New Equity Highs

New equity highs sounds better than run up. Though the latter often produces the former.

By new equity highs, I'm not talking the S&P, small caps or tech. Rather the equity curve on my bond system.

New Equity Highs

New equity highs are fun for sure. Far better than drawdowns. Which I went through late Q3 into Q4.

But the purpose of this post is not to gloat and say how great I believe my system is. That would be one of the worst things I could do or believe. And is the basis for why I am talking about my equity curve.

Even Keeled

Whether discretionary or fully automated remaining even keeled is critical. By that I mean you cannot gloat when you have a win and be filled with depression during a loss. Or series of losses.

At the end of the day strategies are a roll of the dice. Some pre-built "edge" or advantage is integrated into your methodology. But that is in the context of the long term. The bigger picture.

A roll of a few hundred dice and you should be just fine. You should have a  bottom left to top right equity curve. The money will follow if you implement your strategy without fail.

But that's the big picture. The real challenge is the day to day moves.

All of us at some point have looked at an equity curve for a stock. Say AAPL. And wondered, if only I bought here and sold there. I would have made X in profit.

You gloss over the dips. You see them, but your fascination with having had the chance to make X profit allows you to ignore the pullbacks.

But if you were in the entire move, you would clearly remember those pullbacks. And there's a good chance one of them convinced you to sell.


So as I enjoy a period of run up. Just two trades away from a new equity high, I am reminded to remain even keeled. I cannot gloat and think all is great. Just as I told myself not to do the opposite during the period of drawdown.

Rather I have to look at the last few rolls of the dice as reversion to the mean. A strong period offsetting a weak period. To bring me back to the long term mean.

Perhaps I'll rally well above the long term mean. All that "means" is I'll then have a period of drawdown to revert back to the mean. Maybe an extended period taking me below the long term mean.

I think you get the point.

The short term is as much about luck as anything. It's the long term where an edge is exposed. Either for being real or simple fantasy.

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