When I started this blog in March, my target was 100% annual return. This week I achieved that return in less than 7.75 months. Of course that feels good, but it also offers a chance to reflect.
First I should note that over 95% of the gains came after June 3. Why is that important? That is when I finally gave up on my attempt to develop a completely computerized trading system. Those first three months I had results not much different from the last few years when I was more a hobbyist than a professional trader. When you make that kind of commitment it is really hard to say "I was wrong for the last five year. My grand project was a failure." So I really had to go back 20 years to when I was really good at that, and recapture my inner trader.
The first and biggest obstacle was psychological. One of the main reasons for the 'grand project' was to remove or at least reduce the emotion from trading. Back in the day I had great financial swings coupled with great emotional swings, which is certainly one of the reasons I stopped. The 'grand project' certainly reduced the grand draw downs, but it never really had the grand gains either. Looking back on it I feel I was in an grand emotional grey area for all those years.
While I eventually scrapped the system trading techniques, I did salvage the trading execution platform. One of the biggest problems back in the day was the need to call every time you made a trade or closed a trade. The whole act of analyses and mustering the emotional wherewithal to pick up the phone was actually quite emotionally strenuous for me. Having a good automated execution platform really takes a lot of that out of the equation thus keeping the emotional energy more on the trading where it should be.