I am skipping the usual weekly stats for the time being. I did not follow my system very well during this market correction, and so the results are not very reflective of true system performance. The worst thing for me to do at this point for myself, as well as others, would be to shut down this thread at this point. I am including two charts to encourage myself some as I attempt to regroup. I am still positive for the year by 1k, and am up over 12k since system implementation. The broader market is negative on the year. Current equity is 60k, so I am presently in a 26% DD from my equity high of $81300. My system would have exited about half of my positions on 8-3, where you can see the uptick on the YTD chart. Not wanting to take my losses, I chose to override the exits on close as well as the next day stop losses. I also was gambling with day trading BP, hoping for an intraday reversal that never materialized. These two plan violations probably have resulted in my current losses being close to 2X what they should be. I also realize I was taking on too much risk by allowing too many entries per day, as well as the overall maximum system positions. I think a good barometer to use would be if the losses ever seem too great to take relative to your account size, then you are taking on too much risk. It only takes a misstep on one day to short circuit your game plan. I have already implemented changes to reduce risk going forward. I do not think I qualify as "blowing up" at this point. Blowing up to me would be more like a 50-70% DD. I will likely hold my current positions longer as now would seem like a good entry point on many of them. When you have a portfolio, there is a greater likelihood that some of them will recover. I will continue with regular "fund" contributions, as I would whether the market was rising or falling. I did some interesting backtesting recently involving stocks above and below their 200 DMA. I have done this in the past, but was only focusing on the ending net equity for comparison. The backtesting showed a greater ending net equity when including stocks both above and below their 200 DMA, but the curve is much smoother when only entering when a stock is above its 200 DMA. Anyway, I will post some stats later on my findings.
I wanted to get these backtesting results posted so I can look them over this weekend when I am away from my computer. The theory, I believe, is if a stock is above its 200 dma, then it is in a longer term uptrend and perhaps the fundamentals are OK on the stock. Also, when the broader market is bearish, you will get fewer signals and will be more on the sidelines. Being already at 2000 trades in about 10 months, I think I may be over trading a bit. I wanted to keep it under 2000 trades for a 12 month period. There appears to be an advantage to restricting trades to those above their 200 dma. I will be scanning only for those stocks above their 200 dma going forward, and see if it improves performance. These are YTD paper trading comparison stats.
Dear RoI, very impressed with your work and your journal. Its high quality professional way of doing it, and especially impressive since you have no finance background and come from medical industry. The last post illustrates that even one day not following your system can be so deadly to the overall game-plan. Don't lose heart and keep up the good work. You have miles to go.
I experencied something similar, but I staid out the last 3 days, which saved me a good chunk of the inevitable drawdown. Question is, whether or not we are in crises mode, which can have unpredictable consequences. The last few days were already historic. A sustained downtrend like this occured only once or twice in the last 20 years. Will be looking forward to the rebuilding. I myself am staying out for a while.
I am posting a screen shot of the spreadsheet I use to calculate my position sizing. I am hoping by doing this it will cause me to be accountable to maintaining more conservative settings going forward. I will still leave the actual work of deriving the formulas to the individual. To give a perspective on the excessive risk I had been taking, I was using a buying power factor of 4, and a scale in factor of 3. A BP factor of 2 might be suitable for 2X overnight BP. A BP factor of 1 would be for a cash account. A higher scale-in factor allows you to be able to add new positions for more days during a continued market decline. The cells in BOLD are for manually entering desired settings, and the remaining cells are then calculated. This is all done on-the-fly by my auto trading program.
Hi gmst, thanks for reading my journal. I read your journal intro, I think the day you started it, and could relate to many aspects of your journey so far. It sounds as if you are taking a methodical approach now to your trading as well. I am fairly organized with my professional work as well as trading. I always strive to get the greatest result with the least amount of effort. I donât know a great deal about professional finance, at least in how to effectively apply it to investing, but I can crunch numbers and was always good with math. My latest mishap tells me I am not ready for the big time yet. At least I still have some money left to play with. You had mentioned in your journal that % risk should be a function of expectancy and PF. I had been thinking recently that if my system experiences a 25% DD, and yet can return 50 % APR, then that could be a considered a reasonable 2:1 reward to risk ratio. Is this thinking along the same lines?
Rol From your first post on this forum: Your posts of late have repeatedly mentioned manual intervention as detrimental to profits, so I thought a reminder of your origonal intentions would be in order. Also In your last batch of posts the table actual.png must be from inception to YTD, as you later show a graph with 1k profit 2011 YTD. So if that is correct then paper trade (8k profit) is better than actual (1K profit). Is this correct?
Thanks for the reminder Camdo! I followed my system well during the Japan earthquake selloff, taking losses when called for, and it helped immensely with damage control during that time. I think with the increase dollar value in my account since then, I was not as comfortable with the losses the system called for taking this time, not to mention the selloff was steeper, and I suffered the consequences. I also adjusted the position sizing settings since then, to my detriment. Like heech mentioned in HuggieBearâs journal, these so called tails happen once or twice a year, so you had better be prepared. My paper trading equity curves do in fact show a >10% DD about once or twice a year. The actual.png showing $14628.81 in net profit and the paper.png showing $8628.06 in net profit were both as of the close on 8-2. The 1k actual profit was as of Fridayâs close on 8-5. A lot happened in that time! YTD paper profits as of the close on 8-5 are -$9.66, seen on the YTD stats.png âAbove & Below 200 DMAâ column, I posted on 8-6.