Embracing Adversity – Releasing Dot2Dot 2.2 (with Limit Orders!)

When it comes to trading system design and testing, months can go by and I think there is just no way I can improve one of my systems.  I will be completely barren of ideas…until….

Adversity! 

Whenever I go through a challenging trading environment or see possibility of gains in a pattern that I am not taking advantage of, it sends me back to the drawing board to come up with new ideas, or to dust off some old ones and give them another go. How can I fix this? Or how can I improve that?

I don’t know about you, but in trading, like so many aspects of life, I seem to never learn anything when things are going well, what incentive do I have?  I learn and see opportunities when things either don’t go my way, or I get an idea because I am frustrated about something that happened that left too much ‘money on the table’.  I know I can’t take every dime out of every trade, and I know there are losing trades, but I am not prepared to sit by and accept situations that I know I can squeeze more out or stop the losses.

The challenging environment of the last quarter of 2018, and December in particular, forced me to give back many of my gains for the year.  This was frustrating and sent me to test with fury to come up with a solution to the question – how was I going to avoid such wild market action hurting me again?

While I am still working on a few things that may create more improvements, the first thing I am implementing (the results of which are shown in the equity curve below), is a change to my entries into a trade.  It became apparent in December 2018 that Dot2Dot was vulnerable to big drops on the day of entry.  Big drops have happened before, and it’s been no big deal.  The difference this time is that the volatility was bigger than anyone had ever experienced (in Index daily point swings in particular), and the drops where happening in consecutive trades – a phenomena which Dot2Dot (and the whole market itself actually) had never seen.  Therefore, to protect me, and anyone following my trades in the future, this had to be addressed and a solution had to be found.

After extensive research this year and based on some previous work I had already done, I am implementing my first change to Dot2Dot in quite some time. 

As you can see in the graph, with the new version 2.2 there is a marked improvement on the equity curve for the end of 2018, but not just that, it improves the system overall.  I must be very careful when making changes or implementing anything new that it does not negatively affect results in the past in order to fix a current issue.  Just as version 2.1 made a huge change to the overall results of Dot2Dot over version 2.0, it is clear the changes I have made for version 2.2 will make a big difference to the system in the future.

What does this change mean to subscribers following my trades?

Firstly, it means larger gains and smaller losses.  I’m sure everyone is on board for that!  I explained the background to this strategy in detail at the February Market Maker’s Meeting, and I will be doing so again in the meeting on March 6, so please put that in your calendar and attend if you can.  We will also be reviewing how to place these orders, and tips and tricks for execution of the orders at that time.

Secondly, there is a practical level of change, and this is VERY important.  Anyone who has done our training has heard us repeat regularly “Do not use Limit Orders”.  Limit Orders were out of the question in order to achieve what was needed with Dot2Dot 2.1 or before.

Dot2Dot Version 2.2 USES LIMIT ORDERS for entries to achieve its results, so I am afraid there will need to be a little ‘thinking’ from anyone following my trades for a while until you get used to the new trading style.

I will be texting the limit order I am about to place instead of a buy stop order.  I am using a limit order as I am trying to buy lower than the current price.  However, if the price does not reach my limit order by 3:55pm EST, I will be executing a Market order to enter at that time. 

Had I already had this change in place, we would already be higher in 2019 than we already are at 30%, so I am excited to see this fix implemented and I look forward to having a killer 2019 no matter what the market throws my way.

Bring on the Bulls!

John

2 Responses to “Embracing Adversity – Releasing Dot2Dot 2.2 (with Limit Orders!)”

  1. gordon wenzel

    AWESOME!!!!!

    Reply
  2. Omer

    Adversity does make us do the unimaginable!
    Amazing effort there to so quickly modify the system and protect everyone from the shocks we experienced last December and the system equity chart comparison tells it all. Exciting!!
    Glad I am following trades of a very dedicated person!
    So far all major changes to D2D have given good results so looking forward to the limit orders though I’ll be waking up in the middle of the night with each trade due to time zone differences but a man’s got to do what a man’s got to do!
    Keep up the great work!

    Reply

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