Success Story from Mugu

One of the lessons I learned years ago:

If you're in a hurry for any reason while trading, bad things typically happen.

Are you in a rush to trade a strategy with size after you see the backtest?

Probably a mistake.

Are you tripling your size in your strategy that you've traded live for a week and it looks bulletproof?

Probably a mistake.

That's why it's always satisfying to see a trader take a default stance of skepticism.

One of the traders I'm coaching now, named Mugu, took this approach and it paid off immediately. (Sharing this with permission.)

He sent me this screenshot from his results and he said he was worried about slippage in this strategy.

The first thing to note here: there are a lot of trades - which is a good thing.

My suggestion was to take his strategy and filter out the poorest trades using the Cruncher, with an eye towards a rule that weeds out some thinner names.

With that many trades, there should be plenty of meat left on the bone by adding another rule or two.

I checked in with him a couple of days later, and here were his results:

And then the next day:

Fewer trades (although still room to remove more poor sets of trades potentially), and the remaining trades are more profitable.

But that's not the best part.

Here's what he said:

Hi Dave, I've applied an extra filter. I'm observing how the strategy behaves on paper account over the next few days. It had fewer trades over the last 2 days, both days green. I've had too many false positives - I have measured excitement, I'll observe further and let you know.

He learned a valuable lesson and a way to improve his strategy without paying the market any "tuition."

By NOT being in a hurry.

Nice job, Mugu!

-Dave

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