All models are significantly under-performing SPY (+7.12%) and IWM (+6.79%).
There are several trades that have seriously impacted performance. I chalk this up to bad luck and know that given enough time, there will be good luck trades to balance these out. I say bad luck because typically large, losing trades are spaced out over time, and not grouped together over a couple of months. It is not the large, losing trades that make bad luck. I expect losing trades. Instead, it is the grouping. The system is also experiencing the normal cycle of surge and drawdown. More on this later.
Shameless Plug Alert: If you have been considering trying out this system, the best time to start trading it is when it is in a drawdown. Most people want to start trading a system when it is killing it… On The Power Dip System site, there is a tab labeled “Models” where graphs are housed showing previous drawdowns. The current drawdown from the last equity high is ~17% and looks to be very typical of performance during a market correction. (See larger equity curve, below).
For anyone worried that the system will dip buy itself to death, it will not happen. As a stock must be in an uptrend to meet the buy criteria, during a sustained market correction, there are very few stocks in an uptrend. Thus, the system sits mainly in cash until the market improves.
More analysis after the stats…
YTD: 20% of Equity per Trade
Net % Profit: -7.50%
Average Trade: -0.59%
Winning %: 55.93%
YTD: 10% of Equity per Trade
Net % Profit: -4.81%
Average Trade: -0.40%
Winning %: 58.33%
YTD: ATR Position Sizing
Net % Profit: -7.15%
Average Trade: -0.98%
Winning %: 57.14%
.01/share was included for commissions.
- The Winning % has dropped significantly and is due for some reversion to the mean. I expect the Winning % to average 67.5%.
- The 10% Equity Per Trade Model is out-performing the other models. This tells me that the system has seen large losses in high-ranked picks. Since the 10% Model takes a greater number of smaller positions, it has been less affected by large, losing, high-ranked picks.
- I will be generating some control charts which will allow me to draw some conclusions about current performance compared to past performance. Specifically, I want to determine if current performance is normal or abnormal compared to past performance. I fully believe that current performance represents a normal drawdown, but a graph is worth one thousand assumptions.
YTD Equity Curve for 20% of Equity Per Trade
Equity Curve from 1.1.2001 to 5.3.2011
The 10 year equity curve (representing a compounded annual rate of 61.16%) shows the large surge from PDS that started in late 2010 and lasted through February of 2011. After such a surge, a drawdown is not abnormal. In fact, previous surges have resulted in similar drawdowns. Historical backtesting shows that the system has seen similar drawdowns several times over the past 7 years. Evaluated against the big picture, the drawdown shown in the YTD graph does not look nearly as scary. In fact, I look forward to the next surge!
All results are generated from de-listed (free of survivorship bias) stock data.
A free The Power Dip System trial is available.