Of Mice and Men

BarroMetrics Views: Of Mice and Men

“The bestlaid plans of mice and men often go awry” (Robert Burns).

This month I went to live-testing of a new (for me) approach to trading. It’s quite a departure from my usual style. My style has been based on the 18-day swing, (monthly trend). And, my aim has been to hold positions until a 13-week (quarterly trend) line turn.

The new strategy holds positions usually for no more than three days; the first exit is usually in a matter of hours.

In this test period, I have been trading half-position size, generated a 71.43 win rate and a 6.37% ROI. (Full size 12.74%). Annualised that ROI would be much better than my average, around 25% p.a.

To say, I’m very happy would be putting it mildly. So, how did the best-laid go astray?

Well, I had planned to take every signal, unless I had a good reason not to. Yesterday, I had decided not to take trades because of Memorial Day in the US. I thought it unlikely that there would be sufficient range to generate the first exit.

I should also mention my FX day ends at 17:00 EST and begins at 17:01 EST.

The EURUSD set up nicely for a sell signal. I went to bed reasonably early and actually got up at around 4:00 am. I had a quick gander at the EURUSD, and it was dead as a dodo. So I went back to bed thinking to place the entry and initial stop around 7:00 am this morning.

Only problem?

At 5:00 am (17:00 EST), the EURUSD triggered the sell and got to first exit later in the day. Under my rules, I have missed the trade and will wait for the next one. Natch on a backtesting basis, the trade would be counted as one that (at least) got to the first exit.

I post this because it’s a reminder that backtesting merely provides data of positive expectancy. It’s still up to us to execute. And because we are human, there’s many a slip between the cup and the lip. (And next time, I’ll stay up until 5:00 a.m. and then place my order!)

 

 

3 thoughts on “Of Mice and Men”

  1. just curious : Why you don’t stick with your old style ? Is your old style losing its edge ?

    if you were making money with that old style , why you change it ?

    1. Hi Omran

      Thanks for the question.

      Because I’m always looking to improve. I’ve always taken the view that longer timeframes provide a better edge. Certainly, last year was above average. But when I examined the results, I saw most of the profits came from trades that profited from exceptional volatility.

      I sense that times are changing, and that may mean I’ll need new strings to my bow. Hence, I began searching for a new approach and stumbled onto the present process. That doesn’t mean I’ll abandon the old methods. Once the testing is over, I’ll look for ways to integrate the two.

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