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
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.
- NinjaTrader with the Bloodhound 3rd party logic add-in
- MultiCharts using Easylanguage (and it is)
- TradeStation using Easylanguage
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.