Keeping it simple is the key to replication

Legendary baseball pitcher Sandy Koufax once said “As much as you can do to get the variables out of the delivery, the easier it is to repeat. That’s the key to a repeated golf swing or pitching motion or batting swing…The pitcher wants to do exactly the same thing every time.” His biographer Jane Leavy noted, “The hardest thing in sports is no single act, it is the replication of that act.”

Working on my own trading, I have been able to achieve a higher degree of replication by developing a set of rules to guide my entries, exits, and position sizing.  With having fewer variables, therefore not overly complicating the system via over optimisation, I have been able to trust my system to give me consistent profits every year.

It’s very tempting to complicate a perfectly good trading system.  I have tested various methods for achieving even better results, but I found that there has to be a balance.  With one such system, when I added a variable it increased my profits significantly, but also increased the amount of trades, and therefore the amount of losing trades.  So even though I knew that there is a distinct possibility of making more money over a period of a year, it is much better from an emotional and psychological point of view to keep it simple.

It reminds me of the saying, Bulls and Bears make money, but the Pigs get slaughtered! Pigs being the greedy side of us that want to squeeze out every dime from our trading system.  In order to replicate as the quote above states we must get as many variables out of the delivery as possible!

May today be a profitable day…for all of us.

John