Well, there are many reasons, of course. But one of many, and unfortunately a pretty common and obvious one, is this:
Too many traders simply keep using approaches that do NOT work anymore.
Especially approaches that you can find for free literally everywhere. Or, the approaches that EVERYONE talks about.
I still remember how about 10 years ago one of the biggest hits was Statistical Arbitrages. Many traders believed it was the next “hot thing” and most traders I was in touch with were working on some simple StatArb models, based on the plethora of free information available everywhere. Some even started investing a lot of time and resources into developing their own StatArb software…
Guess what? NONE of them trade StatArbs anymore. Including me. (And quite frankly, I’m very happy that at that time, all I did was use some simple models coded in an Excel spreadsheet, rather than wasting resources on building my own proprietary software).
Why? Because NONE of the easily accessible StatArb models work anymore.
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Yes, there still ARE some very successful StatArb traders. But they do NOT work with any models that you can find for free on the internet, or in cheap books. They work with UNIQUE models, their UNIQUE MECHANISMS.
(Btw, this is also why I personally have been for many, many years totally UNINTERESTED in all that free crap on the internet. Once it is out there for free, it is not unique anymore. It is very likely obsolete and very likely doesn’t work anymore – that means, it will probably lose you a small fortune.)
So, if you really want to succeed in trading, you definitely need to work something LESS accessible, or preferably, with your OWN unique models and mechanisms (which, of course, requires a lot of creativity and time to build, but that is part of the game and it’s totally ok).
When it comes to my own trading, I am literally OBSESSED with coming up with unique mechanisms and totally new trading stuff. And I ALWAYS encourage my hedge fund team to do the same. (In fact, this is also how I assembled my hedge fund team – every individual in the team needs to keep coming up with new ideas and unique mechanisms, that has always been one of my key requirements.
And what unique mechanism did I come up with?
One of my favorites is Dynamic Position Sizing, which is a totally DIFFERENT way to approach position sizing.
Another is my Smashing False Breakouts techniques for reducing false breakouts.
But of course, I’m most proud of my unique approaches to robustness testing, like the ROBUSTNESS LEVELS concept that I share in the Breakout Strategies Masterclass.
You see, creativity in trading DOES matter.
It gives us the unlimited opportunity to always have something better and more unique than the vast majority of (losing) traders.
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