Friday, December 18, 2015

20151218 - The Casino Effect

Today, I was busy with other stuff. Fully aware of the risks involved in mechanically trading SAR without being at terminal, I decided to play it with one lot....

There were 2 versions of this SAR system - one that trades more being SAR all the time, and the other that trades less by not being in trade all the time. Both are good and profitable over the LOOONG term. I chose the first one today. Today, was not the day. Even with 1 lot, it's a big loss.

I have tested n number of mechanical systems. Many of them are very profitable over the LOOONG term, but the drawdowns are severe (also when compared to discretionary systems). They have to be played for the long term, but the drawdowns limit the margins that can be utilized, and ultimately the returns for these systems.

So, until that series of big wins start pouring in with these systems, I trade with hope of that happening, just like in casinos. And when the series of big wins happen, margin utilization is increased, in the excitement of it all. Bet big until all is lost. Just like in casinos. End result: The system remains profitable in all backtests, not me.

There is no way that I cannot acknowledge that I have a problem to solve... What will I do about it? TBD.

Day Trading: Nifty M3 Candlestick Chart

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