Keeping Stats

BarroMetrcis Views:  Keeping Stats

When I used to hold seminars, I used to include, as a ‘giveaway’, a spreadsheet that would calculate the stats needed to optimize returns. It answers questions like:

  1. What is my current Expectancy Return?
  2. What rules are performing best/worst?
  3. What instruments are performing best/worst?
  4. What is the greatest drawdown?
  5. What is the average drawdown?
  6. What is greatest profit?
  7. What is average profit?

With the answers, I turn to the Psych Journal to examine the conditions under which the trades (answers) occurred. The idea is to determine if I can find useful lessons to improve.

What is interesting is that less than 10% of total attendees have kept the quant journal – even though all they have to do is insert the data on a trade-by-trade basis. And that is the easy part; the more difficult part comes when we have to face the results in a losing period and reflect on the lessons the market is willing to  teach us.

If the attendees are unwilling to  complete the logistics, what chance would you give them to perform the reflection? And, without the reflection, what are the probabilities of improving?

To improve we need to push outside our comfort zone; and at times, that will require a long hard look at how we take trades that lead to losses.

For me, for the past two years, trading results have been below average. Partially this has been due to the distortion to the trading environment created by QE.

The challenge was to raise my returns to at least average. It turned out to be easier said than done.

Finally, earlier this year, I implemented a change to my trading approach that has produced exceptional results. My results are back to average for the whole period.

I doubt if that would have come about if I had been unwilling to face the ‘reality’ of my results and had not taken the time, effort and persistence to try different ‘answers’ until I struck gold.

Keeping stats is a necessary and essential part for trading success.

1 thought on “Keeping Stats”

  1. Ray,

    As always, thanks so much for your posts. I could see some of the shift in your trading approach/market over this time from your comments and market reads. That said, other than a few comments about “don’t fight the fed” or “long or out until normal trading patterns return”, I am only conjecturing what the specific takeaways and actions you have taken. Would you be willing to share your top 2-3 takeaways from your self assessment and what specific changes in actions/behaviour you took? I find this market incredibly frustrating and it has left me mostly out. Too many head fakes and odd reversals. Things that should not be able to persist actually increase. Terrible to say, but I actually long for the coming crash. At least we can then eventually return to some rational behaviour.

    Bob

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