Unhappy Holidays?

Dec. 28, 2022

Back in 2020, I was feeling great heading into the holidays.

Right around Thanksgiving, my Dragonfly robot was up about 100% for the year and I was near the top of the World Real-Money Trading Contest standings.

Everything was looking magnificent.

The holidays thought that was funny.

Starting with Thanksgiving and then carrying over through December, my robot did nothing but lose.

Lose, lose, lose.

As December wound down, my account had fallen down to +74%, but I was still in 2nd place.

So I cried, “Uncle.”

I turned off the robot and called it a year.

Which turned out to be a good decision because there were one or two more losers coming at the end of December.

Since then, I have a very angry feeling toward the end of November and December.

And guess what? For the Dragonfly robot, December has been lousy once again.

Is it a pattern? Are holidays a terrible time to trade the Dragonfly? My first answer is YES.

But let’s take a deep breath and check the data.

I just ran a test over the past five years (from 1/1/18 to 12/27/22) on the new Dragonfly Scaleout robot. My fancy Portfolio Architect software can then tell me if my anger is validated or just another stupid human bias.

Here’s the Portfolio Architect Monthly Breakdown for the past 5 years on the GJPY only trading 1 lot each time:

Aha, I was right! Look at that: November has been a negative piece of trash for the past half-decade. Of course, I was completely wrong about December but November confirmed my angry feelings.

Does that mean I should shut off my robot? Is seasonality (only trading certain parts of the year) a valid thing to do?

Well…

Just for fun, let’s run the past 5 years before that. Here’s the monthly report from 2014-2018:

Oops. November and December were fantastic in the previous half-decade. Following seasonality would’ve been disastrous in that period. I would have missed the great months and traded the bad ones.

And if we look at the whole 10 years?

Oops again.

Every month is positive over the past decade. Human anger would only have led a trader astray.

Believing in seasonality and acting accordingly would have been very unprofitable.

So it turns out my human brain is petty and emotional.

And I’m not turning my robots off starting in the New Year. (They’re still on now.)

In our next Newsletters, we’ll talk about what I’m doing as we head into 2023.

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.