I hate Mondays – or how to improve a trading system

‘I hate Mondays’ is catchphrase of people who go to work just because they have to. I remember this phrase as words of Puss in Boots from the Shrek movie, who said that when he was sitting at the bar with his friends in the Poison Apple tavern. But let’s move to the topic.

During trading of one of my intra-day systems, I had initially subconscious and then a very clear feeling, that Mondays are not very beneficial for the system. It is currently a year anniversary of running this system on a live account, so I have already a quite relevant trading history. Firstly, let’s look at the system in its original version.

It has reached 1,228 pips in the year, which is approx. 100 pips per month and it earned 104 % of profit with a maximum drawdown of 12 %. The system has generated 184 trades in total. The profit factor was 1.4. This was not a bad result at all. However, the equity line was unstable and there were quite long periods of stagnation. And we still had those Mondays. So, I involved my favorite analytics program offered by StrategyQuant. I uploaded the whole history of the trading directly from MT4 to QuantAnalyzer to check the situation.

My expectation that Mondays are truly loss-makers was confirmed. The longest stagnation period was 106 days long – it means that almost a third of the year I was waiting for a new high after the drawdown. Using the ‘What-If scenario’ tool, which allows simulations of different variants, I excluded Mondays and suddenly everything has changed.

The total profit increased to 1,945 pips, the number of trades fell to 137, the profit factor jumped up to 1.9, the equity line becomes more stable, trading costs were reduced, and what is also interesting – I have obtained extra 52 free non-trading days per year. How is this possible? Because from now, I am going to trade the system only from Tuesday to Friday. This system usually generates trades after the opening of the London Stock Exchange and with low volatility, the stop-loss is hit unnecessarily often.

This was a simple example of how a small change can improve the successful trading system. Now I only have to decide what to do with so much free time.

I wish you all the best!
Peter Svátek