Playing since 2005 lost 13+3 lakhs
- Thread starter stock72
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How is your system created? If it was past history, which years?
Did you test it on any past years?
Our past history is only a one sample out of many possibilities whereas the future still has all the possibilities. Any system should target all the possibilities, or atleast it should work great for one of the possibility and make little or no losses in the other possibilities. With time long enough the certainty of a given possibility increases and the strategy will change your portfolio once and forever after that, never to look back.
If you are only making a strategy fitting the past history which is a random mix of various possibilities, it is not necessary that it will work in the future. Given long enough time, it will fail, do worser than the market indices because it doesn't account for other samples which the future will certainly take given long enough time. Or it may happen that the worst possibilities that your strategy doesn't account for, start from next two months and you will again be out of the game, this time sooner. There is little probability that the strategy will work for the future, as it needs that the future should only have the same samples that occured in the past.
You can self-delude yourself in the name of a system for long enough. Self-delusion is human nature. Lot of reality shows are thriving on this. While many people are not investing in stock market or buying lottery tickets as they have much risk aversion, their innate nature is reflected in the excitement with which they watch TV shows wherein the show features some random outcomes. There was one Telugu TV show, where there was a prize for guessing the right door behind which there will be a said object. The guesses are certainly random, thanks to this show unlike KBC show, given large number of shows, as in the case of tossing a coin, given large number of tosses there happens a situation where you will find a series of heads/tails as if there is no 50% probability. When such possibility occurs, the participant in the show gets to win all the money starting from 10k kind of 1st prize to 10 Lac kind of final prize. Some people play probability well and they only toss the coin few times, and take the profit if it came, after first few samples. As this show goes on every work day, it is easy to see why they attract attention of people, all ages and kinds. People like to experience that adrenaline rush of expecting something without calculating odds or by throwing the rationality out of the window. They rest themselves everytime this show starts again. Even the replays too have some viewing power. My trading too started this way. I look back and smile at myself. I rather play computer games for fulfilling the need for adrenaline rush. Why use lot of money for that?
One thing you could have done is to test your system on the past itself. If I am not assuming, I want to ask, how have you tested your system?
What you could do is to create the system on say, first 3 years of past five years and then test it on last two years. Same way you can change the number of years and test it. You can also interchange the years, say fit your system to 2nd, 4th and 5th years and test it on 1st and 3rd. See how the results are in all these combinations. Does it appear like a random series?
Did you test it on any past years?
Our past history is only a one sample out of many possibilities whereas the future still has all the possibilities. Any system should target all the possibilities, or atleast it should work great for one of the possibility and make little or no losses in the other possibilities. With time long enough the certainty of a given possibility increases and the strategy will change your portfolio once and forever after that, never to look back.
If you are only making a strategy fitting the past history which is a random mix of various possibilities, it is not necessary that it will work in the future. Given long enough time, it will fail, do worser than the market indices because it doesn't account for other samples which the future will certainly take given long enough time. Or it may happen that the worst possibilities that your strategy doesn't account for, start from next two months and you will again be out of the game, this time sooner. There is little probability that the strategy will work for the future, as it needs that the future should only have the same samples that occured in the past.
You can self-delude yourself in the name of a system for long enough. Self-delusion is human nature. Lot of reality shows are thriving on this. While many people are not investing in stock market or buying lottery tickets as they have much risk aversion, their innate nature is reflected in the excitement with which they watch TV shows wherein the show features some random outcomes. There was one Telugu TV show, where there was a prize for guessing the right door behind which there will be a said object. The guesses are certainly random, thanks to this show unlike KBC show, given large number of shows, as in the case of tossing a coin, given large number of tosses there happens a situation where you will find a series of heads/tails as if there is no 50% probability. When such possibility occurs, the participant in the show gets to win all the money starting from 10k kind of 1st prize to 10 Lac kind of final prize. Some people play probability well and they only toss the coin few times, and take the profit if it came, after first few samples. As this show goes on every work day, it is easy to see why they attract attention of people, all ages and kinds. People like to experience that adrenaline rush of expecting something without calculating odds or by throwing the rationality out of the window. They rest themselves everytime this show starts again. Even the replays too have some viewing power. My trading too started this way. I look back and smile at myself. I rather play computer games for fulfilling the need for adrenaline rush. Why use lot of money for that?
One thing you could have done is to test your system on the past itself. If I am not assuming, I want to ask, how have you tested your system?
What you could do is to create the system on say, first 3 years of past five years and then test it on last two years. Same way you can change the number of years and test it. You can also interchange the years, say fit your system to 2nd, 4th and 5th years and test it on 1st and 3rd. See how the results are in all these combinations. Does it appear like a random series?
Last edited:
Stock72,
Re. backtesting, a strategy tested for a streched period of time (say 5 years) is optimised to give you a good result. However, if the same is tested for each of the 5 years, you will find the results totally different.
See my below post to read more on the same, and good luck with your trading.
http://www.traderji.com/advanced-trading-strategies/70338-problem-backtesting-good-read.html
Re. backtesting, a strategy tested for a streched period of time (say 5 years) is optimised to give you a good result. However, if the same is tested for each of the 5 years, you will find the results totally different.
See my below post to read more on the same, and good luck with your trading.
http://www.traderji.com/advanced-trading-strategies/70338-problem-backtesting-good-read.html
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