Category Archives: Strategy Trading Results
Really, this is all about making money trading. Therefore, Part 1 will detail my trading profits.
In Part 2 I will discuss what worked and what could have worked better. I will also discuss the changes I will make in 2009.
Here is a quick summary. My strategy account was up 11.53% (19.16% annualized), while my discretionary account finished flat. Combining the two accounts brings my overall gains in 2008Â to 6.03%.Â I’m not happy with my lackluster performance in my discretionary account, but that is more a conversation for Part 2.
I want to focus onÂ the metrics of the strategy trades. The performance statistics are below. I find them nothing less than stellar. The metrics that I found especially appealing are highlighted in green.
Note the montly performance report. I had only one down month equaling a percentage loss of -0.39%. To be clear, the account made its first trade on May 19th, so I was down 1 out of 8 possible months, during the worst market since the Great Depression.
Feel free to leave any questions about my performance or the report in the comments section.
I want to wish a Happy and Prosperous New Year to the iBC community. I also want to issue a sincere thank you to all of the readers who have supported me over the years. 2008 has been a pivotal year for me, and it absolutely could not have happened without the blog and the readers.
This strategies traded in this account are derived entirely from technical analysis. I strive to tradeÂ theÂ accountÂ completely mechanically. This month I implemented a new short-selling strategy. The short strategy has triggered 2 trades, both of whichÂ wereÂ winners.
I expect that once the market digests the bailout, the strategies will begin toÂ signal several trades a week. The past month or so has been very slow.
Due to the nature of the market over the past few months, I still have not utilized 100% of the capital in this account. Once I feel comfortable increasing position sizes enough to deploy all of my capital, I fully expect these strategies to earn better than 30% per year.
|Â||All Trades||Long Trades||Short Trades|
|Total Net Profit||$3,319.63||$2,667.84||$651.79|
|Total Number of Trades||56||54||2|
|Avg. Trade Net Profit||$59.28||$49.40||$325.89|
|Avg. Winning Trade||$108.25||$97.36||$325.89|
|Avg. Losing Trade||($87.62)||($87.62)||$0.00|
|Ratio Avg. Win:Avg. Loss||1.24||1.11||n/a|
|Largest Winning Trade||$421.02||$421.02||$340.79|
|Largest Losing Trade||($219.00)||($219.00)||$0.00|
|Largest Winner as % of Gross Profit||9.26%||10.81%||52.29%|
|Largest Loser as % of Gross Loss||17.85%||17.85%||n/a|
|Max. Consecutive Winning Trades||25||25||2|
|Max. Consecutive Losing Trades||7||7||0|
|Return on Initial Capital||6.64%||Â||Â|
|Annual Rate of Return||18.16%||Â||Â|
|Buy & Hold Return||-1.67%||Â||Â|
|Avg. Monthly Return||$663.93||Â||Â|
|Std. Deviation of Monthly Return||$717.13||Â||Â|
|Trading Period||4 Mths, 7 Dys, 6 Hrs, 29 Mins||Â||Â|
|Percent of Time in the Market||55.52%||Â||Â|
|Time in the Market||2 Mths, 10 Dys, 18 Hrs, 33 Mins||Â||Â|
|Longest Flat Period||13 Dys, 21 Hrs, 28 Mins||Â||Â|
|Max. Equity Run-up(Daily)||$3,321.63||Â||Â|
|Date of Max. Equity Run-up||9/24/2008 16:00||Â||Â|
|Max. Equity Run-up as % of Initial Capital||6.64%||Â||Â|
|as % of Initial Capital||3.37%||3.37%||0.21%|
|Net Profit as % of Drawdown||196.78%||158.14%||606.99%|
|Max. Drawdown(Trade Close)||Â||Â||Â|
|as % of Initial Capital||1.11%||1.11%||0.00%|
|Net Profit as % of Drawdown||597.77%||480.40%||n/a|
|Max. Trade Drawdown||($413.06)||($413.06)||($261.45)|
I am extremely torn, as I am very excited about this new system, and would love nothing more than to write all about it. I used to not worry so much about divulging strategies. In order for any edge to be eroded, many other traders would have to take the exact same signal and use the exact same exit strategies. I know from my limited experience with mechanical system trading that the system has to be closely matched to one’s personality, psychology, and risk profile, in order for him to trade the system successfullyÂ over a long time frame. So what are the chances that there are enough traders out there that will follow the system closely enough to erode the edge? I honestly do not know the answer.
