Both aggressive models have roughly doubled the return of SPY so far this year.
20% of Equity per Trade
Net % Profit: 9.86%
Annualized: 91.05%
Average Trade: 1.42%
Winning %: 73.53%
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10% of Equity per Trade
Net % Profit: 2.23%
Annualized: 16.42%
Average Trade: 0.38%
Winning %: 70.31%
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ATR Position Sizing
Net % Profit: 7.96%
Annualized: 69.45%
Average Trade: 0.75%
Winning %: 71.74%
.01/share was included for commissions.
What is the difference between the 20% and 10% of equity per trade?
Is it the number of trades?
Thanks
If you are allocating 20% of equity per trade, then you will not have more than 5 positions open at one time. With 10% equity you can have up to 10 positions open at one time.
I’ve GOT to sign up for this 🙂
Do you think the big diff between 10% and 20% might be that the top 5 picks are that much better than the next 5 ?
Omen, that is part of it. The higher ranked picks are more likely to have higher gains (and losses, when they lose). However, in this instance, the 10% model just happened to take trades in OXPA and TA, both of which have been pretty large losers. So there is as always the element of luck. I typically expect the 10% model to do about half of the 20% model.
Are these real results as occured in a live brokerage account, or an out of sample backtest? Was there one really bad trade in the 20% per equity strategy, that was excluded from other strategies? I’m trying to understand the big difference in results btw holding 5 and 10 positions..?
Mark, I generate the reports using an out of sample backtest. On the PDS site, you can view the database where all the trades are listed, with entry and exit dates and prices. There are only 2 things that would make the backtest report different from actual trading and those are i. commissions, and ii. from time to time the actual entry price from the market-on-open orders is different from the official exchange opens. The backtest report is generated from data that uses the consolidated open price and in actual trading you will get the official exchange opening price. Sometimes there is a difference, and sometimes it is in your favor, sometimes not. Over time, I have not found it to make a significant difference. If you go to the site and to the forum, I’m sure there are some subscribers who would be happy to describe their actual results using the system.
There is only one strategy. However, there are many different money management techniques that can be used.
There are two factors- risk and luck. 20% of equity per trade is theoretically risking 2x as much as the 10% of equity per trade, and it is risking more on the higher ranked picks. The 10% model picked up a couple of trades which hit it hard, OPXA and TA, which the 20% model avoided because it was already fully invested when those stocks were selected. I believe the ATR Position-Sizing model also picked TA but because it was a volatile stock, the system sized the position small. In fact, it would have been sized almost half as small as less volatile positions. Thus, it did not affect results nearly as much as the 10% equity model was affected, since it was sized at a full 10% of total equity.