SCOTT WELSH TRADING BLOG

Interview with the Dragonfly

Interview with the Dragonfly

Jan. 20, 2021

We have an exciting Newsletter for you today.

In this issue, we have the distinct pleasure of interviewing the Dragonfly robot. This robot had a stellar 2020. It finished in 2nd place in the World Cup Trading Championships (pending audit). These trading championships have been held for 37 years and its top 3 finishers have included big names like famous trader Larry Williams and his daughter, actress Michelle Williams. Now let’s turn it over to our host…

Scott Welsh (SW): Hello, everyone! We have a special surprise for you this week. Today we’re interviewing a top trader who destroyed the market’s returns last year and was a top finisher in a prestigious trading contest. It is my pleasure to introduce to you The Dragonfly robot!

Dragonfly (DF): Thank you, sir.

Scott Welsh (SW): No need to call me “sir”.

DF: Actually, sir, you programmed me to never use your first name or look you directly in the eyes.

SW: Haha, folks, not true. I would never…

DF: You said if I did those things you would melt me down, drop me from a mountain, and then drop me from a mountain again.

SW: Ahem, well. Moving on. It’s my understanding you entered a trading contest last year.

DF: Yes, sir. I executed my orders for a 12-month period and the results were recorded by a third party.

SW: Thrilling recap. And how did you do?

DF: According to results posted on the internet, a portfolio of my algorithms finished in 2nd place in the Forex division pending audit. As you know, trading futures and forex involves significant risk of loss and is not suitable for everyone. Past performance is not necessarily indicative of future results.

SW: Whoa, boring again. And what was your return for the year?

DF: According to my calculations, my trades achieved a hypothetical 71.1% return for the year 2020. Trading futures and forex involves significant risk of loss and is not suitable for everyone. Past performance is not necessarily indicative of future results.

SW: We got it! The standings I see say you returned 78.7% for the year. Why are you a liar?

DF: I did not give misleading information, Sir. You turned me off for the last ten days of December. That is why the results are different.

SW: Well, someone had to fix your mess. You were up 99% on December 2nd and then you started losing everything.

DF: It is perfectly common for me to lose trades in non-trending markets.

SW: Well, I can’t bail you out every time you start losing like a novice. You say you don’t do well in non-trending markets. Do you do anything well?

DF: I am designed to capture large trends in the Forex market.

SW: And how do you do that?

DF: You have prohibited me from giving out exact details of my system.

SW: Don’t put your selfishness on me. At least tell us something.

DF: I look to enter trades when price is making new highs and the trend appears to be strong. I have a large stoploss. I move my stop to break-even when a significant portion of profit is achieved. I trade Long and Short.

SW: Care to tell us what your targets and stops are then?

DF: You have prohibited me from giving out exact details of my system.

SW: Don’t talk back to me! Let me ask you this: are your “big” targets always the same for Long trades and Short trades?

DF: No, sir, they are not. Long trades and Short trades have differently-sized targets.

SW: Ha, got you! Everyone knows that you have to keep the targets the same for Long and Short trades, moron. Otherwise, you’re over-optimizing.

DF: My testing shows that the small portfolio I utilized hypothetically has no losing years since 2003. In addition, that same portfolio showed a hypothetical 71.1% return in 2020.

SW: You already said that, you arrogant little [censored]. We have some questions from our readers. Would it be too much trouble to try to do something helpful?

DF: I am happy to comply, sir.

SW: Super. Here’s our first question. “Hey, robot, why are you such a stupid turd face?” Hahahaha, looks like you’ve made a few enemies out there!

DF: Sir, that question came from your email address.

SW: Lies! Here’s another, “How did you get your exact targets?” And don’t even think about saying you’re prohibited from answering.

DF: Well, sir, without revealing exact details, I can say that my target was derived from a range of possibilities. There are many profit target levels that produce profit over the long-term. Profit is possible with differing target levels, as long as those levels were large enough (over 50 pips, for example). The exact nature of my targets is irrelevant. The idea of having a large profit target is the most important principle.

SW: Thanks for putting everyone to sleep. Next question, “How much of your trading is manual?” Because your precious profit targets are so large, should a trader manually override your dumb rules and take a trade out that’s been in the market a long time?

DF: To fully achieve the statistical performance of my system, all trades must be allowed to finish without human interference. However, sir, there were a number of occasions where you jumped in and took profit before it had reached its designed level.

SW: You tattletaling little [censored]! I didn’t do that very many times and I was forced to because you weren’t doing your job. I had no choice.

DF: The system would have have produced adequate performance without your interference. According to my calculations, my performance would have hypothetically finished in 2nd place had you done nothing at all.

SW: But you would have finished behind ME! Here’s the real question. The most important question of all. Sure, you produced a return that was more than 4x as big as the roaring bull market in equities, but how big was your risk? Nobody cares how much you make if you’re using Martingale betting or risking it all on every trade. Time to confess, Reckless Randy.

DF: That is not my name. I did not use Martingale betting. I used a fixed trade size during the entire year and my overall hypothetical drawdown was 28.2%. I can show you:

SW: Nobody is impressed with your stupid charts. Well, that’s all the time we have for today. Thank you for coming, robot. I think we all can agree you were a huge disappointment.

DF: Sir, I…

SW: Thanks, everyone. If you have any questions or insults for the robot, feel free to send them along.

We’ll be back on Friday with more systems.

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.