When you are driving down the road do you only look in the rear-view mirror or do you look at the road in front of you?<\/p>\n
When you are making investment decisions do you make them based on what you expect in the future or what has happened in the past?<\/p>\n
When you are choosing a trading system\/methodology do you look at past results only or base your choice on what is likely to happen in the future?<\/p>\n
Based on conversations I have had recently with\u00a0brokers, clients and potential clients, the tendency seems to be looking at what has happened in the past NOT what is likely to happen in the future.<\/p>\n
If you don’t drive by looking backwards, then why make investment choices by looking backwards?<\/p>\n
I think I know why.\u00a0 Because it is MUCH easier to look backward (past) than it is to look forward (future).\u00a0 Also, you are never wrong when you look backward but are often wrong when looking forward.\u00a0 So why bother even looking forward if you are probably wrong!\u00a0 I think that mentality has to be overcome for successful investing.\u00a0 I know I have had to deal with this…it is very easy for a system developer to only look backward since that is the data we have to test on.\u00a0 However, I think trading and investment\u00a0system success only happens when one develops the ability to base decisions on the probable future instead of the certain\u00a0past.\u00a0 Let me repeat that, I assert that trading system and investment success only happens when one develops the ability to base decisions on the probable future instead of the certain\u00a0past.<\/strong><\/p>\n Now, how do we determine the probable future?\u00a0 Well, unless you can see the future (I can’t), the best you can do is look at what is happening right now.\u00a0\u00a0To continue with the driving analogy, we can look at our speed,\u00a0weather conditions, number of cars on the road, lanes of traffic, etc. to determine our probable future (will we get where we want on time, is someone going to pull out in front of us, etc.).\u00a0 For trading, are the strategies performing as expected, what is current\u00a0volatility and 3 month implied volatility and is that good\/bad typically for this system, is there any outside influence on the market (i.e. FED POMO buying\/selling), etc.<\/p>\n System trading is not easy.\u00a0 And trading systems after you have had big losses is even tougher.\u00a0 Specifically with my systems, by far the most common thought is that these systems don’t work anymore because of the results the first half of the year.\u00a0 Well, ALL systems have drawdowns and now these systems have come out of one of\u00a0their biggest ones, and I\u00a0assert\u00a0the reason for the big drawdown\u00a0is because the market behavior changes when the FED is pumping in money like it did during QE1 and QE2 (ref. blog post: http:\/\/trendfindertrading.com\/blog\/?p=1920<\/a>).\u00a0 Now that the intervention is over, these systems are back to performing as expected.\u00a0 Also, current volatility and 3 month implied volatility are high, which is when these systems typically make their largest profits.\u00a0 Is it certain Trendfinder’s systems will have large profits the next few months?\u00a0 Of course not, but based on current conditions that is the likely future in my opinion.<\/p>\n Take on looking forward not backward.<\/p>\n","protected":false},"excerpt":{"rendered":" When you are driving down the road do you only look in the rear-view mirror or do you look at the road in front of you? When you are making investment decisions do you make them based on what you expect in the future or what has happened in the past? When you are choosing […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"sfsi_plus_gutenberg_text_before_share":"","sfsi_plus_gutenberg_show_text_before_share":"","sfsi_plus_gutenberg_icon_type":"","sfsi_plus_gutenberg_icon_alignemt":"","sfsi_plus_gutenburg_max_per_row":""},"categories":[4],"tags":[],"_links":{"self":[{"href":"http:\/\/trendfindertrading.com\/blog\/wp-json\/wp\/v2\/posts\/1982"}],"collection":[{"href":"http:\/\/trendfindertrading.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/trendfindertrading.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/trendfindertrading.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/trendfindertrading.com\/blog\/wp-json\/wp\/v2\/comments?post=1982"}],"version-history":[{"count":14,"href":"http:\/\/trendfindertrading.com\/blog\/wp-json\/wp\/v2\/posts\/1982\/revisions"}],"predecessor-version":[{"id":2208,"href":"http:\/\/trendfindertrading.com\/blog\/wp-json\/wp\/v2\/posts\/1982\/revisions\/2208"}],"wp:attachment":[{"href":"http:\/\/trendfindertrading.com\/blog\/wp-json\/wp\/v2\/media?parent=1982"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/trendfindertrading.com\/blog\/wp-json\/wp\/v2\/categories?post=1982"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/trendfindertrading.com\/blog\/wp-json\/wp\/v2\/tags?post=1982"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}