3 months into trading with real money and i’m down $40k. not what i expected but also exactly what i should’ve expected.
paper trading for 3 years (2020-2022) gave me this false confidence that live trading would be similar. LMAO nope. completely different game when actual money is on the line.
the numbers don’t lie #
started with $400k in january. sitting at $360k today. that’s a 10% drawdown in 90 days.
Figure 1: My equity curve for the first 3 months of live trading. That’s a lot of red.
the worst part? i KNOW why this is happening:
- position sizing too aggressive - started with 2% risk per trade, blew past that multiple times when “confident”
- over-optimized strategies - backtests looked amazing, forward testing not so much
- emotional trading - yeah i’m “100% algorithmic” but i keep manually stopping algos when they’re down
- market regime change - my 2020-2022 paper trading data doesn’t match 2023 market conditions
distribution is brutal #
Figure 2: Daily returns distribution. Mean is negative at -0.41%. Not good.
fat left tail means my losing days are LOSING. like -5% to -8% kind of days. winning days are more consistent but smaller (+1% to +3%). classic asymmetric risk profile that’s bleeding me slowly.
avg daily return: -0.41% daily volatility: 2.33% sharpe ratio: fucking terrible (negative)
volatility is insane #
Figure 3: 7-day rolling volatility (annualized). Averaging 35-40% which is way too high.
my vol is all over the place. some weeks i’m at 25% annualized (manageable), other weeks i’m hitting 50%+ (wtf am i doing).
this tells me my strategies aren’t consistent. probably because i keep tweaking them mid-trade based on P&L. need to stop doing that.
what i’m changing #
been thinking about this a lot at 2am when i can’t sleep (like right now). here’s the plan:
position sizing: cutting risk to 0.5% per trade max. yeah it’s conservative AF but i need to survive to learn
strategy freeze: picking my 3 best backtested strategies and running them for 60 days UNMODIFIED. no matter what happens. need real forward test data.
emotional discipline: this is the hardest one. when i see -$5k day i want to shut everything down. need to trust the process or admit this doesn’t work.
market analysis: spending more time understanding current regime vs historical data. 2023 ≠ 2021 bull market conditions.
the grief factor #
NGL parents dying 3 months ago probably isn’t helping my decision making. some days i’m numb and trade fine. other days i’m emotional and make stupid decisions.
therapist says i’m using trading as distraction from grief. probably right. but also i need to figure this shit out because $400k → $360k → $0 is a path i can see happening if i don’t fix this.
tuition paid so far: $40k #
everyone says trading is expensive education. they’re right. $40k in 90 days is painful but could be worse.
at this rate i’ll blow through $160k in a year. that’s… not sustainable. need to fix this in Q2 or seriously reconsider the whole “full time trader” thing.
2:47am and i should sleep but probably won’t. gonna review my position sizing code instead.
if you’re thinking about going live with algos: expect to lose money at first. a lot of money. paper trading teaches you nothing about emotional discipline or real market conditions.
-AK