28 Dec 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?
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?
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.
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