You see, gono, I'm part of "small minority" in general, but maybe even part of a "majority" here, in this section of Elite Trader forums.
Edbar says "the 10%/month strategy". That's exactly what I have. At a point, after 5 years of tests on TradeStation, I realized that I couldn't build a 100% a month strategy which wasn't over-optimised, so I started building a lot of 10%-a-month strategies.
This strategy of adding to losers sounds very reasonable to me. I traded a bit on the paper trading account of TWS, where they give you 1 million, and I realized that if you add to losing positions, doubling up every once in a while (e.g.: once every 3 hours), you can't lose in the span of 24 hours. There is no market that goes up/down for 24 straight hours.
With 1 million you will have enough margin for 1+2+4...255 futures. You randomly open ANY position of 1 contract in ANY market, and then:
- After 3 hours: if it's winning, you close it and take the money. If it's losing, you add 2 contracts (but 1 would be enough actually, because this is not like the roulette where you've lost your last bet money for good).
- After 6 hours: if the overall position of 3 contracts is winning, you close it. If it's losing, you add 4 more contracts. And so on.
It seems impossible to lose. Do you agree, Edbar? Then if you don't pick your initial position randomly, but pick a LONG trade on an oversold market (better if you're in a "trading range" period and not a "trend" period), then you often won't even have to double up and will be making money after the first 3 hours. But I think the same strategy could be played without doubling up (just adding 1 contract every 3 hours) and it would still make money but be safer.
So what does this mean? It means that if you have 1 million dollars you can make money every day. But I don't have a million dollars and even this strategy is too hard for me to test (doubling up, etc.). For me right now it would even be hard to automate it.
Jnbadger says "Amen Bro. Automation" and not to assume things will go as they have. Yeah, I understand and I agree.
Concerning the power of automation, I could use the example above to show how that strategy could go wrong if implemented by a human rather than being automated.
I already tried implementing it actually, when I got crazy this past year. I got crazy because I overleveraged, and yes I had +100% months, but then also had -50% months, during which I resumed my discretionary trading (trying to make up for losses) and lost everything because of it. What and why? I mentioned the 3 hours to wait. Well, I didn't even wait the 3 hours. I waited something like 15 minutes, market went against me, added 1 contract, went against me for another hour, added another contract, went against me, had no more margin, still went against me, lost everything. That happened because, being human, each time I thought "this is THE bottom" and didn't think "one contract every 3 hours" or "wait, I could be wrong".
But actually, knowing the trend cycles, I would say a better system would be to apply everything like above (the automated strategy not the reckless discretionary implementation of it), but wait 6 hours instead of 3. That way you can really double up (IF you have 1 million, and STILL I didn't test it). I would say the best market to be used is a ranging market like the EUR. Not good on OIL, BOND futures, because they tend to go straight up and down much more than the EUR.
And yes, back to what jnbadger was saying, I, too, was "inundated with stats which say it is impossible to succeed as a trader", but - even worse than that - I was inundated by relatives and friends, non-traders, telling me "if it was possible everyone would do it". I always thought "how can it not be possible? it seems so easy". Then it wasn't as easy, but now I am saying "how can it be possible?" and even "how can it be legal?". How long will it last? I am feeling a constant anxiety, too, besides the curiosity.
How do you react to making money without working? Do you feel guilty? (I mean, of course you worked non-stop for years on your systems, but now you're making money without working). Other thoughts or psychological aspects you wish to share?
P.S.:
I just read now what Topsurfi wrote, so I am editing my post. Sometimes I think that programmers (he mentions using C+) have more tools, but also more distractions. I taught myself some VBA, and I was forced to keep things very simple and basic. But programmers are going to be so ambitious with the automated platform they're creating, that may lose focus of the trading ideas, busy as they are in programming the fastest and most efficient platform. Maybe they try to make everything faster, whereas the key is be slow. I was forced to come up with slow and infrequent strategies, by commissions, platform (excel), poor programming skills, distance from the exchange. Also, yes, as you say, I am competing with banks and dumb people. Put the banks, too, with the dumb people. Because the fact is the CEO may be ignorant about trading, and may hire bright Harvard graduates who know nothing about trading, either.
