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In February, I made 100% on my account. So for March, I asked whether to
1. Increase my position sizing.
2. Decrease my position sizing.
3. Stay with the same position sizing for consistency.
4. Just sit out.
Well, now it's April and the results are in. I knew I was on an unusual lucky streak and I was right. I had a gut feeling I should sit out during March but decided to maintain the same position size for consistency. It turns out my gut feeling is right. February was just too good to repeat. From March to now, I lost 50% of the profit made during February.
So instead of netting 100% in February, my results drops to netting 50% in 2 months. It is still good. But profitability reverting to its average is probably the inevitable result of the law of large number. I guess this is a reminder that you should just walk away from the casino after an unusually lucky winning streak because you know your luck won't last forever.
Can you help answer these questions from other members on NexusFi?
Personally, I reduce the position size based on market volatility in order to maintain relatively constant risk.
Your system shouldn't be risking more than 1%-2% of your account size on any single trade, making the risk of ruin nearly impossible.
Sounds like you have a great system, you just need to control the risk a little better. Profits take care of themselves.
Worldwide there are no more than 100 traders AND hedge fonds, who have a hit rate of 75% permanently for over 20 years. They are the kings.
Everything else is a lie or a coming bankruptcy or both.
I have to correct myself. It's maybe 20 traders or less who achieve regularly 75% over 20 years on average.
If I remember correctly that number corresponds to those achieving 30% yield on average over 20 years.
That's from talks with high ranking individuals I did.
You can derive those numbers mathematically.
Imagine 10.000 traders. Half of them lose, half of them wins. You take the losers out, remains 5000 next year. Again 50/50 win/loss, take the losers out. Remain 2500 next year. After 5 years you have 313 constantly winning traders left.
To recap, I made 100% on my account in February. Then I lost 50% of those profit by April. Well, it is now the end of June and I've finally made back to the height I made at the end of February. There was no adjustment made to position sizing. I pretty much went with the same size. But after 50% of my profit was lost in April, a new strategy which had a more profitable backtest was added to the mix. It turned out return would be better this month if I had stick to the old
portfolio and didn't change a thing. Having said that, I will continue to back this new strategy because it seems promising in backtest, but just not spectacular this month.
On a side note, gambling is addictive. Making 100% in one month was exciting. It was more like gambling in a blackjack table and you expect to either to get double or nothing. I kind of hope to get that adrenaline-packed feeling again but didn't and probably won't for a long time as diversification of strategies tends to dull out earning.
