Last year I tried my favorite Wonton soup in a Michelin restaurant.
And I was utterly disappointed.
It was in Kuala Lumpur, in the famous Din Tai Fung restaurant at Bukit Bintang. It is 1 Michelin star restaurant, with many awards and recommendations. (Including the NY TIMES #1 restaurant in KL).
I love Wonton soup. And I love the way they prepare it in this restaurant. A team of chefs prepare it behind a glass wall. In white, surgeon-like uniforms. With tweezers in hands. And with other weird tools. Giving the impression of performing surgery instead of preparing wonton dumplings (which come in the soup).
Everything is very impressive on the surface.
But the actual experience was quite different.
First, you have to collect a number and wait up to an hour and a half to get in.
Once you’re in, there’s almost no space. You’re squeezed on a very tiny table. Wedged between two other people, shoulder to shoulder, literally touching your body. The chair is so low for a European, that my knees were touching my chin.
But ok, “we’re here for the food”, you might think.
Well, this was – at least for me – the worst part:
Once they brought the famous Wonton soup…
…I could not recognize any difference from the Wonton soup I normally eat in my favorite ‘Mak’s Chee Authentic Wonton’ KL restaurant. Which I can enjoy for half the price, and with half the people around!
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So yes, often we’re most disappointed by the things we expect the most from.
And the same goes in trading.
3 years ago I got to know a guy who was obsessed with adaptive indicators. He was swearing on them and he was also making the impression that this is the final solution for the entire World (if not Universe).
So, I got persuaded and spent about 2 months testing them. Plus inventing my own adaptive indicators that I could use for breakout strategies too.
In theory, they really looked great. So, I instructed my hedge fund team to build some strategies based on them too. We definitely got some built for the database.
I used them for filters and for Points Of Initiations. (If you’re not familiar with my breakout strategy model, I recommend downloading the FREE report on ‘7 Proven Tips To Build Profitable Breakout Strategies Fast’ ebook).
But last month we got a surprising truth about these adaptive indicators.
We were doing some massive analysis and assessment of all the strategies in our database.
It is over 500 very robust breakout strategies among the majority of futures markets. Plus some stocks and ETFs. (All the strategies built with the Breakout Strategies Masterclass).
When we combined all the 500+ strategies together, without any further selection or even without any normalization, we got an equity curve like this:
Again, no normalization (many futures markets have very different tick value and min. move). No selection. This is a very rough image. Yet, it performs very well. Especially considering that most strategies were built 3 years ago already. So, most of them are true out-of-sample since 2016.
Then we decided to start looking closer at different groups, based on different trading logic and conditions.
And one group stood out as the worst performing group. It looked like this:
It was the group based on adaptive indicators.
Yes, I was SO disappointed to see that.
In fact, I thought the adaptive indicators could be one of the best performers.
But they weren’t.
So, now I’m not so keen on fancy indicators.
And I am staying with the cheaper ‘Mak’s Chee Authentic Wonton’ too.
7 Proven Tips to Build Profitable Breakout Strategies FAST
✓ The most common mistakes breakout traders often make that costs them money – don’t let these catch you out
✓ How to choose the best markets and timeframe for quicker and more consistent results
Episode 013: Listener question – “What’s the best software for executing and monitoring strategies?”