06 Nov Trading a Strategy Forever
Trading a Strategy Forever
Nov. 6, 2023
Subscribe to my YouTube Channel HERE.
Why do index funders love losing so much?
The question tortures me.
Why is it when the market goes down, the buy-and-holders become exultant?
When the market tanks, they can’t wait to write patronizing Newsletters (“This is just a typical Bear Market, silly child.”) and make holier-than-thou videos (“Just dollar cost average forever; it’s time in the market, not timing the market, impetuous boy.“).
And those Newsletters and videos have millions of followers and millions of views.
Why is stock market losing so virtuous?
Especially when compared to system traders.
System traders don’t excited when they lose.
They get furious.
I get many emails from traders asking for a system that makes 7% a month with less than a 1% drawdown.
Think about that.
The stock market sometimes doesn’t make 7% in a year.
With drawdowns larger than 70% (depending on the market).
And people love it!
While traders bail at the first losing streak.
So again I ask: Why?
Like everything else substantial, it comes down to trust.
People trust the stock market.
They trust it because it’s been around since the 1800s. They trust it because they see a graph of the Dow Jones from over a century ago and it seems like it only goes up:
People don’t panic when the sun goes down. They have a fair amount of data showing it will probably rise again the next morning.
And index zealots don’t panic because they also have a fair amount of data showing the market will probably rise again soon.
Traders don’t have that.
At best, they see Forex systems that show promise over the past twenty years.
(Although most systems online have much less data than that.)
Or they see Futures charts with a little more data than Forex, but still not 150 years worth.
(And who, besides an experienced farmer, understands why a Soybeans chart goes up?)
To trade a system based on the opaque interest rate policies of countries around the world or the weather conditions affecting commodities is simply not very trustworthy.
And if we don’t trust something, we bail at the very first inkling of negativity.
System traders can’t bask in the warm glow of a bullish chart dating back to 1899. They have no proof of continuing profits.
And that’s the real secret to all of this.
Warren Buffett doesn’t have $112 billion because he’s a good trader. If Buffett had cashed out at a normal retirement age of 65, he would’ve had a handful of millions and no one would’ve heard of him
Ninety percent of Buffett’s wealth has come after he turned 65.
Buffett is great not because he’s a great investor. He’s great because he’s done it for a very long time.
Buffett has complete trust that the market, and his stocks, are going to go up. And he’s traded his “system” for over 60 years.
What online trading forum has a trader using a system that’s six decades old?
Again, it all comes down to trust.
If we trust it, we can trade it forever.
If we don’t, we can’t trade it for a month.
Is there a way to marry the two?
Is there a way to trade a system and trust it enough to trade it for at least a decade?
We’ll talk about a possible solution for that in the next Newsletter.
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.