April had been a disaster for the TF strategy, as a combination of unusual market conditions, poor decisions and bad luck led to a cascading series of losses that wiped out the profits made since August 2019.
On hindsight, I had been too eager to maintain the prior performance of the strategy, and mistakenly assumed that market conditions had gone back to normal following the volatility explosion in March.
After carrying out a full review of the TF strategy however, I’ve determined that it’s still viable. So instead of setting it aside, I’ll keep trading with it and will be monitoring the ongoing results.
Some thoughts
A “downside” of openly sharing my short-term trading results is the self-imposed pressure to look good in front of my blog readers.
I underestimated this effect as, after reflecting on what happened, I realized I’d been preoccupied with “looking like a winner” instead of just doing the work and letting the results be. The change in mindset is subtle, but the consequences are significant.
Ironically, the heightened desire to win led to the exact opposite result.
I am inclined to keep sharing my results however, as I think it can be helpful to others, and that not enough traders are doing it. If you find these trading reports to be helpful, please let me know in the comments section so I know I’m not just deluding myself.
For now, I’m taking it as a personal challenge to overcome the mental obstacle of “performing” in public without letting it get to my head.
Algorithmic Forex Trading
Meanwhile, I’m starting to appreciate the benefits of algorithmic trading.
I don’t know if it’s feasible for a retail Forex trader to operate almost entirely with algos, but I believe it’s a premise worth exploring because:
- Algo trading research helps me identify market tendencies that I otherwise would not have noticed
- Algos can monitor the market around the clock so I don’t have to personally check in with the market multiple times a day (this is a HUGE benefit to me)
- Trading with algorithms removes emotions from the equation, which makes it much easier to make objective decisions
I’ve so far managed to code up a handful of trading robots and run a few dozen backtests before coming across this gem:
For a 100% automated trading robot, this result is quite impressive. The question is, will it continue to perform under real-time conditions? We’ll see.
I am now running this robot on a demo account and if the results are similar to the backtest the next step is to move it to a live account.
The goal is to have a dozen or so robots all running at the same time.
My role as a “trader” would then be to monitor and adjust my capital allocation across a portfolio of robots, rather than trading manually.
As mentioned earlier, I don’t know if this is a feasible goal but I’m going to find out.
If you have any feedback, questions or suggestions, let me know in the comments below.
Good for you for sharing the losses as well as the (past) wins.
It’s easy to blame the market for when things go pear-shaped. Instead what it shows is that the market’s dynamics are in a constant state of flux of varying periods.
So whenever we develop a strategy based on some period of time, whether that be manual or algo, we are “curve-fitting”. And yes that curve-fitted strategy may last for a while longer, but at some point it will break down as market dynamics slip into a different rhythm.
Trouble is that we don’t know how long that change will last and/or whether it will return to what it used to be. And so we get caught with the DD dilemma; when do I pull the plug and start afresh?
With a rather small PF of only 1.46, I predict that your algo strategy will soon fail. You used %risk lot sizing and hence the overall result is skewed. Don’t know what size you started with but looks like it ended up quite large; probably too large to trade at in real trading.
If you are going to run a dozen algos, do check for not being over-correlated.
Hi Andrew, yes I used %risk lot sizing. Do you recommend something else?
Always use fixed lot size when developing an algo strategy.
Reason is that you want to find entry and exit conditions that maximise profits using same lot size. When using %risk lot sizing you skew the strategy selection/optimisation towards the conditions when profits are high, but high only because the lot size in that period was high because it had a good run – favourable market conditions. Note how extraordinarily high your best profitable trade was compared to the average.
And if we provide a signal based on %risk lot size, and the follower begins to follow that signal when lot size is high (not having accumulated any profits to serve as a buffer), well we know how that will turn out…
And of course always much safer to trade smallish lot sizes and regularly withdraw profits; rather than getting carried away and be trading large lot sizes which may not be so quickly filled and may hence no longer work so well. And then losing all when the large lot size trade is hit by a black swan/large weekend gap wiping out most of the gains.
Hi Andrew, thanks for clarifying. I understand what you mean now. Cheers.
Thanks for your honesty Chris. It’s not such a common thing.
You’re most welcome, James. I am definitely no stranger to trading losses and failures.
Hi Chris ,
Thanks again for speaking so clearly and honestly.
It is most ironic that you have probably made so many of us feel better by admitting your struggle as many or most perhaps, are rowing the same boat .
I appreciate all you input and admire your drive and introspection .
Regards Harvey O
Thanks for the comment Harvey, we are all walking along the same path after all.
showing a track record is good. if you cant handle loses then get out,its part of the game.
Hi Chris,
This is a valuable lesson.Thanks for sharing. I see after the fact that the chart shows the end of November 2019 the market has become unpredictable at times.Possibly something from there on will point to the end where with the mind set to make something good for your constituents the blow out occurs. Maybe the Vix Index can help with herds mindset? I’m a hack trader at this point with a hope for your success. Thanks Jeffe
Hi Jeffe, appreciate the suggestion and the well wishes, thank you.