Hypothetically Speaking (An Angry Rant)

It's funny: most people look down their noses at hypothetical data.

"It's hypothetical? Then it's not real. It can't be trusted."

And then comes the inevitable follow-up:

"Do you have any live performance proof?"

On one hand, I get it. People lie. Marketers lie. Statistics (if done in a deceitful way) lie.

Asking for live performance proof of a trading system is a smart question that smart people ask.

But it reminds me of something else.

I spent over two decades developing high-performance tennis players. In that time I trained all levels of players who had all levels of parents.

And here's the one thing I heard from parents over and over again, more than anything else:

"To get better, you have to practice against better people."

Makes sense, right? It's a smart thing that smart people say.

I just have one tiny question though...

THEN WHO THE @$&# DOES ROGER FEDERER PRACTICE WITH?!?

A) Federer is clearly the best of all time;

B) There's nobody better for him to play against;

C) Therefore he never gets better?

A=B, but it does not equal C.

When starting out in tennis, it can help to play against people better than you (sometimes). Fine.

But, ultimately, getting better has nothing to do with who you practice with. It comes down to your own deep focus. That's always the most important thing. It helps beginners improve and makes elite players better.

So, as smart as it sounds, thinking that practicing against better people is the only way to go is bad thinking.

Back to trading.

Yes, live performance matters. It's something you should ask for, and something that would be important to see. Absolutely.

I just have one tiny question though...

How do you show live performance if you've never traded it before?!?

Let's think about this.

What if you decided you wanted to get into trading as your livelihood? You found a methodology that makes sense and had good research behind it. Then you started testing it, incorporating a few small tweaks of your own.

Thousands of hours later you finally get to the point where you're ready to go live.

But there's one problem:

Where are the live performance results?

There are no results! You haven't traded it yet!

So what do you do? Throw it out? Go to trading forums and pick a faceless strategy that's been trading live for a few months?

Of course not. You've spent years on your own strategy and the huge amount of data says it will work. You go live with it as planned.

It makes no sense to base all of our trading decisions on live performance results. All of our trading decisions should be based on the research data.

And I'm not talking about a few months of sloppily tested data. I'm talking years and years. The longer the research period, the better. How long is enough? I say at least ten years.

If you have good research, not research meant to artificially impress, then having live results is the icing on the cake.

Only worrying about constantly hitting against better players will only work for a while (if it works at all). Deep focus will always work.

Only worrying about live performance might work and it might not. Deep research will never let you down.

Here endeth the lesson.

 

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