r/algotrading • u/Brilliant-Unit-1726 • 1d ago

Strategy What fails first, the algorithm or people's patients?

Hello all, I had no idea this group existed and also had no idea "algorithmic trading" was what I'd been doing for years so thanks for allowing me to join!!!

After reading through all the different posts I can't stop from wondering by so many people "fail" at the algo approach and if the reasoning behind the perceived failure is a lack of patience, or is in fact the algorithm. Don't get me wrong, I know this isn't for everyone nor is it easy, but I'd guess 99% of the people who go down this route have the basic fundamentals to build a modestly successful algorithm. Modestly successful is where I'm guessing most people give up, especially if the initial capital people can invest is low?

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43

u/Accomplished_Cash495 1d ago

Depends on so many factors

  • what are the patients in for
  • how qualified is the dr

Still overall id say probably the algorithm

7

u/Brilliant-Unit-1726 1d ago

haha, I get it, I'll fix it.

2

u/qw1ns 5h ago edited 3h ago

I use algo to trade past 8 years.

The best option is approach some mathematical and statistical analysis using past data to find out winning chances, take a bet. True, either fundamental or technical, we take a bet based on assumptions.

That involves learning the market with proper education, identifying opportunities, finding calculated probabilities of winning chances, asset allocation, risk management and psychological control over a well backtested strategy ( logic )

Anything I said can break or fail anytime ! The real issue is future is always unknown, neither anyone nor algorithm can find it.

Retail has higher chances of failure in psychological control, risk management and strategy itself by greed, earn fast money rather than learn properly for less loss approach ( key point to be successful for long time and consistent). The faster retailer learns to reduce loss approach, the better for success.

Most of the retailers want quick money and becomes victims of market, blows the account, never have money.

The above statements are theory. Here is practical examples:

When I had huge sum to pay off my primary home mortgage ( rate was 3.25% ), my friend suggested me not to pay off and invest in market to earn more, but I paid off.

When asked me why, I said who can guarantee me that I will be successful always ( and not blow off in future) and let me be debt free to lead a stronger financially ( esp people like me above 40s age).

Whereas I saw WSB posts, someone had 678k cash bought some reckless spreads ( after few successful returns ) lost money and went negative 670k broke !

In short, This is called Margin of Safety that many retailers do not understand in first place.

Read

https://www.reddit.com/r/Trading/s/2MELwSiIWg

1

u/Brilliant-Unit-1726 4h ago

Thank you for the very well-thought-out reply, it is very rare here!

"Most of the retailers wants quick money and becomes victims of market, blows the account, never have money."

100% agree!

20

u/Otherwise_Gas6325 1d ago

How you managed to spell patience wrong not once but twice is wild

11

u/Pip_install_reddit 1d ago

To be fair, I do lack patents.

10

u/Brilliant-Unit-1726 1d ago

Hahaha, it's my 2nd language, sorry.

6

u/Liviequestrian 1d ago

Personally, if I have a successful backtest showing a max drawdown of like 20%, and then i go to test it live, there is a HUGE psychological hit you take when that drawdown manifests in real life. Getting through it is incredibly difficult, ESPECIALLY if the drawdown happens immediately after going live 😬

A lot of people quit at that point, myself included.

3

u/Sketch_x 23h ago

Yah, max drawdown 20%, get to 5% and panic & disable

3

u/CptnPaperHands 18h ago

Have you tried not having a drawdown?

I joke - but the way that I build systems live is just deploy them on an account with a few thousand dollars once the R&D has been done + I'm fairly confident it'll work. Then a 20% drawdown is "only" a few hundred bucks and it doesn't matter much. If I were to throw a large amount at it and see a 20% drawdown on the entire folio, I'd be a bit more worried

1

u/ABeeryInDora 1h ago

Isn't that more of an HFT thing? I figure for us slower folk it might take a while to evaluate live if a system is any good.

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u/Brilliant-Unit-1726 1d ago

That's part of what I'm thinking, a snapshot will discourage most people if that timeframe is negative or barely positive.

2

u/Liviequestrian 1d ago

Also I've found that my max drawdowns irl tend to be much larger than in my backtests, idk if that's just my luck or not. But seeing a 1.5x max drawdown immediately after going live definitely shakes my confidence, lol.

-1

u/Brilliant-Unit-1726 1d ago

I've personally never back-tested a single project. It's nearly meaningless information that gets in the way of actual performance analysis.

3

u/valuevaluex 23h ago

Backtests are live tests in the past. Think about it.

1

u/Liviequestrian 1d ago

Well I'm no expert, but I do think backtests help. Mostly because it takes so much time to live test my strats. But I've definitely learned not to rely on them. Mostly right now I'm backtesting and then testing the successful backtests live. Here's hoping, lol! And I'm currently gritting and holding through a huge drawdown 🤷‍♀️ real life is messy and so are the real life trades.

1

u/xburbx1 1d ago

So how do you go about putting a plan together ? It’s forward testing only?

1

u/Brilliant-Unit-1726 3h ago

Yes, trust your process and abilities and move forward. Of course, be practical and limit exposure in the beginning.

1

u/Kaawumba 16h ago

A successful back test doesn't guarantee success. But a failed back test nearly guarantees failure. Rethink your process.

6

u/RoozGol 23h ago

We specifically make it algorithmic because we lack the patience that is required by manual traders. Also it is mechanical and does not depend on any of our emotional properties. If it fails, it has flaws.

3

u/88steezy 22h ago

Nothing worse than my patients losing their patience

3

u/coinstar0404 22h ago

Depends on how sick the patients are and which "people" they belong to.

2

u/RobertD3277 22h ago

If the algorithm is well crafted, people's patience and/or hardware/software.

2

u/Tradefxsignalscom Algorithmic Trader 21h ago

My patients fail me more often than my algorithm!

1

u/ungodlyActingTALENT 23h ago

What I’ve learned is that trading live and losing money is far less satisfying than spending hundreds of hours backtesting and developing algos… to lose money.

1

u/RobertD3277 22h ago

If the algorithm is well crafted, people's patience and/or hardware/software.

1

u/BAMred 20h ago

my patients always fail me.

1

u/LoveNature_Trades 20h ago

maybe it’s how the algo is written, conditional statements, logic, certain checks.

1

u/francisco_DANKonia 19h ago

If your patience fails, that is usually because your algo is trash

1

u/BeerAandLoathing 18h ago

little patients, like a pediatrician that hates kids

1

u/ankole_watusi 16h ago

It’s thinking that backtesting works, that training AI on historical data works, or that paper trading is an accurate indication of real world results.

1

u/PlutosTrading 1h ago

Honestly I feel like it depends on the type of strategy and value at risk involved in each trade. But for me both will fail if they are not secured by some good rules.

1

u/Impressive_Essay8167 42m ago

The situation is doctors looking for entries while their patients slowly expire down the hall.

1

u/BAMred 20h ago

judging by your spelling, your algo will fail first.

1

u/Brilliant-Unit-1726 19h ago

Okay buddy 👍 I haven’t worked a day in over 6 years and never will again.

1

u/BAMred 18h ago

it was a joke. lighten up. glad you're successful. Without giving away details, what's your strategy fall under? Or are you independently wealthy so you have room to live off hedged earnings even if you don't beat the market. curious