It has been four months since my last confession. Life has been out-of-control busy, and as soon as I get home from work, I’m punching stuff into spreadsheets, blogging, working on my coding skills, and backtesting. It seems I have little time to do anything other than work. When I’m home, if I’m not in front of a computer, then it feels like time is being wasted that could be spent on the next formula, the next system, or the next blog post. Then, there are my children, and my wife. Life is just go go go right now, every day, including the weekends.
But it almost HAS to be that way, if you ask me. How can I expect to do well trading, when I am competing against people who have 8+ hours a day to do this as their day job? It just happens that my 8 hours a day often come at night or on the weekends.
I am so sick of writing about the Power Dip system. I have sliced and diced and chopped and shredded that system six ways from Sunday. I have tried to spare the readers from most of the process. A woman once said, “I just wanted to hold the baby, not birth it,” and I figure that is how many of my readers are feeling about now. (Although my traffic has not really suffered…Maybe it hasn’t been too awful?)
I hope watching 5 months of real-time trading and tracking of a system has been a helpful exercise. There is a lot to consider when trying to get actual results to come close to matching backtested results, and I have not even mentioned some of the more mundane issues such as order routing or using the best order types for the situation. I wanted to write more about percent-risk position sizing, and how that can be combined with limiting the max number of positions to increase profits and decrease drawdowns. I intend to move these specific discussions onto the Power Dip forum. That way, only those who are interested will be subjected to these esoteric issues.
So I haven’t had time to write as many in-depth blog posts as I used to. My experience is that life moves in cycles, just like everything else does. I’m hoping that I will soon be entering a cycle where I will have more time for writing about a variety of different ideas, systems, etc. Part of gaining more time is learning to do things more efficiently, and as I’m becoming more proficient at coding, theoretically I should have more time to write about what I uncover in my testing.
I have recently quit trading the best short-only system known to man. No one knows about it, except for me and a good friend (who happens to have co-developed the Power Dip). The damn system has returned over 100% a year, consistently, over the past 10 years. I quit trading it after a 5% drawdown persisted for a month. Feel free to call me a pansy, or insert your “P word” of choice. As much as I want to be able to trade it, it just didn’t fit my personality. The damn thing made me nervous as hell, every day. Anyway, that is a good topic for an upcoming blog post. The system must fit one’s personality, goals, routines, and lifestyle.
Okay, this is all for now. I have wasted enough time on this confession and have orders that need to be entered for tomorrow.
i laughed at the last paragraph. The fact that its so good but scared the hell out of you is hilarious.
It is pretty funny. I actually quit trading it one time previous, and then it went on like a 20% run in about a month. So I said, what the hell, I’ll trade it again. My first day trading it, it lost 4.6%, and over the course of the next month, it would never recover to breakeven. And since it scared the hell out of me and was requiring my wife to close trades from home, it was just like an accident waiting to happen.
love what you do shed! thanks for the post!
Thanks Franky! I’m always pleasantly surprised by all the lurkers that come out when I change up my posting routine / topics. I will be doing more of that in the near future.
“The system must fit one’s personality, goals, routines, and lifestyle.”
Such a simple sentence, yet so important. We all can’t/don’t sit in front of our screens the whole day, or have the ability or willingness to jump in-n-out of trades in 10 seconds. You must trade in a way that makes sense to you and using methods that you’re comfortable with.
Personally, I’m fine with drawdowns (options = volatility, afterall), but I also cannot comfortably trade in a “discretionary” way. So I trade a system of strict rules and a few mathematical indicators…for better or worse. I enter orders at night, and look-in on my positions during the last 15-30 minutes…
It works…except when it doesn’t! lol.
I understand completely DP.
I check in during the day using yahoo, but still place trades in the evenings for the next open.
Interesting… Some would say the uncomfortable system is the one you should trade. That’s what you are getting paid for. Complacency breeds blown up traders (system and otherwise) and other bad things.
Oh and please remember to spend some time with the wife and kids.
Yogi, I don’t disagree, re: the uncomfortable system. However, it was a little bit more than that in terms of what was required for daily maintenance of positions.
Will do, with the wife and kids.
hey man, long time reader, first time poster.
the blog is called “System Trading with Woodshedder”
Though I’m not particularly interested in using Powerdip myself, i would love to read about the nitty gritty details you come across when developing your system, as it gives me ideas of things to look at while i develop my system.
If you talked about say percent equity sizing in general terms (pros/cons etc), and then how they relate to a real world system like powerdip, I would find it very interesting. Powerdip isn’t for me but I find a lot of value in seeing your thought processes. There is also convenience to RSS feeds that doesn’t quite translate to forums.
