Too Bold, Too Cautious

Too Bold, Too Cautious

Mar. 27, 2023

Elon Musk was a month away from dismal obscurity.

Jeff Bezos was, too.

These titans of industry built their eye-popping fortunes on…luck?

Wait, worshipping Elon Musk is like worshipping a deranged roulette player who happened to guess black?

An argument can be made.

And why were they a month from ignominy?

They were bold.

If your entire fortune is based on an emergency influx of funds at the 11th hour, you probably didn’t manage risk very well.

(By the way, what was Warren Buffett’s desperate moment? There wasn’t one.)

Being outrageously bold ends badly for many. We just don’t hear those stories (except on Reddit).

It’s probably not great advice to follow.

But being scared is worse.

Being un-bold ruins millions of lives.

Along those lines, several years ago I made 100% in a year using a Forex robot called The Hornet.

I spent 2,500 hours creating it and it worked great. Then I made a similar robot using the CCI indicator. That was the Heron. Both were doing well and life was good.

And then the stupid world changed.

Specifically, my broker stopped offering Forex. And the new broker’s spreads were 10x worse than what I’d been getting. (Other brokers weren’t any better.)

And then leverage in the U.S. was reduced dramatically. (The leverage was the least impactful change, but it was a change nonetheless.)

So, when the spreads changed and the fills got worse, my testing no longer matched my real-life results.

And I gave up.

I took the scared route.

Like the Hornet, the Heron was based on a “negative” risk to reward. It had a small target with a large stop.

Because of that, it also had a high win percentage.

It was glorious. It’s wonderful to win most of the time.

It’s scary, though, to not know if the spreads will eat away too much of a tiny profit. Which makes it easy to not be bold and shelve it.

But last week, I found something interesting. I took the old Heron robot and exchanged the 15M timeframe for a Daily timeframe. Maybe that would help mitigate the spread/execution problem.

And here’s what I got:

I initially created these settings in 2020 during the pandemic. As you can see, t’s held up.

And here’s the Report using Portfolio Architect using 1 lot each time from 2003-2023 on a hypothetical $10k account:

And here are the Annual Returns:

It has a very nice win percentage of 65% and presumably wouldn’t suffer from bad spreads because the target was 130 pips while its stoploss is 160 pips.

It was un-boldness that stopped me from trading this older system.

What other fear-based decisions have cost me money?

We’ll find out in the upcoming Newsletters.

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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.