Mental Reset 

With the Cable Glider mired in an ongoing drawdown, and my former means of professional income now absent, my psychology is at an all time low.  I am in need of a mental reboot.  The following points attempt to address this issue.  

New System

 As always, I have been tinkering with variations of the Cable Glider system, and as yet, I’ve found no satisfactory way to revise the stop loss positioning or trade sizing algorithm.  I have, however, come up with a new entry signal that materially changes the nature of the Cable Glider system.  Previously, the system could be described purely as a channel breakout system.  After re-reading the chapter in Van Tharp’s Trade Your Way to Financial Freedom, I discovered a form of volatility breakout entry that works well in conjunction with the channel breakout entrys that were previously used.
  

New capital allocation 

At present, my total capital allocated for trading the FX market is $40,000.  I have decided to take $10,000 of that off the table as a living expense buffer, and to immediately withdraw enough profits to cover an additional month of expenses any time the system logs a gain that is twice the average gain.  Such gains have occurred 15 times in a 20 month backtest.  My current living expense buffer is approximately 6 months.  If the buffer falls below 3 months, I will immediately reallocate capital to the buffer to push it back to the 6 month mark.  If for any reason I am unable to refresh the buffer, I will look for other sources of income. 
 

Reaffirmation of devotion to pure systematic trading 

Within the context of the system’s recent drawdown, I have compounded the problem by manually taking trades that have lost me more money.  I hereby reaffirm my committment to pure systematic trading.  In order to accomplish this, I have set up separate machines for demo trading and live trading, and I intend to merely monitor the results once per day to ensure that trades were properly entered and exited.  No discretionary trading is permitted.  The system may succeed, and the system may fail, but damnit, I’m not gonna wreck it.

Recognition of large stochastic element

There is a large degree of randomness in the returns of the Cable Glider system.  As an example, I was stopped out of a long position this past Wednesday moments before the GBP/USD skyrocketed nearly 200 points.  My stop was penetrated by a mere 2 points.  This represents the difference between taking a 9% loss v. taking a 30% profit from the trade.  Lest you think I am just complaining, I recognize that there are several times where I come within a pip or two of entering or exiting a trade that would have proven to be unprofitable.  For this reason, I believe that my chances of long term success given my current capital level are a coin flip.  
 

New return chart 

Everyone likes performance charts, so I’ll be starting a new one dated from June 1 to represent this new phase of my trading journey.  For the record, the former version of the Cable Glider returned 73% over an 8 month period of live trading.  Given my current level of capitalization, a return like this is now actually required in order for my trading to be self-sufficient.  Yikes, I’d better keep my computer programming skills sharp in the meantime. ;-)

Optimism

 Every trade taken in accordance with the system’s rules, win or lose, is a good trade.