It sounds like you’re stressed out. Go take a break from blogging and spend some time with your family, the internet will still be here when you get back 🙂
thanks for all the great posts along the way
Thanks dizzy, good to hear from you. And point well-taken, re: the title of this here blog.
I do think I’ll get up a post about percent equity sizing, hopefully in the not too distant future.
Good to know that you’re up for changing your format again.
You should do a post on how to keep from burning out as a blogger. I remember a few comments between you and Jake in that regard when he started his famous tenure at the heralded tabbed blogosphere.
Thanks for being honest about why you stopped trading that system.
Good to hear from you Cuervos!
I’m not sure how to keep from burning out as a blogger except to say that it is like anything else in that one has to have a true love for it, or it is easy to just quit when one gets busy or overwhelmed.
Hi Wood,
Keep up the great work, and please try not to burn yourself out 🙂
Looking forward to the more specific posts regarding order types and position sizing!
Michael
hi woodshedder,
i say finding a strategy or set of strategies that fit the traders personality is the ‘holy grail’ of trading, and will be different for each trader…knowing what you can and can’t stomach is crucial to long term success in this biz….
if the stress of the uncertainty of how each trade will turn out is too much, have you considered trading a smaller position size, so that you can still theoretically profit from the system while having less drawdown?
have you considered trading this model on sector or index etf’s? i have a model (‘BTD Index’) that buys dips in the NDX based on a certain set of criteria…though the model is based on the behavior of the NDX (NASDAQ 100), i trade this model on the NASDAQ 100 e-mini future (NQZ09)…today, this model closed out its 5th winning trade in a row (since june)…i wonder if my model is somewhat similar to yours (of course i have no clue as i don’t know how yours is built, but i wonder just the same): http://stbsmb.blogspot.com/2009/10/btd-index-generated-exit-signal-for.html
i have certainly taken my lumps over the years trading systems that were not a good match for my personality…the funny thing is, i developed those systems!! in any case, i still trade some of them, just with a smaller size…
in any case all the best,
adam
Hello Adam.
Since I had tried to trade the short system before, I knew that it was difficult for me, so the 2nd time around, I cut my position sizes by 2/3rds. I was using only 15% of total equity to trade it, meaning that each position was around 1-2K. Tiny. Honestly, it was a combination of a system that required more maintenance than I prefer (trades HAD to be closed at the close due to overnight risk) and a system that just went against everything intuitive about trading. Maybe that is part of why it does so well. Anyway, I don’t trade during the day, so I had to recruit my wife to close down the trades for me, and believe me, there were several hilarious episodes (at least they are funny now) that ensued as she learned how to use the platforms. My friend has written a java auto-trader for the system, which would significantly reduce the maintenance…so maybe in the future I’ll give it a 3rd try, lol..
I have just visited your blog and your BTD model looks fantastic. I spent a lot of time developing a system for trading the SPY, but have spent most of my time of late working on systems that provide more opportunity through trading common stocks. However, I believe I am going to be working on something new for the SPY in the near future.
Looking forward to perusing your blog. Thanks for stopping by.
these trading platforms are tough enough for experienced users, it must have been quite a scene having your wife figure out the intricacies of it…i remember back in 2001, when i switched from etrades web browser trading screen, to cybertraders platform…i thought i was commanding a rocket ship! now i readily code up easylanguage paintbars, functions, indicators, strategies and macros on tradestation…i love the tradestation platform…if you are up for an adventure, tradestation could be a way to go…
yeah, the BTD model is pretty robust on the NDX…i backtested this model on trading a basket of stocks (IBD 100 stocks), but the results were pretty poor…i believe they were poor because BTD does not use a price based stop, it uses a time based stop…this time based stop has worked well (so far at least) on the NDX, but it didn’t it would work well with stocks…i could build a version for stocks, but my capital is allocated primarily to the futures markets right now…
one of the drawbacks of the BTD Index model, is that it only generates about 5 trades/average year (more though when the trend is up)…it also has a very steep historical max individual trade drawdown of about 15%, so i only trade this model with a small portion of my capital…
the next time you model the SPY, consider also modeling the QQQQ’s or even the NDX (some of the older NDX data may not have true opening prices, so be careful there)…i have found that not only is the NDX more volatile than the SPY, but it is also a bit more trendy…both of these characteristics are beneficial to the BTD model…
thanks again for checking out my blog…posting has helped me become a better trader…feel free to email me at [email protected] for more detailed communications…
adam
Hi Woodshedder,
So what’s this “best short-only system known to man” that you mentioned? I am really interested in it, even though I also have day job but on a different time zone (Europe) which would allow me to trade intra-day, sell at close etc. Of course, I am also interested in the Power Dip System and I am seriously thinking of subscribing to it.
Thanks!