Another one of my long-practiced hobbies is fishing. I find it very enjoyable to go and sit on a riverbank, beach or in a kayak and see what I can get for the day. The more involved in trading I become the more I realized the two overlap.
Some days the seasons, weather and tide all seem to line up. The air is crisp, and the wind is calm. I can spend hours casting in areas where I have seen plenty of fish before and get nothing. This can sometimes happen in trading as well. Indicators are starting to line up, price approaches desirable levels, the markets are moving one way or the other, but none of your entries are hit. Nothing is triggered and the day comes to an end and not money is made. In these situations, it can become quite easy to abandon a strategy you know work and have proven time and again, to abandon your tried and true fishing spot as it were.
You have got to be patient!
Just because I have one bad day of fishing does not mean I give up go to the store, buy all new gear and start trying places on the other side of the state. Similarly, just because you have one stretch (day, week, month dependent on time frame) where your system does not trigger a trade does not mean you need to through it way. Yes, strategies and edges over the market can and will deteriorate however I have not seen dry spells signal this as much as just deteriorating win rates and PnL for a system. Cause for concern would be when the dry spell lasts far longer than anything that happened during your back-testing period, which I try to keep to at least five years where possible. At that point I would start looking for a fundamental explanation as to why a certain asset may have changes. In my case dry spells are usually caused by a lack in volatility. “Has a certain asset/fish’s behavior changes? Is there a fundamental factor driving consolidation?” Both are questions I ask myself when handling dry spells in both fishing and trading. “Should I have gone to the store and bought live bait instead of using a questionable Walmart lure” is another strictly fishing question.
Patience is key in both trading and fishing. Both carry a great amount of reel (sorry for the pun) in the moment conditions and changes that could cause deviations from past experiences. Some years the population of a certain fish explodes, and they aggressively hit every and anything you through into the water, other years its weeks in-between sightings. Like most things in life trade formations and fish come and go in seasons, it is simply a matter of whether those seasons line up with what we expect and want them to be.
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Thank you for reading the article! Please remember none of this is to be considered financial advice and that these articles are simply observations I have made while learning to trade.
I am going to be starting to develop a new strategy in the coming weeks and I plan on sharing that process with you guys over the next few articles. So, look out for them in the next week or so.