Why I'm Continuing my "Failed" Volatility Trading Community
Well, they do, but they don’t know that they do. You hear things like:
- “Sell at 9:20 AM to earn theta.”
- “I have low capital, so I’m an option buyer.”
- “I have large capital, so I’m an option seller.”
- “Theta is an edge.”
The Problem
Most Indian retail traders come from a price-action background. They’re plotting option charts on TradingView, drawing lines, looking for breakouts - but they’re ultimately trading volatility instruments without thinking in volatility terms. And 90% retail traders are losing money (no correlation implied 😉)
I started a small volatility trading community - not for money, but to give the average “desi price action trader” an entry point into vol thinking.
If I measure the outcome purely on adoption or revenue, this has been a failed experiment.
The community content isn’t free… but even behind a paywall it hasn’t been a profitable endeavour for AlgoTest.
And yet - I want to keep this going.
Why Continue a “Failed” Project?
Building Tools to Teach Better
The first one is designed using option buying as an example - the segment that dominates Indian retail. It’s a simple yet powerful tool that follows a very simple trade prospecting funnel? First, the Edge Calculator will determine if the algo has edge, then the Trade Simulator will run some simulations for the algo, and finally the Position Size Calculator will help you size your trades based on risk, volatility, and your capital.
The idea is simple:
You can use actual backtest data from AlgoTest - win%, loss%, average win, average loss - and show:
- Does the strategy have edge? The first decision criterion. If there’s no edge, stop right there (Yes, sometimes it can make sense to continue trading even if the system is negative edge - diversification, but we'll treat that as out of syllabus for now)
- What does a simplified equity curve look like if history repeats? Yes, oversimplified - but useful to illustrate how sizing impacts the journey.
- How to apply Kelly for position sizing, given the margin required for long options. You will almost never be able to handle the variance that Kelly gives you, but it's a good theoretical starting point when looking at position sizing in isolation for a new trading strategy.
To learn more about the tool, check out the documentation for the all-in-one Edge Calculator, Trade Simulator and Position Size Calculator.
This tool forces traders to confront questions they rarely ask:
- Did this strategy actually make money historically? (i.e. does it have edge?)
- If yes, and assuming the past repeats (BIG ASSUMPTION), how should I size my trades? (i.e. if the strategy has edge, what should my position sizing look like?)
- If not, why am I punting?
Most Indian option buyers are essentially playing slot machines. This tool backfills some missing basics.
PS: the tool sometimes shows how Kelly bet sizing, a formula that tells you how much to bet, gets too greedy and asks you to borrow money to trade (not usually a good idea unless you really know what you're doing - see Leverage in Trading: 2.25 Crores in 8 minutes?)