Fire and Fortitude in Algorithmic Trading (Part 2)

In order to be an algorithmic trader, I think one must have a burning desire (fire) to beat the market as well as the fortitude to plod through significant failure with regard to strategy development.

I left off with mention of KD’s approach to algorithmic trading. He also says discovery of the first viable strategy may take an extra long time with subsequent viable strategies becoming easier.

I think one of the biggest challenges to trading system development is sticking with the process and maintaining the drive to continue despite serial failure. I’m so here to tell you: getting knocked over the head so many times is absolutely brutal. As a pharmacist, most everything I did either accomplished something or got me one step closer. With trading system development, I need to reprogram myself to get positive reinforcement from failure. I need to regard every rejected strategy as being one step closer to viability.

In addition to serial failure, I think the specter of scam combines to create a harsh double whammy that few people can overcome. Until I find a viable strategy on my own, I have only others to trust. As failure mounts, a belief that the process is somehow flawed becomes harder to resist. Maybe the talk of viable strategies is all just a good marketing story used to pad the pockets of people like KD. How do we know he has actually found success himself? This is consistent with the comments from [11]. I have reached out to almost 15 algorithmic traders to share experiences and have only gotten two responses. I would not be surprised if most spin their wheels for a time and subsequently exit the arena.

I am not saying KD is a con artist, but like the broader financial industry, he does have a strong underlying motive to get us to believe. If nobody believes, then his business selling trading education will struggle. For the broader financial industry, when people stop believing and sell everything, investment advisors experience a severe decline in assets under management and generate less revenue. They therefore have an inherent conflict of interest when recommending clients “stay the course” and ride out market turbulence.