A Tantalizing Dilemma

A Tantalizing Dilemma

July 12, 2017

In trading, there are real dilemmas and there are weird dilemmas.

A real dilemma is not having a trading system that’s consistently profitable or not having enough money to trade a system that is profitable.

Either one of those is a problem.

But if we have a consistent system AND money to trade it, we don’t have any obstacles, right?

Wrong.

Sometimes you can seemingly have everything you need and still have a problem.

Here’s an example.

I’ve been watching my USDCHF daytrading Hornet robot for several years now (since early 2014). It’s easily the best robot I’ve ever seen with my own eyes.

Well, that depends on how we define “best.”

If best equals consistent, then the USDCHF Hornet is definitely the best. It has no losing years from 2004-now, it has an 81% win rate, and it’s had only one losing month since November, 2014 (and that was a mild loser). One losing month in almost three years!

So why not throw everything into this robot and watch the money roll in? I’d love to!

Except it doesn’t make enough money.

The USDCHF Hornet robot only trades on Fridays. On one hand, that’s very cool. How great would it be to trade-for-a-living and only trade one day a week?

On the other hand, because it trades so infrequently, it doesn’t take enough trades to make a ton of money.

If we jacked up the trade size to the maximum allowed by evil United States Forex regulators, the most hypothetical money we could make on a hypothetical account from 2003 to now is $20,599. That’s an average of $1,471 per year on a $10k account.

That’s decent. That would beat any Index fund out there. But that’s only about $1,200 a month if we traded a $100k account. That’s not enough to retire on.

So we’re back to our weird dilemma. We have a system that’s worked very well for several years. And we have the money to trade it.

But it’s not really tradeable because it doesn’t make enough money. That’s a weird way to be stuck.

You might be thinking, “Why not trade it every day instead of just Friday?” Good point!

The problem is that it doesn’t work as well if we traded it full time. Profit rises from $20,599 to $29,599 but max drawdown doubles. In other words, trading it more often adds way more drawdown than profit.

Plus, trading it more often gives us four losing years instead of none. More drawdown plus more losing years? No, thanks.

We could trade it as a part of a bigger portfolio. True, but we’d have to lower the trade size to make it fit with others, which means we make even less.

Or we could find a broker that gives us big leverage. That would be great! But I’m not leaving the U.S. anytime soon, so that isn’t an option for me.

Like I said, the USDCHF robot offers an odd conundrum. It provides the means to trading-for-a-living but not the ends.

I’d love to hear how you would solve this problem with your trading. The answer to this dilemma is out there somewhere.

For now, I’ll just keep watching it to see if it stays consistent. And I’ll keep brainstorming..