Am I Wasting My Time?

[Richerichaderson]

People by doing trading are also making good money. All you need to do is work with patience and keep back testing your strategies.

 

[Hellbringer]

You know, in fact, a lot of traders don't achieve results right away. And believe me, their situation looks much sadder than yours, but it is not a reason to leave everything and switch to some other activity.A lot depends on how you feel about the fact that something is not going according to plan, please do not worry about it. The main thing is to come up with a structured plan of action that will allow you to understand what you are doing at the moment and what your final goal is... And do not risk your capital, divide it into parts so that you can test certain approaches and decide which ones are best for you. Everything will be fine, don't be afraid of difficulties.

 

[themickey]

People by doing trading are also making good money. All you need to do is work with patience and keep back testing your strategies.

Some trading methods are un-backtestable, that is, impossible to implement.
Or put it this way, some methods could be backtested roughly speaking but the source for your data would be expensive/difficult to obtain.
Not every trading method is straightforward such as bars/indicators as would be assumed by the majority.
Sometimes also, discretionary methods employed by an experienced trader wouldn't be backtestedable, but an experienced traders should have no need for testing.
Imo, backtesting is for noobs.
An experienced trader attempting a new method would test with real money & small size because backtesting on a computer is inaccurate imo.

 

[ironchef]

4. thats not true - smaller investor has an edge over larger players, as there are plenty of capacity constrained strategies that you can find and run

Can you name any examples?

I am not challenging your point, just want some help finding them.

Thanks.

 

[ironchef]

You cant predict when the big winning periods will come. Otherwise hedge funds wouldnt trade through those periods of losing months. They would just stop and wait. Same applies to smaller traders. Unless you have a highly monthly win rate you never know when those winning periods will come, you could be waiting a long time. Lumpy trading profits are not predictable like other seasonal businesses, like retail shops, where large profits are almost guaranteed to come every Xmas.

You just need to trade statistically significant number of trades to get yourself a higher success #, like VC.

 

[ironchef]

Of course you don't know when your strategy is going to make or lose money. You're almost asking the right question. It's not about the win rate but rather about the positive expectation of the strategy. If your strategy goes into a lengthy drawdown or even into a flat period, you need to know that it still has positive expectation to be able to rely on it.

Given a certainty that your strategy still works, you can make allowances for drawdowns or flat periods (e.g. a Sharpe 2 strategy can have a 6 month drawdown or a flat period, but far less likely to have a losing year). For example, imagine that you found a recurrent arbitrage that, on average, takes 1-2 months to collapse but in the worse case scenario will have to held to expiration of the securities.

If I am hunting black swans and my method has positive expectancy, I just have to trade more to have a higher chance of catching the swan. Same logic in venture capital investing. One Google pays for 10-100 failures.

 

[ironchef]

Make the following simulation in Excel:

• Account: $50,000.
• Margin ES per contract: $5,000.
• Net profit per trading day: 1 points ES (per contract).
• Still deduct the commission from the 1 point profit.
• Trading period: 12 months.
• Take end of each month $5,000 from your account for living expenses.
• Reinvest the remaining money.

Questions:

• Is this possible?
• Will you are account still grow?
• How much money will there be in your account after 12 months?

Let us know your answer and I will show you mine.

You can net 1 point ES every day. I can't do that. So, you win.

 

[Same Lazy Element]

Can you name any examples?

A super-obvious example is mis-priced corporate actions like subscription rights or stubs. Usually, these are not big enough to get involved for bigger players and yet you can make pretty reasonable returns.

 

[wrbtrader]

Can you name any examples?

I am not challenging your point, just want some help finding them.

Thanks.

What usually happens here at ET when examples are given...

You willing to take that chance ?

wrbtrader

 

[ironchef]

What usually happens here at ET when examples are given...

You willing to take that chance ?

wrbtrader

Looks like fun.