I think this post wraps up my brief history of trading and moves us into the present tense. Thankfully, the present is less tense.
Picking up the story from where I left off, I began working on an entirely new system toward the end of the summer in 2006. There were numerous fits and starts along the way, and I ultimately changed to Interactive Brokers to put more emphasis on good, cheap execution and less emphasis on real-time data. I used Collective2 to do a lot of experimentation, which proved surprisingly helpful. By December I had all the elements of a new system in place and coming into the new year I’ve started fully trading it.
For now, you can see the results on my Collective2 system 1Day, which was used to try out a lot of ideas, but since the beginning of 2007 is simply tracking my actual trades (though to a different scale, as C2 forces you to start with $100k play money).
The great thing about my current approach is that it is easy. Well easy to execute on a daily basis… it was rather hard to develop. And that is the key lesson I believe I learned from my previous stressful success. Sustainable success isn’t going to come from a system that is massively difficult to actually trade. A good trading system should be like a good compressed codec, to use a techie metaphor. Take MP3s. The codec is designed to be front-loaded. All the time goes into the encoding. The decoding is quite easy and can easily be performed in real-time with minimal processing. The encoding will max out your CPU and takes quite a bit of time.
Likewise, developing a system is hard work, and as I believe I’ve amply demonstrated, takes a lot of time and involves a lot of failure (at least in my case it did). Actually trading the system, however, can be fairly straight-forward. I’ve got a spreadsheet that I use each night to download the hits on the six screens I use, and then ranks them and puts them in a format to be uploaded to my broker. It takes about 5 or 10 minutes a night to do my trades. Encode hard. Decode easy.
So my new system succeeds at lowering the stress level… time will tell if it remains profitable.