"Goes back to the fact that successful traders eventually figure out they can never have what they inwardly want. Which is why the mass majority who persistently try to get what they want out of the market, fail." Well put!
Any given market gives us (at most) a few key opportunities of inefficiency to exploit during each given session. Some volatile sessions have quite a few spots, some dull sessions have one spot at most where we can clearly create a defined edge for ourselves. The vast majority of time in a day we have no edge in a given market... it's a coin toss at best before trade costs are subtracted from the mix. Way too many traders keep themselves too busy leaking money in the coin-toss game to ever make real money in the few prime spots where a true edge exists that they should be patiently waiting for instead. We are all the same. We love this game. It's important to control ourselves at all times from making the game addiction our reason for trading
Our ATS has been like a trading psychologist to me over the past few months, as it was tested day after day in simulation. I learned that a system programmed to trade all setups with fixed rules for risk and profit-taking is net profitable as long as the setups are based on a positive edge. Seeing this during the sim phases helped me become far more aggressive and eliminated the most stressful aspects of trading. I went from just a few trades a day to a minimum of 8 a day now. I learned to trust the bigger picture and not worry about losses, even 3 or 4 in a row is meaningless in terms of the larger result we seek: consistent profitability. I gradually became more relaxed. The most stressful part of trading for me was the discretionary stuff, the urge to move stops too soon, the urge to take profits too soon, scratching trades because price "felt" like it was stalling, etc. The ATS taught me how beautifully patience pays off, taught me that a trade can go from green back to red and back to far more gree, taught me that a setup is a setup is a setup (my non-survivable stop criteria kept, and still keeps, me out of so many great trades). Last week the system took a long trade based on the break of previous bar's high. The bar was 115 ticks from low to high. It was in the trade before I could cancel the order and it was quickly out of the trade for the .20 loss. I said to my husband, "I thought we implemented a filter for setups with non-survivable stops." He told me he eliminated that filter because when he ran extensive back-testing, he found that limiting trades based on the size of a previous price bar resulted in much lower overall profitability. Later that day the system armed itself for a trade, this time off a 56-tick price bar. That was also way out of my survivable stop league and I avoided the trade, feeling right smug that I saved my trading account 20 ticks by not taking that idiotic trade the ATS took. The trade ran over 100 ticks from entry and the ATS patiently held the position through consolidation in a containment zone and later exited for 80 ticks profit. So there I was stressed out over the fact that an individual trade resulted in a "needless" loss, and the system came out with net 60 ticks profit between the two trades. The ATS demonstrates for me the value of stress-free trading. Stress-free trading means you trade with a trader's mindset, trusting your setups and your edge based on trading all of them, not picking and choosing. Suppose I traded that first trade and took a quick .20 loss, then as a result of that avoided the later setup? I've seen transcripts of a few of Austin's live trading chat. He sees a setup, trades the setup. If it's a loser, then he waits for the next setup, trades the setup. It's so much easier and stress-free that way. It's as if you personally are no longer responsible for being "right" or "wrong". You're trading a proven system and each individual trade is meaningless in and of itself because you know that over time you get the result you need. As soon as you agonize over what might happen, and start picking and choosing from among your valid setups, you're in effect telling the world you are such an amazing master of reading the market that you KNOW in advance what will happen next and that qualifies you to pick and choose. When you're right, you rejoice at how good you are; when you're wrong you look for more limiting factors to help you pick and choose better next time. What you're really doing is effectively dilute your edge.
NoDoji, out of interest, was your ATS backtested on just one contract or does it add contracts as well?
1 contract For now, the plan is for it to eventually size up based on increasing account size, but it will be all in/all out regardless of position size.
That sounds exactly like my days of system writing back in 2004 - 2005 era. I learned more about markets, stats and trading success than my mind could process back then. It literally took years for those systematic lessons to sink into my logic-addled mind. Whenever I find myself wandering down the path of emotional trader, I pull myself back by the shirt-collar of what systematic results proved in plain math to me over and over again. Which were pretty much exactly the same things you have learned with your algo. I'm equally sure I could write a volatility breakout based strat that would parallel what yours does. Did that in FX years ago, with exactly the same lessons learned and results gleaned
Great post and, on the surface at least, seemingly contradictory in some ways to my last post above this. It's interesting all we can learn from our SIM trades. I've mentioned before, that one of the most important things I've learned from mine is just what you're mentioning, that patience frequently does really pay off. Time after time when I'd let the trade go and not take a smaller profit, which I tend to do in my own real trades, the end profits were much bigger. This is something I'm trying to work on. Perhaps doing this at the optimum level is a matter of further refining one's entry and exit rules, stop parameters, and profit targets for a given market. And as you've mentioned too, building in soft profit targets but having hard, but appropriate, stops. Of course a lot of the realities of this are based on which instrument we are trading and what the market conditions are like at any given time. Like a lot of us, I tend to over-think and micromanage trades. And SIM trades can also help you realize what you do well, which in my case frequently is make good entries. And they can show you what you need to work on, which for me again is be more patient letting the trade develop before cutting it short with a small loss or smaller profit. I do want to be more specific about defining the rules with more detail and strictness.