Tuesday, 25 February 2014

What It Takes to Be CP Now

I've been writing this blog since 2009 and since then have worked with hundreds of traders. Many have succeeded in achieving CP (Consistent Profitability) but, sadly, many have not.

At first, I took the fact that a trader failed very personally. But over time, a pattern of failure has emerged that I could not mitigate in some people, no matter what I said.

The reason that traders fail is probably due to believing:
  • I MUST make money today to pay the bills
  • I'll trade too many contracts for my available risk capital
  • I'll use tight stops so I keep my losses small
  • I don't need a very detailed trading plan that covers every aspect of my entries and exits, so detailed that another trader could replicate my trades
  • I don't need to stick to my trading plan. I can make changes on the fly. I think its easy to make critical decisions under extreme financial pressure and lack of time.
  • I don't need to back test.
  • I don't believe that the harder I work the luckier I get
After a lot of thought I've come to the conclusion that there is a solution. Everyone deserves to become CP if they put in the effort. So what's the solution? How can you almost know that you can become CP?

There is one way. Flobots! And not turning them off.

With a Flobot that a trader creates to suit his own requirements he (when I say "he" it also means "she" because women are very good at creating algos), a person can mitigate the ingredients of CP failure:
  • my flobot has a positive expectancy so I believe I will be CP.
  • my flobots provide statistics of historical trading over more than 10 years so I have a good handle on possible and probable drawdowns
  • my flobots have data mined to discover where to put stops so that they are out of the way of positive market activity
  • my flobots are built using a trading plan that I have devised based on real world trading. Anyone can replicate my trades by just turning my flobot on.
  • my flobots are like Henry Ford's production line. Each flobot just does the same thing, hour after hour, day after day, week after week.
  • my flobot does not change until I do a re-optimization based upon my trading plan and testing over more than 10 years of data. The trading logic and base inputs do not change.
  • I have back tested my flobots "ad infinitem" until I know and understand how they perform.
  • I spend 12 hours a day testing and developing and testing a flobot until it is ready.
Flobots (algos) are not difficult to create. You can have a lot of programming knowledge or no programming knowledge. My platforms of choice, in no particular order are:
  • NinjaTrader with the Bloodhound 3rd party logic add-in
  • MultiCharts using Easylanguage (and it is)
  • TradeStation using Easylanguage
I'm on the move for the next 6 weeks or so. My Flobots will be trading away on my servers while I visit my kids in London, Dubai and Australia. All I have to check is that they stay on and trading.

I will be writing more on trading algorithms in this blog as I believe that there is a dearth of useful information available on how to implement this style of trading. I found that having Flo work while I play takes away that feeling of lost opportunity when I spend time away from my workstation.

I strongly believe that both a MarketProfile context based discretionary trading style and a portfolio of algorithmic strategies are both the basis of CP.  However, letting Flo do the heavy lifting is probably a shorter route to CP.


  1. Interesting to get your take on CP based on the discretionary vs. algo. After taking your course a few years back, and going the discretionary route, I do agree that it probably is best to diversify methods and add an algo strategy to cover more bases.
    Aloha from Kona

    1. Good to hear from you.

      We all evolve as traders as both our skill level and capital increases. Its a matter of earning the most from the least risk while trying to work less, at least for me.

  2. You're confident letting the flo's run while you're away? Do the cloud servers provide you enough assurances/backups that they won't drop out in the middle of the night eg trading US when you're in oz
    I wouldn't want to wake up the next morning with an unexpected position

    1. Hi Ross

      technology has this covered. I have alerts if the VPS goes down (0nly happened oncein 4years) and I have alerts if the algos lose connectivity with the broker. I just need the alarm on my incoming emails on my mobile to be loud enough or the vibration to wake me. Tests worked so far although I'm quite cranky if I get a false positive which can happen.