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 successfully 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 almost 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. 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, 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 |
 $ P/L |
% P/L |
Total P/L |
|
|
|
|
|
|
|
|
|
|
$939.95 |
XXX |
13-Aug |
52.08 |
75 |
3913 |
54.77 |
15-Aug |
4100.75 |
187.75 |
4.80% |
|
XXX |
13-Aug |
56.84 |
75 |
4270 |
56.61 |
15-Aug |
4238.75 |
-31.25 |
-0.73% |
 |
XXX |
14-Aug |
17.63 |
200 |
3533 |
18.115 |
15-Aug |
3616 |
83 |
2.35% |
|
XXX |
14-Aug |
28.13 |
150 |
4226.5 |
29.41 |
20-Aug |
4404.5 |
178 |
4.21% |
|
XXX |
15-Aug |
37.98 |
125 |
4754.5 |
37.74 |
26-Aug |
4710.5 |
-44 |
-0.93% |
|
XXX |
19-Aug |
40.23 |
125 |
5035.75 |
38.83 |
21-Aug |
4846.75 |
-189 |
-3.75% |
|
XXX |
20-Aug |
35 |
145 |
5082 |
35.65 |
26-Aug |
5162.25 |
80.25 |
1.58% |
|
XXX |
20-Aug |
44.94 |
110 |
4950.4 |
44.52 |
29-Aug |
4890.2 |
-60.2 |
-1.22% |
|
XXX |
20-Aug |
43.92 |
115 |
5057.8 |
44.56 |
26-Aug |
5117.4 |
59.6 |
1.18% |
|
XXX |
20-Aug |
31.89 |
150 |
4790.5 |
32.47 |
29-Aug |
4863.5 |
73 |
1.52% |
|
XXX |
22-Aug |
31.33 |
160 |
5019.8 |
32.59 |
26-Aug |
5207.4 |
187.6 |
3.74% |
|
XXX |
22-Aug |
32.96 |
150 |
4951 |
32.95 |
29-Aug |
4935.5 |
-15.5 |
-0.31% |
|
XXX |
26-Aug |
15.28 |
395 |
6042.6 |
15.94 |
28-Aug |
6289.3 |
246.7 |
4.08% |
|
XXX |
27-Aug |
33.24 |
180 |
5990.2 |
34.34 |
29-Aug |
6174.2 |
184 |
3.07% |
 |
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. The loss I took on August 21st was from an erroneous entry of a sell-at-market order rather than a stop-loss order. 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 sizing 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 per round trip, my 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.
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