My Systematic Trading Journey

My story going from a losing systematic trader to a profitable one

My Journey:

I started trading about 4.5 years ago, and that journey has not been easy. I tried numerous different ways to make money. I tried trading discressionary stocks and futures, I tried intraday trading, I tried trading on a daily timeframe, nothing was working. Every time I made a few hundred bucks I would lose it all and more. I knew something needed to change…

Let me back up a little bit. I have always been interested in investing, my parents had me open a brokerage account with $2,000 of my own hard earned money when I was about 14 years old. I bought big name stocks like Apple, JPMorgan, GE etc. and over the years I did make money from these investments, but the returns where slow and boring and there where times I was in a draw down for over a year. I tried throwing a few speculative shorter term trades on from time to time based on news I heard online, those never worked. For awhile, investing was something I was just interested in and liked to talk about, but was only just a hobby, but eventually that all changed.

I remember the exact investment/trade I made which really got me hooked. I bought Enphase (ENPH) at around $3 per share in 2018, and eventually sold it around $130 per share a couple years later. I bought it because I saw a few articles online about how it was the next big thing, and I also remember looking at the stock chart and for some reason liking the shape of the price action (I had no idea what technical analysis was at this point). Not really sure why I liked the price action, but I did, so I bought. Sadly, I didn’t own that many shares in the grand scheme of things, so no, I am not a millionaire; but you could say that from this moment on, I knew I needed to figure out how to buy stocks like ENPH more often.

Covid rolled around in 2020 and everything closed. I found myself with lots of extra time on my hands. I decided now was the time to figure out how to invest/trade like the pros because if I could just figure out the key ingredient to making money from stocks consistently, then I wouldn’t have to worry about money ever again. Like I mentioned earlier, during Covid I tried every discressionary style and trading instrument under the sun with no consistent success. I thought trading was going to be easy, it’s just hitting buy and sell buttons right? Then, I can’t remember where I first learned about it, but I found myself researching systematic trading and leveraging computer code to automate strategies to trade for me. I thought this was it, this was the key I was missing to make me profitable. Having very little knowledge of coding, I decided I would learn Python and develop my own trading system (I got a C+ in my one college coding class, it was my only C in my academic life!). After about two weeks of banging my head on the table, spending about three hours a day coding, I had about 200 lines of code making my first trading system (yes, it took me 2 weeks to code 200 lines, I’m sure most coders could do that in about an hour). The system was stupid and was never going to work, but the even dumber part was I had it coded so that it was hooked up to my broker to trade for me automatically, which is a death sentence for clueless traders like me.

The code was probably the worst code you have ever seen in your life, no error handling, was slow as dirt, and worst of all I hadn’t heard of backtesting yet, so my system was completely made up from some idea I had that I told myself “has to work, there’s no way this wouldn’t work” (fyi, the trading system bought when a stock 1 minute candle closed below the lower Bollinger band and sold when the stock price bounced back to the mid Bollinger band, how original). Lucky for me, the system always crashed before it could place a trade (remember I said no error handling), so I didn’t actually lose any money from this trading system (trading system is a very generous term for this abomination of code!). After about three weeks of attempting to trade live, I stopped attempting to trade it, moved on, and went back to learning.

Over time my methods were refined, I realized I didn’t know anything and I invested into some trading education so that I could actually figure out the proper ways to trade systematically. I found myself buying a couple garbage trading courses, but I did also find myself involved in a couple very good trading courses as well. After learning much more about systematic trading, I ended up launching my first fully automated trading systems that actually worked in the beginning of 2021 (I launched about 4 live systems at the same time), they traded and individual futures contracts and traded intraday. I was nervous but excited, my first trade on the launch day made $1,200 dollars trading NASDAQ futures. I was scared to death and watched the trade the entire day, but once the trade closed I thought to myself “I did it, I figured out trading!”. The first few weeks of trading these futures systems live my P/L was up over $7,000 dollars, but I was trading with way too much risk for my account size. I had no risk management, in fact, my risk management strategy was just pray I make enough money to cover my margin costs before the first major draw down… how stupid. Well, I’m sure you can guess how that turned out. A few weeks after being up $7,000 I was down about $20,000 from my equity high, basically a 50% drawdown! I couldn’t continue this, I was emotionally a wreck because I had lost such a substantial amount of money in such a short time. I had to take a few months off from trading because of this event. I did not respect the volatility of futures trading and I got smacked because of it, and I am glad I did because it lead me to the next phase of my journey.

