Monday, 26 November 2018

Lesson I learned a Long Time Ago

There's a huge advantage to day trading, and even more day trading automatically using a flobot (an algorithm if you haven't been reading this blog for a long time). I get reminded of this on most days after a profitable day of day trading futures using my Flo variations when the volatility becomes extreme.

One of the emails that hit my inbox today told the story of, a sad story of another options fund wiping out investors. This is a result of people taking unlimited risk and having positions open "overnight". More risk than many people understand.

In the world of today and tomorrow and even the world of yesterday, risk control is everything. For this reason I day trade and, more importantly, nowadays I most day trade using a fully automatic algo, Flo. The reasons are simple:
  • I can earn much more money using algos because
    • I can look and trade many markets at the same time, even when I'm sleeping or at the beach, and,
    • I don't need to be smart every day, only smart once when I build my algo methodology
    • I can use my more than 50 years of trading experience in the design of my algos including order flow, and,
    • I back test them, stress test them and satisfy myself that they will over time be very profitable for me, and,
    • I can enforce the risk control that I want without the chance of them being over ridden, and,
    • trading multiple markets makes my average daily drawdowns much lower, and,
    • the list goes on.

The picture above show the stats of one of the algos I am running. This is the last back test. I expect to achieve between 50% and 80% of the profitability shown in the back test with strict stop losses in place. You can see that the stops are not too tight as the Max Adverse Excursion (MAE) is fairly loose as it should be.

Transitioning to algos has been quite painless, much less painless than I thought it would be. I still keep my hand in and trade as a discretionary trader but now only a few days a month and only for a bit over an hour at a time. I just don't need to because Flo earns more with less effort and risk.

As there seems to be a bit of interest in this evolution, I'll be posting more detailed info for those who want to continue down this road. I did do a training on algo creation a number of years ago but the technology and my expertise has improved many fold since then and the market has become more saturated with algo trading.

Only trades with defined risk are safe by definition.


  1. Hi Tom,
    Care to license Flo for my use? I have asked this question to you before and never heard back? I atteneded your MD class way back in Chicago.

    1. Hi Andrew, sorry I didn't see the previous.Send me an email so I can put you on the list. There's something very, very new and different coming in the January for completely auto trading. My daughter, Keelia and I have been working on it for the last 2 years. You will be able to try it for free to either just run and watch or trade live. We will need a few people to subscribe free to get the bugs out of the new web site.

  2. jenrique42

    pues a mi me gustaria ser uno de tus conejillos de indias jjj
    por supuesto me gustaria probarlo y darte mis consejos, si es que si es lo que pretendes jjjj

    1. Hello jenrique42, good to hear from you again. Thanks. Send me an email and I'll put you on the list

      Hola jenrique42, bueno volver a saber de ti. Gracias. Envíame un email y te pondré en la lista.

  3. You can put me on the list too. Thanks, Gary

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  5. jenrique42
    nada mas me gustaria que poderte
    mandarte ese correo pero no se tu
    si tienes la gentileza de ponerlo
    te lo mandare .....

  6. An of course Tom, you can add me to the list. Still trading using the original video series with some minor modifications but and getting tired of sitting in front of the screens for 6 hours a day. Auto trading for much of the day sounds like a great plan for me.

    1. Glad the "old crew" is still doing well. We're getting older and want to enjoy the money being made :-)

  7. I would be very interested as well. I've been a follower of your blog for a long time, implementing many of your techniques. It would be a major step forward for me to not look at all of the markets at the same time on my screen.

    1. Send me an email as we are getting close.