Friday, 21 June 2013

The Ever Evolving Trader

The road to consistent profitability is to find something that works and then do it over and over again.

This doesn't mean that you do EXACTLY the same thing for ever as markets are evolving, particularly as technology and the economic climate changes.

To meet these changes, we must subtly tweek our successful methodology.

How do we know that its necessary to tweek and how do we make the tweeks?

We know that it's necessary because we keep detailed records of our trades in either a spreadsheet or in a program like MSA. By knowing the profile of our trading, we can see statistical changes taking place. We then go back to our charts and look at the trades and see where the issue is.

Once we have an idea of the changes taking place, we go back to our trading app and rerun the algo that we use to test our methodology - assuming we have been clever enough to create a model of our trading.

Creating a trading module - an algorithmic represntation of how we trade our pictures/ setups is cnow necessay, even if we are discretionary traders. We need to test the effectiveness of our entries and exits. If the math doesn't work we can't be CP.

For me, alogorithmic testing is the starting point of a new idea. Without this, it can be just guessing. Looking at the number of traders who don't use algos for working out their methodology gives you an idea of why most traders lose.

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