2012: The Battle for Survival

Discussion in 'Journals' started by neke, Jan 17, 2012.

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  1. neke

    neke

    It has been a little over two years since my cumulative equity peak. Two consecutive down years have taken a toll on my psyche. However, I am determined to right the wrongs and come back to a new equity peak. Towards the end of last year, I started a change in the parameters by which success is to be measured in my discretionary trades. Going forward I am going to watch the profit factor (PF) on my discretionary trades like a hawk. The minimum ongoing level I expect is 1.20.


    Discretionary trades will be sized (higher risk for higher conviction trades) based on expected PF. High conviction (Hc) trades are those that I expect a PF of more than 2.00 (over a large sample of such trades). Medium conviction (MC) trades will have an expected PF of between 1.20 and 2.00. Low conviction (LC) trades will have expected PF of less than 1.20. If wishes were horses, I would like to see the distribution of discretionary trades below for 2012.

    Code:
    Conviction	NumberOfTrades
    HC		20
    MC		80
    LC		320
    
    PRIOR THREADS

    2011: Rebuilding My Battered Account
    Taking 410K to 4million by Year End 2010
    Taking 320K to 3.5million by Year End 2009
    Taking 103K to 1.2million by Year End 2008
    Taking 76K to 500K by Year End (2007)


    QUICK RECAP

    Here is a quite recap of my past trading. Opened an account and placed my first trade with Datek Online in Dec 1999 at the height of the dotcom bubble, starting with 16K (basically my whole savings) and within 2 weeks I lost 50% of that. Through the years till Nov 2004 I lost a cummulative of 54K (account goes down, let the account idle for sometime until I can save
    some more money, and then replenish, get the next drawdown, and so on). At that low point, the balance in my account was 5.3K. Every thing in the account now sprung from that balance with some additional deposits, and lots of withdrawals as follows (The figures here are for full year, and not just period covered by thread):

    Code:
    	From		To		StartingBalance			Net P&L		Return%		Net Cash Movement	Closing Balance
    	===========	===========	===============		===============		=======		=================	==============
    	Nov 2004	Dec 2004	          5,300			  8,700		    164			    1,000		 15,000
    	Jan 2005	Dec 2005		 15,000			132,000		    880			  (12,000)		135,000
    	Jan 2006	Feb 28 2007		135,000			115,000		     85		 	 (174,000)		 76,000
    	Feb 28 2007	Jan 12 2008		 76,000		        138,000		    182			 (111,000)		103,000
    	Jan 12 2008	Jan 11 2009		103,000			377,000		    366         	 (160,000)		320,000	    
    	Jan 11 2009	Jan 10 2010		320,000			210,000		     65			 (120,000)		410,000
    	Jan 10 2010	Jan  9 2011		410,000		        (44,000)	    (11)		  (30,000)		336,000
    	Jan 10 2011	Jan 17 2012		336,000		       (121,271)	    (36)		  (11,000)		203,729
    
    
    Notes
    * Closing Balance = StartingBalance + Net P &L - Net Cash Movement
    * Net Cash Movement is total of deposits less withdrawals. From Jan 2006 up, there has never been a deposit (just cash withdrawals).
    * Return% is percentage based on P/L over the starting balance, with no regard to the timing of deposits or withdrawals.
    * The periods listed here for 2007 onwards is from start of thread to start of next thread for completeness, including the 2 or 3 weeks before the next thread. So may differ a bit from the figures at the end of the 50-weeks of each yearly thread.


    [​IMG]
     
  2. Krixx

    Krixx

    Hi Neke!
    Good to have you back in business. :) Hope this year will be positive for you. Good luck !
     
  3. gmst

    gmst

    Good Luck! Why not eliminate LC completely ?? Have you thought about this - to somehow eliminate 320 trades of LC and in there place just increase 20 trades in MC and 5 trades in HC.

    Your DD will improve dramatically and overall PF will be solid.
     
  4. d08

    d08

    What makes you think eliminating LC would lower the DD?
    If the LC trades are not correlated with the rest, it makes absolute sense to take them.
     
  5. gmst

    gmst

    I have seen your PL in the PL thread and I think you are a systematic trader. Yes, in your world it makes sense, as the law of large numbers and uncorrelated well designed strategies will result into peaked return distributions with small 2nd, 3rd and higher moments.

    However, the way Neke does discretionary trading - based on earnings news, stock intraday momentum, news driven price movement, he doesn't have well calibrated strategies with low 3rd and 4th order moments. Almost all his trades are based on his market experience, his news read and ofcourse the research he has done over the years.

    What I am saying is that he doesn't trade in Lescor's way.

    Given above information, the conclusion I draw is that correlation of his LC trades with MC and HC trades are random. and doing more LC trades will just lead to higher # of consecutive losing trades and thus larger DD.
     
  6. I commend you for keeping this journal going despite the difficult years. I also find that most of my profits come from a smaller number of high conviction trades. However, I still like doing low conviction trades because it keeps me in the game and thinking. Also because as a whole my low conviction trades are still profitable.
     
  7. d08

    d08

    Alright, I missed the "discretionary" part in Neke's post. He does do (or at least did) automated as well.
    I'd still say there isn't any way to know about correlation, I guess neke could analyze the historical trades and come up with some DD numbers, if he wanted to.
     
  8. good luck this year neke im rooting for you!
     
  9. pneuma

    pneuma

    good luck Neke
     
  10. ssrrkk

    ssrrkk

    Just my opinion, perhaps your overall PF is high enough such that you do make profits in good times, but due to your PL variance, you dip down into losses some years. This could mean two things: (1) if you can raise your PF by 1 or 2 standard deviations of the PL then the chances of a losing year might be lowered; and (2) if you tighten up your variance, aka draw downs, then again you may reduce the chance of losses. This might mean, as someone else alluded, to reduce the number of LC trades...
     
    #10     Jan 18, 2012
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