"The party continues", that is how the month can be summarised in one sentence. In fact, the party became a lot better than in previous months. I did not expect this: I had expected that the 2017 year-end rally would stop and reverse once the new year got under way. And expected that my account would encounter a drawdown. That didn't happen. To give an impression of how the account has grown since the lowest point in late September (normalised to the value at the lowest point): The account's normalised net liquidation value is shown in yellow, the normalised high water mark in green. Four months of growth, resulting in about 2.5 times the account size. The profitability has further increased compared to last month (I didn't add any money). Seeing the results obtained thus far, have I decided to change my 2018 targets and pull them in. The objective remains to withdraw twice an amount equal to six months cost of living. However, instead of doing so in April and October, will I do this now and in August. Will the account be able to generate enough profit between now and August to allow the second withdrawal? That will be the challenge. The profitability graph shows the "exuberance" of the last four months very clearly (one unit on the vertical axis corresponds with six months cost of living): As my account is growing did I have to make changes to the number of instruments I'm tracking and to the number of positions I'm allowing to be opened. I decided to start tracking some more instruments in the categories bonds, equity and forex. I used to allow only one position per asset class, but by now has my account reached a value where it makes sense to allow two positions in certain classes. All this meant that I had to adapt my software in certain areas. On top of that, because everything is going well, did I also receive Margin Violation warnings from IB, which I had to take care of. Luckily were these only warnings, and did IB not actually interfere with my portfolio. My portfolio is filled to the maximum my account allows, apparently. All in all have I been rather busy with this hobby, spending more time than in previous months. Current open positions (IB symbol names): futures, long: CL, ES, ESTX50, HE, M6E, NZD futures, short: 3KTB, FLKTB, GE, V2TX, ZC, ZT ETFs, long: DIA, EWJ, QQQ, SPY, XLB, XLF, XLI, XLY
I think you mentioned you choose from 40 or 45 ETFs based on their highest trend value. Can you post the list from which you are considering? DIA,QQQ,SPY even XLI,XLY looks all similar to me. Along with these you have ES, which makes it very US centric. How are weights to these ETF's and futures allocated?
The main trading activity is the futures trading. The entire account capital is available for that. And the risk parameters are derived from the account value. The ETF system operates independent of the futures trading system. I thought that it would be helpful if I don't leave the account capital as cash in the account, but use it for some ETF trading. I don't make the entire account capital available for this ETF trading. I use 70% of the account capital. Maybe this 70% is a bit too high as I'm still incurring a bit of debit interest at IB. Using a lower percentage will result in lower debit interest being charged, but also in lower return from the ETF trading. The list of ETFs I track is: XLY, XLP, XLE, XLF, XHB, XLI, XLB, XLV, IBB, SMH, XRT, XLK, IYR, IYZ, XLU, GLD, SLV, JJC, USO, UNG, UUP, FXE, FXB, FXY, HYG, IEF, TLT, SPY, EWG, EWU, EWJ, EFA, EEM, EWZ, RSX, EPI, FXI, DIA, IWM, QQQ, RWM, PSQ, DOG, SH.
The futures system runs on a 25% target volatility (annual). That much is not possible with ETFs because their price volatility is much lower and they don't have leverage. The position sizes are therefore limited by available capital, not by volatility.
Well, well, that was an interesting month. As announced did I withdraw money from the account on February 1st. It was a rather large portion: almost 25% of the total account value. The system responded by reducing position sizes because smaller account value leads to smaller risk appetite, leads to smaller position sizes. This took one day to complete. Hardly had it been completed or suddenly the stock exchanges started to plunge. As a result did also other instruments show increased price volatility. Such as currency exchange rates, bonds, oil, and eurodollar. All this increased volatility led my system to further reduce position sizes. Smaller position sizes lead to lower margin usage. I didn't receive any margin violation warnings from IB this month. And of course did my account go into a drawdown. By the time the first full week of February had ended, was my account size reduced to around 55% of the value it had by the end of January. This sounds gruesome, but it only meant that it dropped to the value it had in early December, just two months prior. So what did I do during the remainder of February? Review the situation, adapt the diversification settings to the account value, and start building up again. The next goal, withdrawing money in August to cover the next six months cost of living, can therefore be redefined as to whether my account will be able to recover from this large drawdown and be able to reach and exceed the current high water mark, which was achieved in late January. If not, then future withdrawals cannot be sustainable as they would further erode the account value. The account would get depleted further at each withdrawal. The graph of the account value and high water mark shows the situation. Instead of showing the graph from the very beginning (October 2016) do I only show the recent couple of months. The vertical axis is normalized: one unit represents half a year cost of living (my withdrawal target, to achieve twice this year). NLV is the net liquidation value; HWM stands for high water mark. The turmoil on the stock exchanges also led to changes in my ETF portfolio. ETFs based on USA equity indexes and sector funds got replaced by currency exchange rates ETFs (plus temporarily gold and oil). However, by the end of the month were also positions in QQQ, EWZ (Brazil) and RSX (Russia) included. Current positions, by the end of February: (IB symbol codes) futures, long: M6E, ZS futures, short: 3KTB, FLKTB, GE, ZT ETFs, long: EWZ, FXE, FXY, QQQ, RSX, XLY
Trading is a great hobby I find. It is also an intellectual exercise with positive rewards for success. Only trade with what one can afford to lose seems a good idea.
Not much to say about the past month. The account ended somewhat lower. I am starting to fear that I will not be able to achieve my next target: to be back at the high water mark by August. Why this pessimism? Last year I experienced a long period of "doldrums" during the summer period. And the 2018 summer period is about to start.The graph below shows the lack of any progress during the 2017 summer.It shows the normalised net liquidation value and high water mark. Position sizes were still relatively small, due to the increased value volatility and due to rather neutral forecasts. Does that mean that really nothing happened? No, not exactly. While I was away on a holiday the computer crashed and didn't monitor my account for about half a week. I could see in the log files that something had happened, but was not able to remotely alter the situation. All I could do was to log on to IB's account management and see whether some disastrous event had happened to any of my positions. I could have elected to close the positions via webtrader but didn't. When I returned home I discovered that the computer was still alive, but that it had lost its internet connection. Nothing major had happened to any of my positions meanwhile, so when the system restarted it only had to do some minor adjustments. Positions at the end of the month (IB symbol codes): futures, long: GBS, M6E futures, short: GE, HE, NIFTY, ZN, ZT ETFs, long: FXB, FXE, FXY, USO