Is it 2021 yet?
It’s never a good idea to wish time away or want to speed things forward, but I am ready to make an exception for this year. It’s been an eventful 12 months so what better time to hit pause for a moment and take inventory of the good and bad from this memorable year.
We’ll also share some insights of what’s to come into the new year and what we’ve been working on.
It’s hard to have imagined just how impactful and drawn out this terrible virus would go on to destroy lives and fundamentally change the way people and businesses operate and communicate with one another.
I wrote a blog post earlier this year with some of the big takeaways and lessons that really stood out to me during the first quarter (specifically related to markets) so give that a read for more thoughts if you missed it.
From a personal perspective, it’s amazing how much I miss the little things I clearly took for granted, like going to meetups and networking events, or simply grabbing a bite to eat and enjoying the comfort of a restaurant.
While I can’t wait for those opportunities to return, I know that there are many individuals who have been impacted much more severely due to the pandemic. I hope all those affected have a speedy recovery and get back on their feet soon.
Transition to quantitative systematic
2020 was the first full year I outsourced all of the buy and sell decisions from myself to my trading systems. This hand-off started in 2019 with the launch of Merlin, but 2020 was the first full calendar year I sat patiently and obeyed my trading system through all of the ups, downs, volatility, and uncertainty — and what a year for all of that!
Transitioning to a fully automated systematic approach isn’t the first time my trading process has evolved and it probably won’t be the last time. My progression over the last decade looks something like this:
→ When I first began trading I bought and invested in companies I knew or used.
→ I quickly found this thing called technical analysis (TA) and got fascinated with charts and price action.
→ Once I figured out I could apply TA to intraday time frames to make buy and sell decisions, I became obsessed with day trading.
→ A couple of years into that and I came to the conclusion the stress and time wasn’t worth it (this end of year post covers those thoughts), so I transitioned to a slightly slower pace of overnight swing trading.
→ From that point on, I realized having a process and following rules-based decision making was the key to survive for the long haul, so every year that passed I built more tools and structure around my trading.
→ Fast forward to 2019 and I had built up all of the logic and rules to make myself obsolete. Entries, exits, position size, timing, partial profits, etc. were all scripted and included in code.
→ Merlin launched, and Evan took a back row seat.
Transitioning to this completely systematic role of trading didn’t just happen spontaneously one year. It was a decade-long journey in the making.
I really enjoy the peace of mind systematic trading gives me, the freedom of my time back, and the confidence in knowing the research and data support all of the decisions I’m making.
Full year of monthly performance reports
We have always posted some type of performance or track record for our trading signals throughout the years, even prior to Merlin. However, this year I set out to make it a habit to post results every single month with net performance and a list of all the closed trades.
We offer trading systems and signals as a service to traders so we think it’s our responsibility to have performance information publicly available for traders to analyze. After all, if you can’t see how the strategy performed each and every month, then why would you subscribe?
It’s a challenging thing to do because it’s uncomfortable to write a public report when results are negative. It’s not fun to underperform the market, and it’s clearly not going to lead to more sales when you post a bad month. But drawdowns are a natural part of trading. You can’t trade and not have losing days, weeks, months, or sometimes even years.
I picked a nice one — and frankly, it’s a reasonable question — but I’m sure you can imagine some of the other comments we receive.
We post performance to highlight our systems, but whether or not you decide to subscribe to our systems is entirely okay with me. What I hope these reports accomplish more than anything else is to show traders that it’s okay to not be perfect. You’re going to have down months and that just means you’re one month closer to having something positive.
Lamorak trading system launch
Two is better than one.
We launched a brand new trading system this year, called Lamorak. We’re really excited for this one because it’s the yin to Merlin’s yang.
>Merlin holds trades on average for 3 months at a time.
>Lamorak holds trades on average for 4 days.
>Merlin is long only
>Lamorak trades long and short
>Merlin will hold 25+ positions
>Lamorak holds a concentrated max of 12
The fact that they operate on completely different timeframes and directions means these strategies are highly uncorrelated. In fact, on a monthly basis going back 15 years, their correlation is only 0.21!
We also think Lamorak will serve traders well who are looking for calculated short entries and more tactical short-term swing trading. They are very different systems from one another, so that means the real power is unlocked when you combine them together to smooth out your equity curve and trade a portfolio of strategies.
Growing the business
We made our first hires this year! The Trade Risk is growing and we’ve increased our (part-time) team size to 4 paid student interns to help with various marketing projects and day-to-day operations.
We’ve also collaborated with the University of Washington on classroom projects with students to collect member feedback and improve our services.
The Trade Risk launched as a blog back in 2012 with the sole purpose of sharing thoughts, findings, and analysis, with other traders. There was nothing for sale and there was no intention for the site to be anything more than a public diary of trades and trading education.
As the years have gone on, we’ve kept education front and center, but we launched services, tools, scans, indicators, all to meet the organic demand of our followers. I’m truly grateful to have earned the trust of so many of you and to be able to serve like minded traders. Thank you everyone who reads, watches, or gets value from our tools and services.
Our Worden TC2000 store continues to expand and is the largest third party (as far as I know) repository of custom scans, indicators, and support for the platform.
In 2020, we launched our research series, Beyond the Charts, dedicated to uncovering what works and what doesn’t in markets. We only published two episodes before we paused to launch the Lamorak trading system, but 2021 will bring new Beyond the Charts episodes with new insights.
Our partnership with Investor’s Business Daily continues. They are great people over there and it’s been fun to have front row seats to their tools, lists, and software, which we think traders can really benefit from.
For 2021, we want to double down on education. It’s how the Trade Risk got its start and how it grew, and we fundamentally believe that sharing education, research, and insights is how everyone collectively levels up and becomes a smarter trader.
We’re going to be changing up our content line up a bit for 2021, adjusting some existing videos and publishing new pieces, so stay tuned for more updates on that in the coming months.
Like I mentioned, I’m truly grateful to be in a position to do what I enjoy on a daily basis and I hope to grow and continue for the years ahead.
Have a great holiday season and let’s bring on the new year!
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