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Big fan of the podcast. Wanted to say a huge thanks for helping build my motivation to dive to trend following properly after dabbling for years. Larry Hite and Tom Basso are my favorite guests! So much wisdom there.
The biggest challenge that I’ve faced with my trading is wanting to be right and expecting perfection. I’m finding that implementing systematic trading has for me improved that situation dramatically. I’ve seen myself do really stupid and expensive things when I’m too close to the market and end up fighting reality like some kind of monkey. I love being able to build a system and then step back and let it do its thing. I can see that my next biggest challenge is going to be avoiding needless tinkering with systems that have a long track record of robust performance.
The best thing that I can say about these challenges is that they have helped me to build a bunch of awareness of my limitations, resilience to get back up and keep going and lastly, it has forced me to reassess how I do things. That ultimately led me to becoming a trend follower.
For context, I’m currently in a drawdown since January 2021. I didn’t adapt what I was doing (or cut size of my trades!) as fast as I needed to as the market changed. I can now see how adapting to a changing market is completely taken care of by the standard trend following rule-set so I’m glad to have seen the light and to live to fight another day!
What trading strategy (and time frame) has kept you in a drawdown for 2021-2022?
I was trading breakouts with long call spreads on equities from April 2020 and that worked well enough for me to feel comfortable leaving my job in tech and move back to Australia mid-pandemic. I realised at the time that it was a super tail environment and was happy to get aggressive while it was working.
In January 2021 I tried to ‘diversify’ because I suspected that the environment would change. I started with a signal service that led to my single biggest loss ever due to me getting over-confident and way over-sizing the trade. This was after 2 other big losses that I created in new systems that I was trying to use to diversify (and trading with too much size).
In the first half of 2021 I was still trying to trade breakouts in an environment where they were consistently failing, I lost my objectivity and began trading poorly. The big drawdown happened between Feb and May 2021 from basically 3 trades. From there I cut my size and started to look for a new solution. I’ve bounced around a lot and made a ton of changes (mostly focusing on cutting my losers MUCH faster and building automation to get me away from the screen).
I appreciate your interest and any observations, thoughts or challenges that you would be willing to offer.
So you were not a trend follower while you have been in a drawdown in 2021-2022.
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