I lose money regulary…
Insert caveat – When I’m testing a new strategy!
In the thinner winter markets I often spend a lot of time revising data collected at other times of the year and inching forward on new ideas. I’m a great believer that no matter how much data you have, it’s more important to actually apply things into the market. There are two key reasons for this: –
(1) You need to be careful when Data mining, it can be statistical deja-vu. Just because something happened in the past, doesn’t mean it will happen in the future.
(2) Applying a theory to the market can be quite problematic in reality and your initial assumptions may change.
Time and sample size easily overcomes the first but it’s the second which tends to give me more problems. This is because there are a whole host of unknowns available in the open market. Can you implement the idea? What settings will you use, what error trapping do you have in place, will the market accept your stakes?
When you start executing on these questions you start to get some answers. But, inevitably, there are lots errors in the early stage of implementation of a new strategy and this often costs you money. You may also discover your theory doesn’t quite work out in practice or you have mis-understood something. But if there is one thing I have learnt it is that this expense is worth it.
First off, the maximum loss you can make in an efficient market is just the commission on your winnings. But also, as you start to execute, you very often bump into some characteristics that you previously haven’t seen and that opens up the door to another branch of the strategy or something completely new. You will be amazed how often this happens.
So, finding or implementing a new strategy can be a little painful to start. But it’s a necessary step on the road to a valid strategy. As you see errors, make mistakes or misjudgements, you can gradually isolate those and this will move you towards a profitable strategy. Make sure you set aside a budget to experiment that will withstand errors and also make sure you use practice mode where possible. I tend to automate a basic strategy at first to isolate general characteristics before homing in on specifics, this eliminates human error.
So, when you are looking at a new strategy, expect losses; but don’t let losses put you off. be restless and keep experimenting, there is lots to find out there!
Category: Trading strategies, Using Bet Angel