And there is also the issue of scalability…This strategy may not be able to be traded by the hedge fund manager with 100 million in capital. So maybe I’m just paranoid, or over-cautious, in my secrecy.
What I do know is that I’m in this to become filthy rich, and not so much to brag, so why take any chances? And then there is the fact that 2 other traders have spent a significant amount of time helping to develop this system. Anyway, for these reasons, I will not divulge the strategy.
That being said, I do want to promote the idea of trading mechanical systems, to anyone who is interested. I have been making more money, and I am less stressed since I started trading almostÂ 100% mechanically. When I wake up in the morning and see the futures up big or down large, I do not really care any more. If the trades stop out, who cares? I did not pick them, the system did!
There are other benefits, too. No more do I have to get frustrated after spending hours researching a trade, only to have the trade turn against me almost immediately. No more do I waste time considering when to sell a profitable position, and then kick myself for selling too early or too late.
What I find satisfaction in now is seeing a profitable system develop from infancy to implementation.Â It is especially nice when real profits start to roll in after looking at years of historic/hypothetical profits.
This system is being traded out of my Scottrade account,Â so I do not have the fancy graphics and reports that Tradestation generates. Here are the recent trades, without their symbols:
|Symbol||Date||Entry||Shares||Cost||Exit||Date||Proceeds||Â $ P/L||% P/L||Total P/L|
Win percentage: 64.29%
Average Trade: $67.14
Average Trade %: 1.4%
Average Winner: $142.21
Average Loser: -$67.99
Commissions of $7 on each leg are included in the results.
Some thoughts about the results up to this point. First of all, two trades were botched.Â The loss I took on August 21stÂ was fromÂ an erroneous entry of a sell-at-market order rather than a stop-loss order.Â The second error was made when I accidentally mis-typed the stop order amount, by one dollar. Of course, the stop was hit, and then I realized my typo. I did not really track the trades to see if they would have been gains or losses, had all the correct parameters been applied.
I started trading the system with smaller positions, with a stop loss on each trade of 6% from entry. This position sizingÂ limited risk on each trade to about .35% of total equity. On the last two trades, I began ramping up risk to about .5% of total equity per trade. I will eventually settle in somewhere between 1-2% risk on each trade. Obviously, trading with 1% risk would have tripled the profits and losses above. That should provide a good idea about what kind of returns I’m expecting. CAGR in the backtested results is 47.35%, using 1% risk per trade. My current profits represent about 2.3% gain on the total account size, even though I was only fully invested for about 2 days out of the total period.
At $14 dollars perÂ round trip, myÂ commissions are about 21% of my profits. As I increase my position sizing and percent risk, percentage of profits relative to commissions will improve. Still, the ratio is too large, and the system will benefit tremendously by switching to a cheaper broker.
Above are the results since inception of May 19, 2008, from the mean reversion strategy (RSI2).
The strategy is holding one position, which is marked to market, in the above results.
I have still not had the entire equity allotted to this strategy in the market. The cash is available for positions at least 2x larger than what these results reflect. I am getting more and more comfortable with the system with every new trade, and it is getting to be more automatic. Before 2008 ends, I want to go a little bigger with my positions. Common sense tells me that my returns will be twice what is reflected above, but that will remain to be seen, as changes in position size affect psychology. The hardest part of system trading is managing my psychology.
The circled area on the equity curve reflects the last days of June and the first half of July, when the indexes were moving downward, with very few spikes up or down.
This system likes trending conditions, if they have regular counter-trend moves. As long as there are swings, it is happy.
The green dot means that the account closed today at a new high. I’m hoping this means the near-term market conditions are changing to be more favorable for this type of strategy. Months like January and June will result in drawdowns or flat results.
It was another difficultÂ period to be buying strength, yet the strategy turned out another profitable week. It didÂ register the first loss since May 19th, yet it was very small. I was uncomfortable being long, and therefore took half positions. I also closed out the trades early due to going out of town, and my overwhelming sense that the markets were going to tank. Obviously it turned out to be the right move to make. Had I not closed the trades out early, they would have stopped out for losses.
