Learn by Doing

BarroMetrics Views: Learn by Doing

Ultimate III jus concluded. The class was evenly split between institutional and retail traders. But, the results could not have been more different.

Today, we’ll look at the retail stats.

Ultimate is a 4-month course whose main focus is to ensure that the attendees can apply the course ideas in their trading. Whether or not they do, depends, of course, entirely on them. But, at least, they can apply the concepts if they wish. It includes a theoretical and practical dimension:

  • Four weeks for theory,
  • Followed by a tw0-day seminar/webinar.
  • Then three months of application.
  • Finally, four weeks of unassisted trading (the exam). Here I am looking to see if the attendees follow the process rather just relying on the results of the trading.

Here are the retail stats:

  • 23% dropped out at the end of theory section. In other words, 67% took the practical.
  • 7% failed to complete practical section.
  • 31% failed the exam. By this I mean, they knew what they had to do but failed to do it.

Here’s a classic example:

John chose to trade mechanically. Given the results of his personality test, I agreed with his election.

September 2016 had unsuitable trading conditions for FX. When that happens, mechanical traders lose money. At this point, John abandoned the system or at least found ‘reasons’ why he would not trade the signals. 

Unfortunately, from the end of October, conditions reverted; and if John had continued to trade the system, he’d have made a tonne of money.  So, what stopped him from returning to the system? The need to prove he was right in stopping its use. 

When you compare John with the 39% who did well in their exam, the main difference is the successful group did the basics well:

  • They followed their position sizing rules.
  • They adhered to the method rules – whether they were mechanical or discretionary rule-based traders.
  • Most important of all, they kept their journals (both equity and psych), AND they reviewed them, so they learned from their mistakes.

More tomorrow

4 thoughts on “Learn by Doing”

  1. Hi Ray, Was there a difference in drop out rates between discretionary and mechanical?
    What type of questions or answers to discern if more suitable to be a mechanical or discretionary? are there types of people ie artists or architects more suited to a particular style.
    And with a discretionary approach could there ever be something akin to the Turtle Traders experiment?
    cheers Baz

    1. Hi Baz

      • no real difference but the sample size was too small to draw firm conclusions.
      • there are personality tests you can take – Google. Generally mechanical traders need simple, clear parameters for their entry and exit. Discretionary traders are the reverse. Boundaries are needed but within them they need a certain freedom to interpret market info.
      • Don’t know about different professions.
      • There are a number of hedge funds e.g. Tudor Jones that provided support for discretionary traders.

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