ATS Live Test Update: #2
Starting Account Value: $10K, Current Account Value: $18,548
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. Even with forward tests, there is no guarantee that performance will continue in the future. Trading futures is extremely risky. 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.
The TAMI Show is a 1964 concert that included performances by popular rock and roll and R&B musicians from the United States and England. The concert was held at the Santa Monica Civic Auditorium on October 28th and 29th of 1964. The best footage from each of the two concert dates was edited into a film that was subsequently released on December 29th of that same year. For context, this is a year when shows like Gilligan's Island, Bewitched, and The Addams Family had just debuted and the remote control was the closest kid to the TV.
Perhaps the most iconic performance of the film is from James Brown featuring the song, “Please, Please, Please”. Released in 1956, it was his first chart hit. It later became his signature song, largely because of this performance.
The lyrics start out with James Brown singing: “Please, please, please, please….”
And then the chorus chimes in: “Please, please don't go….”
And again James Brown sings out: “Please, please, please, please….”
And then the chorus chimes in again: “Please, please don't go….”
It’s so beautifully sorrowful. By the end of the song, James Brown is throwing a fit of exhaustion on the stage, falling to his knees over and over again. It is the performance of a man that is utterly tormented!
What does this have to do with the Live Test?
This is how I felt at the beginning of the Live Test!! There were times when I too was quite literally on the floor yelling out to the gods of technical analysis, “Please, Please, Please, Please!”
The hope was that automated trading would allow me to disconnect from my emotions, but it only disconnects me from my ability to act on those emotions, not the emotions themselves. The best thing about being on a live hunt is that it forces certain revelations and truths to rise to the surface that wouldn’t otherwise, and this was my first revelation. Automated trading, in many ways, is almost harder than manual trading. It takes a temperament that I have yet to master. It’s Claude McKay walking on burning pavement slabs. It’s making a transition from Judo to Aikido.
When that first trade triggered, it dawned on me that this was real and I had to ask myself some very difficult questions about my decision process. How will I react? As is the case with manual trading, the speed with which I cycled through this process of discovery was directly connected to my ability to survive, so I decided to call for help.
How to survive the trials
Of course it depends on the person, but for me, the best way to get through these trials is to cultivate a network of people to keep you grounded. So, when I’m on the floor yelling “Please, please, please” to the market, I have someone I can reach out to before I go on tilt. I have an inner circle that I work with. I also have several mentors that I call for help. I also have a therapist/coach I work with. Recently, I’ve also been able to reach out to the good folks in ATS Research for help. I’m big on asking for help—it’s a good way to stay humble and on the level.
So I reached out to a few traders who are further along on this path than I am and realized you just have to go with it. Once you’ve done all the analysis, you have to protect yourself, but then you have to jump out of the plane. This was a hard jump, because unlike manual trading, I can’t bail if conditions change. If I see a tornado coming, I just have to trust that I chose the best parachute.
So what happened
Week one was difficult, but no trades.
Week two was difficult, but still no trades. The pressure was on.
By week three I had to call my mentor for a sanity check—several times. Thankfully he was always there to say “eyes on the prize” and “trade for the next day”—thank you so much Jeff.
Finally, in week four, the self-introspection and pleading with the gods of technical trading paid off. I had a breakthrough. The portfolio made four trades and all four trades were profitable, for a gain of $8,565. I went from singing, ‘Please, Please, Please” to “I’ve Got The Feelin”…
As much as I want to celebrate (and I did pop a few bottles), this is only four weeks of performance; in trading days, we’re only on Day 7, which is nothing. What I’ll be singularly focused on for the duration of this test is a systematic approach for selecting:
which strategies to run in the Core portfolio,
which strategies to run in the non-Core portfolio; and,
how many contracts/which instruments to run each strategy on.
I’m hoping this live test experiment will create the right environment from which to do it. I also hope we can all learn from the process so you don’t have to hit the same road-bumps.
With that, let’s get into the live test update and what I’ve learned so far. At the end, I’ll talk a bit more about risk management and the composition of the Live Test Portfolio.
Remember, the Live Test is based on strategy performance in the Q1 2024 Forward Test. The forward test is based on the backtest, which you can find here. I’ll provide a forward test update in the Mudder Report at the end of the week. I’ll also give you a quick update/overview of what’s in the strategy/application pipeline.
Live Test Update
Starting Account Value: $10,000
Total Gain: $8,565
Fees and Commission (varies by broker) = $17.12
Current Account Value: $18,548
Here’s an overview of Summary Statistics: