Avoid this One Account Killer

Trader's Mindset

Jun 06

Serially correlated losses is probably the number one futures account killer. Serially correlated losses has been my Achilles heel.

The question is why do they occur? In my case, most serially correlated losses occur when I use a specific style of trading where I try to shoot in multiple contracts without taking virtually heat. I can often, but not always, do this successfully because a large percentage of my entries do not take any heat. But, I have to cut the trade almost immediately if it doesn’t work.

The problem is that when I miss an entry and keep retrying it. If I keep retrying it then I can accumulate greater losses faster then even if I used a reasonable stop loss.

Below, I suggest some ways I plan to avoid this account killer going forward:

  1. Max one retry for a single trading idea.
  2. Do not add contracts until I am positive on the trade or day.
  3. Generally seek to reduce trading frequency. Trading is one activity where you get payed more to do less.
  4. Find a better way to rank trades.
  5. Better yet, do not trade manually. Instead program your entries into a graybox like BeyondBot and let the computer execute.

About the Author

The author is passionate about markets. He has developed top ranked futures strategies. His core focus is (1) applying machine learning and developing systematic strategies, and (2) solving the toughest problems of discretionary trading by applying quantitative tools, machine learning, and performance discipline. You can contact the author at curtis@beyondbacktesting.com.