If You Can’t Suffer The Pain, Don’t Play The Game

Last Updated on November 16, 2020 by Oddmund Groette

The above title is a quote from George Soros. I got this quote in an e-mail from a reader of my blog, and it fits quite well for my swing trading performance in august.

In July I wrote about my performance. It was good. Very good until the end of July when I opened a corporate account and deposited much more money. And what usually happens happened: after a very good run it’s tempting to increase the size. But the market cycles play some tricks and typically after a good run there is a bad one. That one started exactly on the same day as I started with the bigger size. All my strategies turned bad: momentum strategies go mean reversion and mean reversion goes trending. Is this a permanent change in the market? Are my strategies finished? Trading leaves a lot of unanswered questions. It’s so easy to backtest, but a lot more difficult in real trading. However, I went through all my backtesting in detail and made an equity curve of all my current strategies. And what has happened in August has happened before. Actually, the longest drawdown period was from May until September 2011. And here I am, worried about a 4-5 week drawdown? Going back into history is a great motivational help. This at least gives me a lot of comforts to continue. It’s so easy to lose sight of the forest because of the trees. I’m used to day trading and not having long periods of drawdown.

(In addition, I have screwed up by making errors in my sheet and sending the wrong share size. So August/September so far is pretty bad, down about 3%.)

However, day trading is pretty good, so now I focus more on that. Daytrading will always trump my swing trading.