Executing a strategy I don’t understand = pain

This is probably obvious to most, but like many things, I had to bang my head against the wall to learn it. My lesson is not investment domain specific though that was my classroom.

I am always receiving promos for different investment or trading platforms, most of which are subscription cloud services. Sometimes i see one that is worth giving it a spin. My first lesson awhile back was a ‘paper exercise’ is not a sufficient test; i always make exceptions or rationalizations of insufficiencies of the platform or my required responses to it. I have to put skin in the game, i.e., money, to learn.

I saw one that seemed like worth a try; I followed their daily recommendation but failied to exercise the stop/loss due to my inability to monitor every minute of trading hours. – i did not understand the behavioral requirements of the strategy. I lost all $200 of my test.

Looking back, I would do one of or both of deeply understanding the strategy and my required behaviors and / or follow a poorly undertood strategy to the letter of the prescribed behaviors. The risk of the second action is that I would not be able to innovate within the strategy when conditions change, yet conditions always change.

This then is the pain of a poorly understood strategy … failures of execution both due to mistakes and the inability to innovate within changing conditions. The remedy is simple – execute only strategies I know sufficiently to innovate; and ideally, constantly increase my strategy portfolio.

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