ATS 2024 Live Test Final Tally: Up 196% after Six Months and 42 Trading Days
Lessons learned and next steps...
Important: There is no guarantee that these strategies will have the same performance in the future. I use backtests to compare historical strategy performance. Backtests are based on historical data, not real-time data so the results shared are hypothetical, not real. Forward tests are based on real-time data, but past performance is never indicative of future performance. There are no guarantees that any performance will continue in the future. This is why trading futures is extremely risky and the results you see here are not typical. If you trade futures live, be prepared to lose your entire account. I recommend using these strategies in simulated trading until you/we find the holy grail of trade strategy.
This post can also be read on ATS Research.
Day 14
“Everyone has a plan until they get hit in the face.”
Mike Tyson
For me, that was Day 14 in the Live Test.
I hit a peak on Day 13 at $32,644, which was then followed by a $8,500 loss on Day 14. For such a short stack, it was a brutal attack. That day was followed by a general loss in confidence, but I slowly crawled back to $32,882 on Day 33, only to finish the test on Day 42 at $29,587.
I’m not unhappy with these results—how can you be unhappy with 196% return—but I feel I could have done better and will need to figure out a way to limit max exposure before investing more.
The good news is that I plan on starting another live test in January 2025 which gives us six months to create a better plan of action. Given that my initial plan of action amounted to little more than throwing spaghetti at a wall, it shouldn’t be too hard. It is utterly fascinating how much I did not know or even bother to consider before starting this Live Hunt. I gave a little thought to a beginning, mid- and end-game from an account value perspective, but did not prepare for getting hit in the face. My hope is to convey a bit of that experience here so that you might avoid the same fate.
What do I mean by hit in the face?
I mean things went south fast due to a large short position and I did not employ the risk management parameters (a $2,500 fixed stop loss) that I started with. Instead, like some old, sad blues song, I convinced myself that 25% of the account value was a better stop loss because it gave the position more time to correct, but of course that never happened and suddenly my high of $32,644 dropped to $24,144. I was hit in the face by my own hubris and it really hurt. I would have rather had a bonfire and used 10K $1 bills for kindling. It forced a reckoning of sorts.
Before I get into the results of that reckoning, I want to share the final results of the Live Test with you:
Here’s another view of performance over the Live Test:
It was a slow climb back preceded by a week of reflection and consultation with other traders. The new ‘After Day 14’ (AD-14) plan:
placed more weight on individual strategy performance than portfolio selection
used smaller positions; and,
focused on the use of micros.
In the same way that a boxer might use footwork to avoid getting ‘hit in the face’, I used data to reorient the hunt and focus tactics on taking small positions on strategies that had been recently profitable in the forward test.
Here’s an example of some amazing footwork by boxing legend Mike Tyson…
I’m not on Tyson’s level, but I’m closer than I was six months ago. I’m grateful for that “Day 14” KO. I’ve learned a lot about what kind of ‘automated footwork’ is required to take a 196% return to a 500% return (and beyond).
Volatility: Friend or Foe?
All the best games are easy to learn and difficult to master.
Atari founder Nolan Bushnell, 1971
Bushnell's quote was referring to arcade games although the concept extends beyond video games. Likewise, the game of trading, and automated trading in particular, is deceptive and at times illogical. Answers are often ridiculously obvious, but hard to see without the hardship of some sort of emotional experience, which induces irrational thinking.