3.1 Inappropriate goals - perfect trading strategy (1)

Traders need to consider what the final trading strategy they want to achieve before establishing their own trading system. This is an obvious but little thought for the trader.

For example, when you ask a trader what his trading strategy hopes to achieve, the content of the answer is often similar to the words “make my own assets add value”

This sentence is very exciting, but it is also very worrying. This is because such a statement has deviated from the actual situation and turned into a sentence similar to ideal. Below we make a brief description based on the actual data of the market, combined with the virtual example.

Time: The end of 1999.
Trader: A
Research results: Successfully develop and establish a trading strategy – the result is a constant increase in assets.

According to the research results of Trader A, the strategy developed will guide the trader's specific trading behavior and increase the value of A's assets. If the strategy causes a large loss in the asset (a small range of losses, we temporarily believe that the strategy is still valid) then it does not meet the purpose of the strategy, and will not become the research results of Trader A.

In early 2000, Trader A began using this "successful" strategy. Because the strategy is successful, when the securities market is in the process of decline, Trader A's funds will not have a large loss, and in the process of market rise, Trader A's funds should rise.

What effect will it have since the implementation of the strategy in 2000 until 2018? The chart below shows the fluctuations of the Shanghai Composite Index(China)  during this period:

Through data collation, we organize the larger range of cycles that the strategy can use as follows:

The income generated by the investment during this period is organized as follows:

	Investment start and end time	Percentage of revenue	Simulated funding changes
0	1999-End of year- Strategic research success		10,000.00
1	2000/1/Mid-term——2001/6/Mid-term	≈ 57%	15,700.00
2	2002/1/Late——2002/7/Early	≈ 24%	19,468.00
3	2003/1/Early——2003/6/Mid-term	≈ 16%	22,583.00
4	2003/11/Late——2004/4/Early	≈ 33%	30,035.00
5	2005/7/Late——2005/9/Late	≈ 19%	35,742.00
6	2005/12/Early——2007/10/Mid-term	≈ 470%	203,729.00
7	2009/1/Early——2009/8/Early	≈ 83%	372,824.00
8	2010/7/Late——2010/11/Early	≈ 24%	462,302.00
9	2012/12/Early——2013/2/Mid-term	≈ 20%	554,762.00
10	2014/7/Mid-term——2015/6/Mid-term	≈ 153%	1,403,548.00
11	2015/10/Early——2015/12/Late	≈ 18%	1,656,187.00
12	2016/6/Late——2017/4/Mid-term	≈ 13%	1,871,491.00

As can be seen from the above table, such a strategy has amazing effects. But is it actually the case?

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