THE PURSUIT OF TRADING EXCELLENCE
LOVE HURTS, AND SO 'CANI' TRADING
A couple of weeks ago I made a trade on the AUS200, and I was wrong. Very wrong, and paid the price for it.
If I’m honest and at the risk of sounding cocky, this is actually relatively rare for me these days. I make a lot of losing trades due to poor discipline and/or trying to make something out of a choppy market, but I rarely get both size and direction wrong in any kind of major way, given the size and quality of the data I consider before making a trade and how that protects my downside.
I’ve said before, the most pumped I get when trading is actually when I make a loss, and the larger the loss, the more excited I get. I’m excited because I’m confident that I can reverse engineer the solution, never make that same mistake again, thereby imrpoving my future profitability.
As I reflect on the recent misstep with the AUS200 trade, it becomes increasingly clear that this experience is part of the journey of Constant and Never-Ending Improvement (CANI). In trading, as in any field, the path to mastery is paved with countless moments of challenges and learning opportunities. Embracing the CANI principle means recognizing that every loss, every misjudgment i make, is not just an isolated event, but an opportunity for growth and refinement. It's this relentless pursuit of improvement, and commitment to learn and adapt, that transforms a setback into a stepping stone towards the next profitable trade. In my opinion trading isn’t just about perfecting strategies or understanding markets; it's about cultivating a mindset where every experience, good or bad, becomes a valuable lesson in the continuous quest for excellence.
In this particular case, it forced me to backtest and reconsider my beliefs on a number of market variables which I had previously had a strong view of. Manually testing various ranges for these variables led me to the following results when applied over the last 3 months. These trades do not occur every day and are meant to be traded as much more targeted, high-probability setups. This is what I discovered with the proposed strategy:
Long trades: 14
10pts Target Hit Rate: 86%
20pts Target Hit Rate: 71%
Average Move to High: 21pts
Max Drawdown (Target not hit - Hold to Close): -13pts
Short trades: 16
10pts Target Hit Rate: 81%
20pts Target Hit Rate: 69%
Average Move to Low: - 28pts
Max Drawdown (Target not hit - Hold to Close): 0pts
Note that the days which didn’t hit target also gave significant opportunities for profit, as the market topped/bottomed much higher / lower than the close. For example, in the worse case short trade which finished flat, the market rose 24pts intra day, so for me, I would be taking short positions at open, +10pts, and +20pts, for a net result of +30pts. As I progress, I can also structure the strategy with my ‘get out clauses’ based on the data, where I identify any trades that don’t work, and set my stops on the other side of that time of day, maximum day range etc.
I’m also self-aware enough to know that any strategy needs to capitalise on the largest day moves, to feed my FOMO psychological condition, so was happy that the strategy also traded 12/19 of the largest end of day falls over the last 3 months (CPI, RBA etc made up most of the others) and interestingly only 3/15 of the largest rallies, giving me some more homework to go away and do on that irregularity (testing done and strategy now found).
My overall point is, I’ve been trading indices for a long time, and with my current strategy working well, it would be easy just to hit ‘comfort’ mode on the overall strategy. But I continue to test and iterate and in doing so have found another data point to improve my overall AUS200 strategy even further, and further increased the value that I can give to traders on my daily stack.
The way that I backtest my various trading hypothesis will no doubt be different from yours. I know many people who are much smarter than me who can do all of this work in half the time through coding and programs like ProRealTime and others. When I first started out I had literally hundreds of A4 pages of my scribble, with the data pulled from charts. Anyone can do this.
So instead of hiding from your losses, the idea with CANI is to embrace them, as hard as it is. I’m reminded of this when I see people / finfluencers on the mighty blue bird (RIP) have deleted tweets where they’ve made a call and turned out to be wrong. That’s not CANI. Of course it hurts to be wrong, especially publicly (I should know, it happens to me a lot), but in my opinion, it’s a necessary penance to pay for long-term improvement.
Have a good week.
Cheers
Marto