I wanted to get back into stocks, it was what I was familiar with and could control my risk better with a relatively smaller account. I studied up on the specifics of stock trading, learned how to backtest properly, joined another trading course for stocks specifically, and after a few more months I ended up launching my first actually well designed and properly backtested stock trading system in early 2022. This stock trading system was a trend following system on daily bars with pretty decent performance, about a 22% compound annual return, 30% max historical draw down, and much less volatility day to day than the futures trading system. After launching the system it immediately went into draw down and I was in draw down for many months, I couldn’t catch a break.

I slowly added more trading systems to the portfolio mix over time, improved/sped up my live execution, and focused a lot on journaling and meditation to keep my mind stable. Eventually, I was pulled out of draw down and made new equity highs and my portfolio has been slowly growing ever since. Do I make money every day/week/month/year? No, that’s not realistic for 99.999% of people, beating the SP500 is hard enough over the long term as it is, making money every single day/week etc. is absurd and anyone who says they can do that are trying to scam you! With that said, you can outperform the SP500 over the long term with systems like the trading system above, just expect some losing times here and there.

I have slowly added more and more trading systems into the mix, building up my trading portfolio over time. Today I am trading 26 different trading strategies, all using daily data to make trading decisions. My trading takes about 5-10 minutes every day. I boot up my computer every morning, run a script that downloads new data for that day, and runs all my trading systems. I then review what trades I plan to place that day to ensure there are no errors, I hit a button to send all the orders to my broker, then I go on with my day. I plan to continue to expand my portfolio of trading systems over time and continuously improve my trading for years to come. Ideally, one day I will have over 100 trading systems, but it will be years before I get there. Until then, I will take it one day at a time, slowly growing my account and working towards financial independence, and documenting the journey here on this substack.

The image above shows my current systematic trading portfolio. Each colored line shows the equity curve of one trading system in the portfolio. The gray region is the total historical performance of the entire portfolio since 2000.

Why Am I Starting a Substack?

I am starting this substack account because I feel like my journey is not unique. Systematic trading is a lonely journey, not many people do it, and when you tell your friends and family about what you are doing, many times the feedback you get in return is not positive; people just don’t understand it, it’s taboo to them. I started an X social media account so I could start networking with other traders and share some ideas/techniques I had learned, but it is difficult to get into the details on X.

Hence, why I am starting this substack, so I can share more complete thoughts. Many people have/are going through the same struggles I did when I first started. The lessons and techniques I learned over the years of trying to figure out systematic trading are invaluable, and I want to be able to share all these concepts and ideas to help out systematic traders. It doesn’t matter if you are just starting or have been trading systematically for years, there will be something for everybody and I look forward to sharing all I have learned.

What Content Do I Intend To Share?

Some of the general topics on the agenda include the following:

• Backtesting

• Robustness testing

• System design

• Building systems together

• Diversification in systematic trading

• The biggest mistakes in systematic trading

• Testing/validating systems found online together

• My trading philosophies

• Trading psychology

• Weekly/Monthly/Yearly performance reviews

• How to create a stock trading portfolio

• How to practically trade a stock trading portfolio

• Advanced portfolio techniques

• Trading Software

• Reader suggestions

• And much more!

Have ideas for other topics to cover? Message me!

What Type Of Person Should Subscribe?

Anyone will benefit from the content I plan to share. It doesn’t matter if you are just starting or have been trading for years, there will be something to learn from. That being said, to be successful in the game of systematic trading, you need to be determined to succeed and have a good work ethic, because profitability does not come easily as my trading journey described above demonstrated. With some hard work and dedication, and maybe some tips from this substack along the way, I am sure we can help improve your trading over time!

So please, hit that subscribe button and show some support! You will get quality content in return, win-win for everyone!

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