People think that I’m joking when I say that nowadays, automated trading strategies have a very short life. In fact, shorter than EVER.
But look how this is true almost EVERYWHERE.
10 years ago, I owned a Volvo S60. It was an insanely reliable car and I barely had to visit the mechanic or get it serviced. Today I own a new Mercedes E Convertible and have to get it serviced much more often than with any of my previous cars. (Yes, even though it’s a Mercedes).
Or, I remember, how my grandma had a vacuum cleaner that lasted 15 years. I don’t know how about you, but my vacuum cleaner barely survives 3-4 years now.
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So, to make a long story short – EVERYTHING is failing faster than ever.
INCLUDING TRADING STRATEGIES.
Trading strategies used to last years. But this has changed a lot. With constantly increasing competition in the markets (even 3rd world countries now have fast internet connections and their own great traders competing for your money).
To give you an idea of how serious I am. Here is a screenshot of the recent combined performance of trading strategies older than 3 years from our hedge fund database. (Just a note, these are SUPER ROBUST strategies, passing our extremely tough robustness testing procedures):
Of course, we don’t trade them. We already know the longevity of a trading strategy is usually much shorter (I have a complete coaching session in the Breakout Masterclass on this topic, including much deeper research).
But even newer strategies that we do trade are slowing down after 1.5-2 years. It’s a bit noticeable on one of the portfolios we’re currently trading:
Yes, I think it is time to start calling it obsolete. (And yes, we’re already working on an upcoming refresh – which is not part of our regular procedures).
So, how to get out of this mess?
You need a constant flow of fresh, new strategies.
I’ve been saying this for years but still, there are too few traders really getting it.
And you need to be constantly refreshing your portfolios too. (I personally don’t believe in a strategy older than 2 years).
Please, take this seriously.
Do yourself a favor and learn to produce GREAT strategies nonstop. (And please, I’m not talking about software that automatically generates strategies randomly – which is often just overfit crap. I’m talking about quality strategies, based on a proven model, proven components and proven robustness testing criteria).
The easiest way to start is through our free 14-day breakout challenge, in which I share more of my M.A.C. framework to create a constant flow of high-quality trading strategies.
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