07 Apr Desperately Seeking Short-Term
Desperately Seeking Short-Term
Apr. 4, 2021
We’re interesting, I’ll give us that.
We want to lose weight but we really want to eat cinnamon rolls.
We want to write a book but we really like wasting time on our sadness machines (aka smartphones).
We want to reach out to friends but we really want to watch YouTube.
The smartest people in the world are trying to keep in fixated on instant gratification.
And they’re doing a great job.
Why do we want to be traders?
Because of the allure of making money and not having a boss (or any obligations whatsoever).
Even better, if we’re automated traders, we could potentially make a lot of money, never have a boss, and never have to look at a screen.
It’s a good dream.
And it’s possible…if we have a long-term view.
Do you remember the study done by a big broker on who wanted to know who their best traders were?
[It’s important to know that drawdown was not considered for this analysis.]
The broker’s best traders –the ones the made, by far, the most money– were dead people.
Think about that: the best traders were the ones who just let their trades go for decades.
They weren’t the people buying AMC seventeen times during a parabolic move.
They weren’t the people gambling on stocks on their apps.
They weren’t the people who caught one lucky move for a month and then gave it all back.
They were the traders who took a very long-term view.
Great. That’s a nice story.
What are we supposed to do about it?
What if we’re anxious? What if we’re under pressure from our families to make money? What if we need the money and can’t wait thirty years for things to play out?
Or what if we just get antsy waiting for a three-week trade to play out?
Is there possibly a way to make money on a shorter time horizon?
The answer is yes and no.
First, we absolutely have to fight the short-term mindset with everything we’ve got. That mindset ruins almost everything.
But we also have to do what we can do.
A new five-miles-a-day running program will never work if we can’t even make a half-mile.
We have to have a program that we can actually do. It’s okay to start with just running one block a day.
Yes, we won’t become the #1 runner in the world doing a block a day, but, if we do it every day, we’ll be better off than 98% of the people on earth who don’t do anything.
Doing ANYTHING regularly is exponentially better than doing nothing and only a little worse than doing the absolute max.
So, if our brains need a short-term system (at least for now) then we need to investigate a short-term system.
If it works.
Obviously, we can’t trade something that doesn’t work.
Here’s a system that trades on a 4-hour chart and has a timed exit of 5 bars.
That means that all trades are over within 20 hours. And that seems like a reasonable time to wait for a trade, even for the most anxious of traders.
Here’s the Performance from 2003-2021: https://www.screencast.com/t/qVD4n9ApGCJE
It made $143,000 with a max drawdown of about $17,000.
It’s not quite as good as the longer-term systems we’ve looked at, at least at first glance, but it’s pretty good.
And it’s short-term.
Which might solve a big problem.
In our next Newsletter, we’ll look at the details of this system.
Talk to you soon.
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