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Capital Available & The Platform Works

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We continue to actively look for traders to allocate capital to as part of the AxiSelect Incubation program. So far we have made 33 allocations over a 9 month period and we are eager to make many more.

Every day we get investors signing up to PsyQuation wanting to invest in our trading talent. We are not yet ready, but we are close to having the appropriate regulatory licensing in place to match trader talent with investor capital. Stay tuned for an announcement with an expected launch date.

THE PLATFORM WORKS

I am sure you have wondered how PsyQuation traders compare to non-PsyQuation traders. Here is the answer you have been wondering about:


The results we present are based on thousands of accounts and are statistically very significant. PsyQuation accounts improve total performance by 31% and monthly performance by 29%. PsyQuation accounts have 41% better Max Drawdown numbers and PsyQuation accounts survive 3.22 months longer than non-PsyQuation accounts.

LESSON LEARNED ON THE BATTLEFIELD

I thought I would share a painful costly mistake I made early in my career which I think has some practical takeaway benefits.

It was 2003 my main area of expertise was trading yield spreads in corporate and government debt. My work colleagues I was sitting near on the trading floor where trading the S&P500 index futures and some were trading options on the index. I thought I would also like to trade that exciting index which was so well covered on CNBC and all the other news outlets. I had a personal REFCO account (before it went bankrupt) with $35,000. I proceeded to place a trade thinking I was buying $3,000 worth of put options.

To my shock, I got an immediate broker note saying I had purchased $33,000 worth of out of the money puts, but I couldn’t work out where I went wrong until I studied the fine print:

Large Notional Size — around $200,000 per Contract with the SPX index at 2000 (10 times that of SPDR options)

What I didn’t know at the time was that there were things called big SPX contracts and mini’s. I thought I was trading the mini which was 10x smaller than the big one. My next big error was to follow shortly thereafter. Instead of accepting my costly mistake, I fell for the endowment effect, that is after spending $3,000 in transaction costs I felt compelled to stay in the trade to recover some of my costs. Then came the classic ego mistake, I walked around the trading floor bragging about the size of my trade.

The story has a familiar ending, you guessed it, with my very first foray into option trading I dusted the entire account in basically 1 trade.  What lesson can you learn from my stupidity?

Don’t think that the mistake is a sign from above, as I did. No, the Gods are not with you! If you are lucky enough to recognize that you have made a mistake fix it, do not accept it as fate. I only wish I had the lesson ringing in my ear to accept the initial cost of my mistake and cut my losses to fight another day.

If any of you reading this land up making a position sizing error, remember my words and fix it.

 

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