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You Need a Trading Track Record
Written by: PaxForex analytics dept - Friday, 27 June 2014 0 comments
A TASK THAT MUST BE DONE
A good trading track record is a noble achievement that’s being aspired to. It’s a proof of your trading prowess – an absolute requirement that must be provided before you’re viewed as a pro, whose trading strategy is worthy of emulation or who could possibly be considered as a money manager.
Maintaining a consistent track record isn’t something that’s easily achieved, particularly in the face of the vagary of the markets, but it’s absolutely possible. A typical account history would have losing trades and winning trades; with average losses that are much lesser than average profits. This account would surely have occasional roll-downs, which would now and then be recovered, provided the trader is using a positive expectancy system. Therefore a good account history is the one which survives all the odds of negative trades and drawdowns over a long period of time. The account history thus would have a current balance that’s higher than the initial deposit, no matter how small or big the percentage profit is.
It’s recommended by certain trading strategists that a trading system ought to be tested for at least, 4 months on live market conditions. If the strategy then enables the account to be in a plus zone after the 4-month period, then one could use it on one’s account, with the premise that it would survive the future uncertainties if its rules are faithfully adhered to. That kind of strategy must enable the user to open long and short trades. One expert of trading track records declares that an account history must be, at least, 2 years old before the strategy/strategies used on it could be judged as being time-honored and having any chance to survive the future uncertainties.
Mark Jurik, a celebrated trading maverick, once said that no strategy should be considered as being fit to be published unless a minimum of 500 trades have been placed with it. He also went ahead to state that such strategy shouldn’t be considered as being fit to be used in managing funds unless a minimum of 1000 trades have been placed with it. If an account history is still in plus zone after this, then the strategy used on it is really worth being considered.
One thing must be put in mind though; you don’t need to double your account several times before you can be seen as a pro. During the bear markets of the year 2008, many funds managers ended the year with mild or severe roll-downs, and yet, there was someone who ended the year with only 1% profit. With some shallow thought, one may think that’s far from being impressive, but the real fact is that the person was able to avoid an annual
roll-down. This means he was able to keep the portfolio he managed safe. The most import thing is the existence of your portfolio, not the profits made on it.
Build a track record, for it’s an absolute essential. A typical investment bank might consider you for a fund manager position if you’d been trading on your own account for 3 years with annual profits of around 30%. You trading track records would, undoubtedly, open new doors for you. Go to various trading forums, blogs and websites, you’ll see many participants who know lots of things about trading. These people live and breathe trading, yet the only people to be respected are those who’ve good track records. There are many people who do the talking, but they don’t do the doing. Therefore, we respect only those who do the doing, and do so successfully.
Having a good track record would make you wealthy, since many people would approach you with offers. There are renowned pros out there. Why do you think they’re renowned? They’ve good track records. Billionaire and millionaires traders have, in most cases, made their money from their investors. They’re able to do this because they’ve track records. In the trading world, the most important qualification on the battlefield of the financial markets is your track record, not your PhD.
Conclusion: You shouldn’t find an alibi for not having a track record after many years of trading. And this is achieved by giving your winners some leeway, as you truncate your losers. Negative positions must be closed. You see, the journey towards financial freedom is no picnic. In reality, it’s ups and downs in all aspects, especially if you don’t know the secrets to permanent success in the markets. No wonder only 10% enjoy everlasting success in the markets. You’ll often go through periods of losing streaks and wrong trades, to the extent that, unless you’re highly determined, you’ll get fed up with trading and throw in towel. If you goal is to get rich quickly, and you don’t get rich as fast as you want, you’ll decamp and join those who’ve stopped trading. Rather, your goal should be to get rich slowly: a record of 15% to 25% per annum is even a commendable achievement.
I’d like to conclude the article with the quote below:
“Expectancy (and statistics, for that matter) proves that cutting losers and maxing winners will eventually work out to be consistently (but not always) profitable.” – Dirk Vandycke