“Remember that 50% of building a system is thinking about the goal” (from The Psychology of Magicians)

Advice from the author who trained many traders (Mr. Van K. Saap).

“Remember that 50% of system building is thinking about goals.”

Although it is described as a system,

it is also an algorithmic trading like EA,

and a trading rule for discretionary traders.

Isn’t 50% too much?

That’s what I thought,

but he strongly emphasizes how important goals are.

Indeed... “I want to win.”

But what kind of win we are seeking is vague.

Should we aim for a stable 10% per month, or try for a major wave once a year?

To earn living expenses as a full-time trader,

or to grow assets over the long term as an investment?

Just changing this goal setting completely changes the required risk tolerance,

the time horizon, and the nature of the methodology.

I develop and sell EAs,

but I wonder if I have properly explained the goals and risks of EAs?

I feel I haven’t done so adequately...

Reflecting on this.

• What monthly PIPS should be targeted?

• How should capital growth be envisioned?

• What about trading frequency?

• What is the assumed maximum drawdown percentage?

• What is the assumed maximum number of consecutive losses?

• Will there be prolonged periods of unrealized losses?

• Is there a possibility of a forced stop-out with one shot?

There seem to be more items...

EAs like grid averaging and martingale are high-win-rate,

but many products can be stopped out in a single hit.

Even if that cannot be avoided...

the developer has a responsibility to explain it properly.

Until next time.

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