a portfolio of trading systems to greatly improve your chances of becoming successful.