Some other adjustments I did in last couple of months (mostly very recent): Another update of MR short to reflect observations from this market. Another reduction of average exposure with same looking ARR and better recent DD. Position size is already pretty small so no changes. This version uses sorta market barometer and steps aside if it thinks too much excitement is happening in general. Introduced support for trading multiple accounts in my execution software. Primarily to enable running automation on my registered accounts with IB. Launched "slower" long MR strategy for RSP account. Launched one more long strategy that is designed to take advance of bubble-like conditions / allocated more capital to it as was working well after first 2 months. Most of the month I was more or less flat. Shorts were loosing, longs were compensating. This week started with a several % drop in combined equity and stays there. It will be interesting to see how latest versions will handle next few months. I should have killed open short positions after strategy change. But decided to let close with old rules. There was cost to that too. Val
It is hard to not feel very smart being heavily long since yesterday. That kind of thinking is probably what gets discretionary traders in trouble most often But I will indulge. As that would have no impact on the next trades. Feeling pretty damn smart today. Out of DD basically overnight. Val
I'm not necessarily feeling smart, but am definitely grateful to the brokers for intervening against the unruly herd who have been messing with my MR short results since early December. And I hope to never again experience the kind of wild account swing that has occurred in the past two days. Also at zero DD now
Don't your MR system have a hard stop loss or it just holds on till liquidation or mean reversion comes
It has a time stop but not a price stop. There is no historical precedent for a million members of an online forum pumping worthless stocks like this, not even 1999. Fortunately I was not short the worst ones due to various non-backtestable safeguards, but the model of that strategy is completely broken now.
I was thinking about you guys because of the recent developments. But it is not as usual as we may think, because it took me a year to select and polish up some shorting strategies (just in backtests/paper) because any of them had high risk of blowing up every year. I was able to get them down to max drawdown of only 30% per year, and around 20%/year on average. But the one I'm running now online (demo) is still holding up with only 12% drawdown, so this isn't even the worst year! https://deustrader.com/plutus_shortus2.html Keep in mind that some of those trades have lost 200% (per trade), so betting small is the key to survival in times like these. And even though I describe this as "penny stock shorting strategy", so it's different from your trades, it caught quite a lot of recently popular stocks, including NAKD, KOSS, AMC, EXPR, etc. It also shorted GME couple times, but managed to make profit out of those. I probably would've traded it live (maybe adjusting to larger stocks) if I weren't busy with options and finding ways to bet on those stocks both ways using options, though not all are optionable.
Without actually trading it it would be hard to say how real are those numbers. Most profitable opportunities in GME, NAKD, KOSS, AMC, EXPR are highly questionable as they were either hard to borrow or contract not available to short at different times. IV on GME options hit 1000% I heard, which changes dynamic of that play too. --- When it comes to mine - a portfolio of strategies is traded. Objectives are not the same as just running one. For instance here is what one short strategy offered against another long one. And those are just 2. 4-6 are traded at any time. Updated my live stats - current short model I was talking about is at 12% DD with ~13% recent max DD. New model has potentially better handling of current market, but yet to be seen of course. My positions are sized pretty small, I can survive individual trades go 200-400% without loosing much of an account, use of capital is pretty low, which leaves lots of room to deal with unusual margin requirements. Not that I am looking forward to it but I'll be fine. What worries me though, is the revenge trading of the crowds running up some stocks using social media after seeing GME precedent, portraying mythical man in suite or faceless "rich" as an enemy. I don't think they will stop on a company with a story. Once brokers make trading those difficult they will just start running up some random stocks. Not sure how fast brokers can tighten requirements on everything and put up more generic barriers. Interesting time. Val
Yeah, I've noticed that $GME started like any of the dozens of stocks that go up by 50%+ every week, some may have some value, others are speculative, usually low float and highly shorted. But some newbies just learned about short interest and started talking about it like it was something new, thus finding newfound meaning and excuse for their own greed, imagining they're fighting the Goliath for the good of the planet BTW, my shorting strategy was actually getting better results live because my orders wouldn't fill until a stock went higher and some people had to close positions thus freeing shares for me to short at a higher/better price than my initial orders. But it was still risky and too nerve-wracking to watch.
Mine also. Discrepancy between backtest and actual results for January was the largest I've ever seen. Fortunately (and uncommonly) actual was the winner.