Is it realistic to design a 100% rule based system that will make you money every month?

D

Dmitry8

Hi guys,

Several years ago I was caught up in this "trading for a living is easy" nonsense. Long story short, being young and naive I just did not understand the fact that this "anyone can trade for a living" BS is too good to be true.

It took me years of trial and error to realize just how BS it is. Maybe I am a very stubborn person. Most of the time I was backtesting and forward-testing certain principles, but I have also traded live for about 8 months based on a so-called discretionary approach. I lost money, but not too much.

After trading live, I continued trying to find and filter through bits and pieces of information on trading. I was backtesting and forward-testing strategies/principles again, this time 100% rule based ones. I managed to get significant P/L in some of my tests, but it was not consistent over time. In summer 2023, my inner voice was already telling me on a daily basis that it is time to stop, and I did.

Also, just before I stopped, I came across a relatively simple 100% rule based BREAKOUT system that someone designed for Forex markets. The guy showed a backtest of the BREAKOUT system and it had a significant P/L, BUT there was a major problem with it. It would make money for long periods of time relatively consistently but would then become a BREAK-EVEN system for over a year (i.e. neither making nor losing significant money during that time, ignoring trading costs). This was a Forex system, and this person stated that the reason why this BREAKOUT system would not make money for such a long period of time is because there was a "volatility crunch", where there was a sharp non-steady drop in Forex market volatility that lasted for a long period of time. This sudden drop in volatility was around year 2013/2014 and affected all major currency pairs.

So, based on everything I did over years and what this guy presented, I made a solid conclusion that the concept of "trading for a living", where you are making money every month, either a) does not exist or b) exists but not easy to achieve. The reason I am still not 100% convinced that it does not exist is because I am thinking you can have a system where you trade more than 1 strategy, over more than 1 asset classes, using short timeframes. Mathematically, this should shorten the periods of time where you are not making money. But the question is how short can these periods of time become... I understand that IF it is possible to achieve consistent profitability (where you are making money every single month but not necessarily every week for example) you surely need a lot of knowledge in mathematics/statistics and programming at the very least, as well as fundamentals, depending on the asset class.

Anyway, the question is in the title. Is it realistic? Has anyone here achieved this and what did it take you in terms of time and knowledge?

Going back to trading after not achieving anything in it in such a long time would probably be self-destruction. But I am not planning it, unless someone convinces me with clear logical arguments that it is worth doing.

I would really appreciate some responses.

P.S. To those who are new to trading and thinking that it can be easily done for a living, all I will say is - there are LOADS of bad people in the world who are cowardish enough to harm other people's lives for financial gain, while operating within the law.
 
Dmitry8 said:
So, based on everything I did over years and what this guy presented, I made a solid conclusion that the concept of "trading for a living", where you are making money every month, either a) does not exist or b) exists but not easy to achieve. The reason I am still not 100% convinced that it does not exist is because I am thinking you can have a system where you trade more than 1 strategy, over more than 1 asset classes, using short timeframes.
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Why haven't you been able to make money every month?
 
Dmitry8 said:
Going back to trading after not achieving anything in it in such a long time would probably be self-destruction. But I am not planning it, unless someone convinces me with clear logical arguments that it is worth doing.
More...
It ain't worth it. Go back to your 9-to-5 and don't look back. At the very least, you'll retire with your savings and what little you made from your 401(k).
 
Yes, it's possible. This thing is like code breaking which is why it is hard. Most people ignore the basic market auction and go straight to the chart. Maybe you can start questioning how market auction represented in chart. From high liquidity to low liquidity. Only then you can design a trading system. Question yourself when to take action and how, what is reasonable stop loss and take profit, how to trail, etc. Then journal it and look at the stats. Do it repeatedly and you will figure out.

Knowing what doesn't work @ sometimes doesn't work is also a knowledge.

Don't expect day trading methodology work on swing trading. Forex and futures are harder than stock trading. Maybe you can look at miverni and qullamagie for position stock trading.
 
@Dmitry8 , in a nutshell, this is unfortunately not possible.

I've had the privilege of chatting (on Facebook, we never met in real life) with a real market wizard, Tom Basso. He's a chemical engineer by training, had his start in 1980 and suffered a drawdown period from 18 months !

That is, it took 18 months before his equity curve hit a new high - and he has averaged around 18% per year, vastly outperforming the S&P 500 (most professional money managers FAIL to beat the S&P 500 over long time frames) over decades. Another words, he's a star investor.

All markets tradeable (indices, agricultures, "you name it") for us investors and / or traders are becoming increasingly efficient, to make money every month would require a very inefficient market that is easily forecastable. Those markets don't exist anymore and very likely never will in the future.

If you, Dmitry8, find the time, a great interview with TB :
 
Making a profit every month is an unnecessary burden on a strategy. But that's the only problem with the ambition of trading for a living.

Except if you also count withdrawing your profits rather than compounding your account.
 
Dmitry8 said:
Hi guys,

Several years ago I was caught up in this "trading for a living is easy" nonsense. Long story short, being young and naive I just did not understand the fact that this "anyone can trade for a living" BS is too good to be true.

It took me years of trial and error to realize just how BS it is. Maybe I am a very stubborn person. Most of the time I was backtesting and forward-testing certain principles, but I have also traded live for about 8 months based on a so-called discretionary approach. I lost money, but not too much.

After trading live, I continued trying to find and filter through bits and pieces of information on trading. I was backtesting and forward-testing strategies/principles again, this time 100% rule based ones. I managed to get significant P/L in some of my tests, but it was not consistent over time. In summer 2023, my inner voice was already telling me on a daily basis that it is time to stop, and I did.

Also, just before I stopped, I came across a relatively simple 100% rule based BREAKOUT system that someone designed for Forex markets. The guy showed a backtest of the BREAKOUT system and it had a significant P/L, BUT there was a major problem with it. It would make money for long periods of time relatively consistently but would then become a BREAK-EVEN system for over a year (i.e. neither making nor losing significant money during that time, ignoring trading costs). This was a Forex system, and this person stated that the reason why this BREAKOUT system would not make money for such a long period of time is because there was a "volatility crunch", where there was a sharp non-steady drop in Forex market volatility that lasted for a long period of time. This sudden drop in volatility was around year 2013/2014 and affected all major currency pairs.

So, based on everything I did over years and what this guy presented, I made a solid conclusion that the concept of "trading for a living", where you are making money every month, either a) does not exist or b) exists but not easy to achieve. The reason I am still not 100% convinced that it does not exist is because I am thinking you can have a system where you trade more than 1 strategy, over more than 1 asset classes, using short timeframes. Mathematically, this should shorten the periods of time where you are not making money. But the question is how short can these periods of time become... I understand that IF it is possible to achieve consistent profitability (where you are making money every single month but not necessarily every week for example) you surely need a lot of knowledge in mathematics/statistics and programming at the very least, as well as fundamentals, depending on the asset class.

Anyway, the question is in the title. Is it realistic? Has anyone here achieved this and what did it take you in terms of time and knowledge?

Going back to trading after not achieving anything in it in such a long time would probably be self-destruction. But I am not planning it, unless someone convinces me with clear logical arguments that it is worth doing.

I would really appreciate some responses.

P.S. To those who are new to trading and thinking that it can be easily done for a living, all I will say is - there are LOADS of bad people in the world who are cowardish enough to harm other people's lives for financial gain, while operating within the law.
More...
I’m attempting to go 100% this year. I take it one day at a time. I only trade once a day, at the open. I only trade AAPL & SPY.
 
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