When you analyze a potential trading strategy how do you avoid being a calculator millionaire?
I mean hindsight is pretty dangerous. It is very easy to look a chart and see how some simple setup could be very successful. You might say back test. But that is not so easy for me because my setups are not based on a simple indicator signal. I might scan for something like that. But then reject 95% of the setups after looking at the chart. I think my philosophy and strategy is good. I am making a little money in equities. Originally lost a lot in futures. Considering going back now that I have much more knowledge and experience. But there is also much more risk. Hence my concerns. I am always checking my thinking. Just because some setup worked one day does not mean it works everyday. I am always trying to avoid the trap of being a calculator millionaire. Just wondering how others avoid this very dangerous trap.

So what do I mean by calculator millionaire?
This is the problem of making overly optimistic projections because you are under estimating downside risk and not being objective in your analysis.
The answer of course is simply to be aware of the problem. To constantly step back and ask if you are missing something.
This post is in many ways just my way of reminding myself not to fall into that trap. Its okay to be positive and aggressive, but don't forget to look at when and how your setups fail.

Well if you were backtesting a system I would say Walk Forward Optimization should help prevent being a 'calculator millionaire' but since your trading is more discretionary I honestly don't know.

mcteague 

Just because some setup worked one day does not mean it works everyday. ... Just wondering how others avoid this very dangerous trap.

Just think in patterns: One rule set for every weekday. Every weekday has some normal behavior with high probability.
If your patterns work fine on some days - repeat them in life tests or with walk forward testing.

Be sure you know your instrument by heart.

Good trades!
And - just again to not forget: Know when NOT to trade!

GFIs1

I'm not completely sure what you're asking about (even though you explained it) but it sounds to me like you are not willing to accept losses in some fashion. You are allowed to define your downside risk so how is it possible to underestimate it? Unless you don't think your stop will get hit. You wouldn't be the first.


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