A Sharp Stick in the Eye

Mar. 2, 2022

I love everything about trading.

But I don’t love that.

Last week, the markets whipsawed hard on news that Russia had invaded Ukraine. It was a horrible event that cost many people their lives and produced no good for the world at large. Heavy sanctions were placed by Europe and the U.S. while supply chains prepared for even more stress. Oil prices were at risk as well as relations between China, Russia, and everyone else.

And this was all happening while inflation was the worst it’s been in 40 years. It was a mess. And the market fell, naturally, while fundamentally-sound systems all over the world got Short.

And then this happened:

Oh, this too:

The world is in flames. The only logical thing that could come next is a raging bull market.

It’s never fun to have a losing trade. It’s really not fun to have a losing trade that won’t make sense if you studied it for the next hundred years.

It’s like losing a tennis match when your opponent gives up, closes his eyes, and hits a screaming winner as hard as he can when you’re up match point. It stinks to lose. Losing like that, though, can make a calm man want to throw himself into oncoming traffic.

But it’s only one trade. And only one system.

It’s not like everyone in the world lost (it was a lot, though!). It’s not like every system has struggled.

Think about it. Violent whipsaws can be treacherous on an hour-to-hour basis. But they aren’t as big a deal on long-term systems. Do you think Buffett gave one moment’s thought to the neck-breaking V-reversal last week? Most assuredly, he did not. And that’s the advantage of thinking long-term.

Here’s an example of a long-term system. I developed this one back in 2020 for the GBPJPY on the Daily chart. It has weird settings  but uses one of the most timeless strategies in the world: turtle breakouts (on the Turtle Robot). Here are the settings:

Turtle Big Target (Daily)

• Long Entry: Above high of last 10 bars
• Short Entry: Below low of last 25 bars
• Target: 500 pips
• Stop: 100 pips
• Trailing Stop: 20 bars
• Break-Even: 50 pips (plus a 10-pip buffer above the entry)

How has it done since December 1st, 2021? Using 1 lot each time:

Not bad. Over $3k hypothetical profit with small drawdown. Here’s the Equity Curve during this wildness:

Yawn. No problem.

(Just in case you were wondering, here’s the Equity Curve for this strategy going back to 2004. It’s done pretty well for a while.)

Would a person trading this strategy be writing their sour grapes in a Newsletter?

Absolutely not.

Longer-term perspectives don’t care about short-term volatility.

In our next Newsletter, we’ll look at another long-term strategy.

Talk to you soon.

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Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.