So I have a decision to make today. Actually I already made it. But I'd like to go through the thought process.
It relates to my running of a Treasury system and today's ten year note auction. There's a good chance I'll be in a trade when the auction happens.
What To Do
So what do I do? My initial thought was fifteen minutes before the auction I'll just go flat if I am in fact in a position. By the way, I keep my system on screen saver mode so I don't stare at the screen and do something stupid.
After all, why should I trade amid something like an auction where price can move insanely fast either direction. Purely based on the results of the auction. Having nothing to do with how a particular instrument was trading up to that point.
Well I'm going against my initial thought and doing nothing. I'll take my chances. And there are two reasons why.
First, I don't like discretion. None whatsoever when it comes to automation. Discretion is another way of bringing in emotion. And emotion is really bad when it comes to thinking in probabilities.
But the real reason I'm doing nothing? Other than the fact that I haven't studied performance during note auctions and bond auctions. Is that my gut says trading performance on these days is above breakeven.
In other words it makes money on those days. Even though the win rate may be well below my average of about 58-62%. My breakeven is about 38%. So there's a bit of room to still make money.
I should and will run a test on these dates. Though it is a bit of work to pull out five years of dates to test.
I've chased the holy grail to an extent. It does not exist. I am currently around a 60% win rate with a reward nearly twice my risk. To me that's a pretty robust system.
I highly doubt I can develop a system with such a risk reward ratio and get 65% or 70%. That's a holy grail.
So if in fact performance on note and bond auction days is insanely bad, then I would achieve the holy grail. I would bump my win rate 10% higher.
But I don't think so. I think that is highly unlikely. Which tells me performance on days like today is likely just fine.
Surely I will do some sample testing. But my gut says. Do nothing. Sit on hands while my system trades. And don't even think of interjecting discretion.