what can possibly go wrong?

Discussion in 'Trading' started by brynno, May 16, 2013.

  1. brynno


    thought experiment. this is a serious question.

    all signs are pointing to my making several million dollars over the next 5-10 years or so through day trading equities. from my experience, however, something ALWAYS goes wrong. it's just too good to be true, isn't it. I've surely overlooked something. or lots of things. Realistically I do NOT necessarily expect this to work, I am NOT in any way naive and I do have a few ideas as to the kind of thing that might potentially bring this to a grinding halt, but I'll keep them quiet until ive heard from you first. id really like a list of possible stumbling blocks, perhaps in order from most to least likely, maybe. something like that

    this is what you'll need to know (any further questions that might be relevant please ask):

    - I have a very well backtested and forward-tested strategy where both my win:loss ratio and my reward:risk ratio are significantly better than 1:1. I have used interactive brokers' historical data/charting for all of my testing;

    - system produces around 20 trades (round trips) per month on average;

    - I have gone to great lengths to ensure that all of my rules are algorithmic so there is no discretion involved, can be automated in principle;

    - I have also gone out of my way to avoid excessive "curve fitting"; all of my rules and concepts are logically justified - nothing is there just to make the data "look good";

    - I have so far never been able to trade it profitably because, although it is as logically simple as I can make it, it is still unfortunately a bit too complicated for me to trade it manually with any consistent accuracy (I miss trades, I enter when I shouldn't, etc). I have tried and tried and am now satisfied that it cannot be done;

    - I have decided that the only way to go is to get somebody to code it for me and let my computer handle everything. I have had a meeting with a university professor (school of computing) who having listened to my presentation is optimistic that she will be able to source my programmers for me. I will pay for the service of course.

    - I have plenty of capital to start off with (50-100k) once/if I get the program up and running. I will reinvest any profits and increase my size accordingly. I will always only trade stocks that are liquid enough for the size I am trading.

    what could go wrong at this point?
    what have I forgotten to consider?
    what have I overlooked?
  2. rwk


    I predict that the software development will take longer and cost more than you plan for by several orders of magnitude. If you ever actually get it running, you will never know for sure whether it is right (i.e. bug-free).

    Then I expect you will find that your system is psychologically harder to stay with during inevitable losing periods. You will begin to doubt both the approach itself and the software.

    Finally, if all goes well ... which is unlikely ... the market will change, and your system will stop working or your software will have to be re-done. It will be then that you discover the software is unreadable.

    Good luck! If this were easy, everybody would be doing it.