SCOTT WELSH TRADING BLOG

Good for Them, Bad for Us

Good for Them, Bad for Us

Nov. 25, 2020

There’s nothing wrong with success stories.

Mostly.

Studies show that thinking about success indirectly programs us for success. Have you ever watched a great tennis match and then gone out and played tennis? You definitely play better after watching Federer, for example. It’s science.

But if the success is unattainable for normal people (or not real), it doesn’t do us any good.

Ever read a trading book about a successful trader that used a method we’d never be able to do?

Great, it’s cool you made 58% last year. But how am I supposed to trade new IPOs when I don’t have access to the shares?

Great, I’m glad you have 12 winning months in a row. How I am I supposed to replicate a $2 million high-frequency computer set-up that’s hardwired two feet from the exchange?

If it’s not accessible –if it’s not repeatable — it’s worthless. It doesn’t help us, not…one…bit.

Which brings us to the World Cup Trading Contest I entered this year.

Here are the latest standings (as of the end of last week):

I’m in 5th place. Hooray.

But that’s not what’s important. What’s important is that my results are from an automated strategy.

An automated strategy that needs no human intervention. All I have to do is turn it on and let it go.

It’s repeatable for me and anyone else.

Now, I don’t know what my competitors are doing. Maybe they all use automated strategies, too. If so, that’s awesome.

But, most likely, they’re using discretionary methods which are completely unusable for us.

Sometimes traders show us discretionary methods that are completely useless for regular people. Their methods are based on individual intuition that can’t be explained to someone not in their shoes.

Or they have results that can’t be repeated because their results are reported after the fact or were achieved by last-second “gut feeling” decisions. We can’t follow along if they’re entering and exiting based on their gut.

Automated systems, though, can be repeated. ANY completely automated system can be repeated.

A system that’s understandable, has rules that are known beforehand, and is strictly followed is something that can help people.

Having said all that, have I let my robots trade this year completely on their own?

No. I’ve meddled. I’ve turned them off during some weekends during Covid and during the election. Not many weekends, but some. And I’ve exited a few trades early that were in profit because they’d been in a while and it seemed like they had stalled out.

Why would I do that? Because I’m an idiot.

Did my few interventions help? No.

If I had let the robots run untouched all year, they would have returned 90.5%.

With my super-smart overrides, the account has returned 89.1% (as of this writing).

While no one could have easily followed along with my handful of discretionary decisions, anyone could have just left the robot alone and made more money.

In short, anyone could have achieved the same or better results than me.

That matters.

And that’s one of the main reasons I entered the Contest in the first place.

I wanted to see how a perfectly repeatable system could do compared to other discretionary methods.

With one month to go, so far so good.

 

Talk 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.