PERFECTIONISM AND MINIMUM VIABLE STRATEGY
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DISCLAIMER:  Futures trading systems and commodity trading bear a high degree of risk. People can and do lose money.
Hypothetical results have many inherent limitations. Past performance does not guarantee future results. 

 

ACTUAL RESULTS SHOULD BE VIEWED WITH CAUTION, BECAUSE PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.

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#049: PERFECTIONISM AND MINIMUM VIABLE STRATEGY

The experience that I have gained from my students, as well as from my own trading and from building my own hedge fund, has taught me lots of important things. One of the most important was: don’t pursue the perfectionism. It is just a waste of time. What you should do instead is to improve the average to something really good.

 

Yes, even I have to admit that I used to be a perfectionist as well. My idea of any new trading product was that until it is absolutely perfect, totally spotless, it won’t get to my portfolio. But on the way, I have learnt a lot of new things. Like for example:

 

  1. If you are looking for perfectionism in trading, you permanently create more new questions than you will have answers and therefore, your projects will take too much time, some will be even never-ending, which means they are never finished and you never start with the live trading.

  2. The need of perfectionism brings a lot of questions, that are, due to the nature of this business, impossible to solve - as we work only with probabilities and insecurities. So we are getting into “Catch-22” situation which isn’t really going anywhere.

  3. There isn’t any perfectionism in trading, as trading is from its nature totally imperfect business. We need to learn how to live with this insecurity, as it is part of the business and even the highest level of perfectionism won’t solve it for us.

  4. Excessive perfectionism brings too many headaches.

  5. Excessive perfectionism brings extreme requirements for hardware reliability, which is something that is hardly possible to get even in the 21st century - so far I haven’t found a single device (mobile phone, PC, laptop, …) that would be totally bug-free.

 

My rich experience with perfectionism has learnt me to reevaluate a lot of aspects and today I incline more to the variant when instead of creating a “minimum viable product” I create a “minimum viable concept” - i.e. trading and analytic concepts that need to be brought into practice in a minimum functional condition and to improve them further while running (without trying to have it all perfect since the beginning).

 

Therefore, if you are a perfectionist and you feel that you need to postpone the live trading until everything is perfect, here is my advice:

 

  1. Start trading live the first strategy with acceptable drawdown that you find and that passes all robustness tests. This will get you over your fear and concerns and start to learn, what a real live trading is about, experience the feeling and excitement of it. It is a big difference to simulated paper trading.

  2. Let your first strategy run and in the meantime focus on another one, on your first portfolio. Your first strategy is your minimum viable product that you will slowly improve while growing to portfolio level, adding Market Internals and other new ideas.

  3. Take your bad trading days with your first strategy as a motivation to work harder, speed up, complete more strategies, make a step further (not to perfectionism, but just a step further).

  4. Use your good trading days for strengthening your self-confidence, faith and believe. Simply assure yourself that it is possible and that you can do it.

  5. Take unexpected problems and technical issues easy. You are building long term business, so in the mid-term horizon, it will be just a tiny issue and you get new, valuable experience.

  6. Appreciate yourself for every small step you make. You step out from your comfort zone, move to new levels and you deserve a self-respect. It doesn’t have to be big, crucial steps to self-compliment and self-respect for being one step further than you were yesterday (and this is what trading is about).

 

During the bad days, don’t stress out. It only means one thing - you need to relax, take some distance and get perspective. Stop for a moment, so that you can get into a relaxed state, when you get new inspiration and new ideas.

 

Personally, I still like perfectionism, but I have learnt to spread it to a long-term horizon and be grateful for every single step that I make. As it all is summing up and moving you ahead. As a matter of fact, a small imperfectionism can be quite perfect.

 

Happy Trading!

 

Tomas

 

 

 

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"Tomas is one of the most creative traders I know. He is able to generate unique trading ideas and elegant solutions to system development challenges."

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"Tomas has been a professional trader for more than a decade and I have had the privilege of monitoring his accounts in action since 2006. His systems are performing as some of the best I have ever monitored and executed. I have been in the trading industry since 2002 and worked with many developers from all over the world. Tomas is definitely the one to consider."

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MFRM, CAIA 

"Tomas is a professional trader, who for the last 10 years has specialized in developing trading systems. We have been tracking his trading systems for about 5 years and they generally show very robust, stable and above average performance. Striker is pleased to work with someone like him - a real professional with enthusiasm and deep knowledge of trading."

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"Personal consultation with Tom helped me to re-evaluate the complexity of my robustness testing and optimization processes. Plus, it has helped me with a specific plan on how to take things forward. It has given me some great ideas on how to avoid overfitting and make my testing more robust and provided tips on low hanging fruit in terms of the best markets to trade for intraday/short-term breakouts."

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"As an experienced trader, I used Tomas´s consultation to get more clarity on best-practise robustness testing procedures, risk management, and portfolio management. He was quickly able to help me refine my current trading and system development approaches, and pointed me to really practical measures that I could implement immediately. I found Tomas to be not only extremely knowledgeable but very helpful and a great teacher. This has given me more confidence in developing robust strategies that work, and I would recommend his mentoring as extremely valuable for any systems trader."

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