Update, and a Comment Answered

The end of week update is at the bottom.  Currently, I am up 22% for the year.


In case you don't look at the comments, there have have some excellent questions posed.  I like to answer a couple of them here:


"There are 2 sets of numbers, one where the system is traded mechanically, and one where the system is traded by a live human being.


1. I was thinking if you compare those numbers (for the live trader) for the 2 contests that you won previously (if available), would there be any major differences?


2. Would you use those numbers (for a live trader) to measure how you have improved over the years?"

These are really neat questions, since they bring up psychology in trading.  For example, what good is an historical  backtest, if the live trader (by thinking he is smarter than the system) deviates from the system?

For me, I can tell you that when I had discretion in what I did, I almost always did worse.  I don't have any hard data to support this, but there have been times where I would develop and test a system, and then haphazardly trade it real time.  By that I mean sometimes I'd overrule the entry, and skip the signal, or stay in it longer when I should have exited.  I also sometimes added to losing positions, which really got me in trouble.

My general feeling was that my "monkeying" around with the system in real time was almost always bad in the long run.  The kicker was that sometimes, in the short run, my discretion was better, and that was enough positive reinforcement to keep me doing it.  Kind of like winning a little bit playing slots.   Plus, my stress level went up, since I now had to make more decisions, after ignoring earlier system signals.  

Now, I take every signal, as is.  Without fail.  I don't try to get cute and skip or overrule signals.  Since I trade 10 different systems now, I really couldn't deviate from the systems, even if I wanted to.  I'd be confused very quickly!

I wish I had numbers to back me up, unfortunately it would be a major research project to prove all this.  But my conclusions are:

1.  It is better, monetarily and psychologically, to trade well researched and tested systems AS IS.

2.  Trading systems without questioning the signals leads to less stress.

3.  Over the past 6 years, my performance and ability as a trader has greatly improved by following rules 1 and 2.

I may have more to add on my trading progression since 2006, from an article I have recently written.  I'll give details when it is published.


In a future post, I'll also show how I now track my performance (systems signal results versus actual results).