It is easy to see from charts that mean-reversion strategies will get killed during a significant market move oneÂ direction or the other. I am well aware of that reality and am glad that I used my override to ensure I did not stay long into a free fall.
|TradeStation Performance Summary|
|Total Net Profit||$87.99||$87.99||$0.00|
|Open Position P/L||$0.00||$0.00||$0.00|
|Adjusted Total Net Profit||($69.55)||($69.55)||$0.00|
|Adjusted Gross Profit||$45.51||$45.51||$0.00|
|Adjusted Gross Loss||($115.06)||($115.06)||$0.00|
|Adjusted Profit Factor||0.40||0.40||n/a|
|Total Number of Trades||4||4||0|
|Avg. Trade Net Profit||$22.00||$22.00||$0.00|
|Avg. Winning Trade||$77.70||$77.70||$0.00|
|Avg. Losing Trade||($33.70)||($33.70)||$0.00|
|Ratio Avg. Win:Avg. Loss||2.31||2.31||n/a|
|Largest Winning Trade||$140.00||$140.00||$0.00|
|Largest Losing Trade||($51.18)||($51.18)||$0.00|
|Largest Winner as % of Gross Profit||90.10%||90.10%||n/a|
|Largest Loser as % of Gross Loss||75.93%||75.93%||n/a|
|Net Profit as % of Largest Loss||171.92%||171.92%||n/a|
|Select Net Profit as % of Largest Loss||171.92%||171.92%||n/a|
|Adjusted Net Profit as % of Largest Loss||(135.89%)||(135.89%)||n/a|
|Max. Consecutive Winning Trades||2||2||0|
|Max. Consecutive Losing Trades||2||2||0|
|Avg. Bars in Total Trades||3.25||3.25||0.00|
|Avg. Bars in Winning Trades||3.00||3.00||0.00|
|Avg. Bars in Losing Trades||3.50||3.50||0.00|
|Avg. Bars in Even Trades||0.00||0.00||0.00|
|Max. Shares/Contracts Held||n/a||n/a||n/a|
|Total Shares/Contracts Held||179||179||0|
|Account Size Required||n/a||n/a||n/a|
|Return on Initial Capital||0.18%||Â||Â|
|Annual Rate of Return||12.53%||Â||Â|
|Buy & Hold Return||0.34%||Â||Â|
|Return on Account||n/a||Â||Â|
|Avg. Monthly Return||$87.99||Â||Â|
|Std. Deviation of Monthly Return||n/a||Â||Â|
|Return Retracement Ratio||n/a||Â||Â|
|Trading Period||5 Dys, 2 Hrs, 59 Mins|
|Percent of Time in the Market||98.58%||Â||Â|
|Time in the Market||5 Dys, 1 Hr, 14 Mins||Â||Â|
|Longest Flat Period||n/a||Â||Â|
Max. Equity Run-up(Daily)
|Date of Max. Equity Run-up||06/25/08 16:15||Â||Â|
|Max. Equity Run-up as % of Initial Capital||0.42%||Â||Â|
|as % of Initial Capital||0.24%||0.24%||0.00%|
|Net Profit as % of Drawdown||73.05%||73.05%||n/a|
|Select Net Profit as % of Drawdown||73.05%||73.05%||n/a|
|Adjusted Net Profit as % of Drawdown||(57.74%)||(57.74%)||n/a|
Max. Drawdown(Trade Close)
|as % of Initial Capital||0.13%||0.13%||0.00%|
|Net Profit as % of Drawdown||130.55%||130.55%||n/a|
|Select Net Profit as % of Drawdown||130.55%||130.55%||n/a|
|Adjusted Net Profit as % of Drawdown||(103.18%)||(103.18%)||n/a|
|Max. Trade Drawdown||($120.52)||($120.52)||$0.00|
Only two strategy trades placed this week. The trades are still open.
P/L for the week is ($62.61)
Results since Inception
Return on Initial Capital: 4.37%
Annual Rate of Return: 48.39%
I did close out some very profitable trades Monday, but I did not include them here, as they were included in last week’s mark to market summary.
This week saw 3 trades entered, and all three were closed with gains. The peformance summary shows 9 trades, but that is because I scaled out of the 3 initial positions.
Psychologically, this week was a difficultÂ period to be buying weakness, but it did pay off.
Since the inception date of May 19th, the strategy account is showing a return on initialÂ capital of 4.5% and an annualized rate of 63.53%