I have a system that I've been using since January. In January, I backtested it on a few different markets going back a few years, and it was extremely profitable. In 2009, it was over 100% profitable. I went all-in in January 2010.
To make a long story short (I posted on this many months ago), I traded it in January and suffered stunning losses, which basically set me up for abject failure the next several months because I lost faith in the system, so I would trade discretionarily from the system, cut my profits early because I was afraid of taking further losses , etc.
In June, I did a re-analysis of the system, including all data from 2010. Had I stuck religiously with it, I would have made about 40% YTD trading 1 contract. Instead I lost 40%.
But looking over the numbers, it appears that it is still following the same percentages of success. So after having renewed faith, October 2010 I decided to go all-in once again, with no intervention on my part, fully automated. I put in literally all my money and wrote up a trading plan, where I would trade slightly more aggressively (1 contract per $7500 instead of 1 contract per $10,000). The expected target and stoploss were roughly $150-200/contract per day (the average for 2010), and I would trade once per day. If I hit 20% loss I would quit entirely.
So, as you can imagine, in the first 4 trading days of October, I've suffered humongous losses: 1 breakeven trade and 3 full losses. To put this in perspective, on average, my system has 1 loss per week, 1 for every 5 trading days. It usually has 2 wins per week, and 2 break evens.
So to have 3 full losses in the first 4 trading days puts me in a significant hole. The last time 3 losses in a row occurred was January 2009.
As well, 2 of the losses were double the expected size, $300/contract and $400/contract. So in fact, I've suffered the equivalent of 5 trading losses. My account is down 10% in the first 4 days of trading.
My question is: What should I do?
Should I continue with the plan and keep going until I hit 20% losses, or should I scale back my trade to 1 or 2 contracts and bide my time until next month?
To make a long story short (I posted on this many months ago), I traded it in January and suffered stunning losses, which basically set me up for abject failure the next several months because I lost faith in the system, so I would trade discretionarily from the system, cut my profits early because I was afraid of taking further losses , etc.
In June, I did a re-analysis of the system, including all data from 2010. Had I stuck religiously with it, I would have made about 40% YTD trading 1 contract. Instead I lost 40%.
But looking over the numbers, it appears that it is still following the same percentages of success. So after having renewed faith, October 2010 I decided to go all-in once again, with no intervention on my part, fully automated. I put in literally all my money and wrote up a trading plan, where I would trade slightly more aggressively (1 contract per $7500 instead of 1 contract per $10,000). The expected target and stoploss were roughly $150-200/contract per day (the average for 2010), and I would trade once per day. If I hit 20% loss I would quit entirely.
So, as you can imagine, in the first 4 trading days of October, I've suffered humongous losses: 1 breakeven trade and 3 full losses. To put this in perspective, on average, my system has 1 loss per week, 1 for every 5 trading days. It usually has 2 wins per week, and 2 break evens.
So to have 3 full losses in the first 4 trading days puts me in a significant hole. The last time 3 losses in a row occurred was January 2009.
As well, 2 of the losses were double the expected size, $300/contract and $400/contract. So in fact, I've suffered the equivalent of 5 trading losses. My account is down 10% in the first 4 days of trading.
My question is: What should I do?
Should I continue with the plan and keep going until I hit 20% losses, or should I scale back my trade to 1 or 2 contracts and bide my time until next month?
