At the spec party in 2014, I had the pleasure of an audience with Mr. Eisenstadt. Actually, in hindsight I believe that I monopolised his time more than was polite– photographic evidence exists of my transgression on Mr. Owen's telephonic device.

Regardless, I discussed this meeting with an ex colleague who had just recently gone out on his own. I had worked with this gentlemen at two previous hedge funds in both Chicago and London.

The amazing thing about the early work from Mr. Eisenstadt was the lack of often pointless long term back tests on unclean data. Cutting through the detritus, what he did was come up with an idea and then test it in real time with only a small reliance on the past–the ultimate in financial market experimentation.

Anyway, my ex -colleague, in the rare times when he experienced a notable drawdown, was always able to pin point the problem to 'switching' his stop loss or limit levels based on changing contemporaneous information.

After my discussion with him, he undertook a live experiment. For a period of one year he was to record the difference between his override trading and the actual levels he set when he initiated the trade.

I have before me the results. Those of a certain Galtonion proclivity may have a passing interest:

Total trades - 477

Wins - 267

Losses - 94

Scratch - 116

He managed an 13% return over the period.

The net result of his 'switching' based upon gut feel, headlines and other ephemera was negative 3.6%.

I don't suggest anything groundbreaking in this. Rather it is the result of a real experiment, with real money, in real time.

He feels that he is ready to start a process where he will begin to cure himself of his 'switch-itis'.

An interesting comment from him was: "It makes more sense to lose what I was initially comfortable risking on a losing trade than to try and finesse it."


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