Hammering away, slow and methodical

[Rol]

Quote from sprstpd:

How often do your strategies change? How much confidence do you have in a system before starting it live? What kind of backtesting do you do?

Personally, I think moving into the index trading space (SPY, QQQ, DIA) is a questionable decision. Those indices are highly efficient - the odds of finding a viable trading strategy there is lower than in individual stocks.

However, good luck! Interesting journal.

I know it sounds like I am jumping around. It is more like taking my core strategy and looking at it in different ways, making adjustments, and then plugging it back into the system. I spend a great deal of type thinking about various “What ifs..?" I initially used Amibroker for portfolio level testing, but now after last August, I see it was not realistic in realtime. By only following a few ETFs, I can see in TS charts precisely where all the entries and exits occur, as well as max DD going back to when the ETF first got listed. So this helps with confidence in the system.

I agree the indices are highly efficient for intraday scalp type trading, but my hold time will be 6-7 days on average. I don’t see any way to not be net profitable over the long haul, unless the market starts trading at only one price from here on out, or heads strait to zero. Last August has become my benchmark for the worst my system could perform, so I am taking it from there.

 

[Rol]

I launched my new improved strategy the later part of last week. Rather than trading only SPY, DIA, and QQQ, and their inverses, my basket will consist of the stocks in the S&P 500, and a variety of about 80 ETFs. I noticed when scanning all stocks, I would often end up over concentrated in sectors. Whereas limiting trading to the S&P only, I get fills on a wider variety of sectors. I closed out my shorts midweek last week for a $300 loss. One rule of my strategy is to only enter a trade when the last tick is above its 200 DMA. So for practical purposes, my basket currently includes about 350 stocks and around 70 ETFs. I altered my rules somewhat to allow for more fills than before, so I won’t need to do nightly scans to get signals. All stocks will be monitored in real time. By concentrating on stocks in the index above their 200 DMA, I hope to avoid “Enron” type companies and Chinese pump and dumps, for example. I will be shorting, but only when the market is in a downtrend, and going long when in an uptrend. I am kicking my new strategy off with 30K, and will make bimonthly contributions to accelerate compounding. Current maximum position size is $3300, but I plan to inch it up to $3600 soon and keep it there. I may load up on an ETF on occasion, but only after much deliberation and patience. My new strategy has me holding for longer periods of around 5 days, which is something I will have grow accustomed to. I will let my winners run a bit longer than before.

Real-time Unrealized P/L $120.24
Real-time Realized P/L (Today) $39.69

 

[Rol]

Symbol Open P/L Open P/L % Average Price Quantity Total Cost Description
 NSC ($95.20) -2.87% 70.47 47 $3,312 Norfolk Southern
 HOT ($35.60) -1.08% 54.95 60 $3,297 Starwood Hotels&ResWorldwide
 LLY ($29.30) -1.34% 39.15 56 $2,193 Lilly (Eli)
 FTI ($12.60) -1.16% 51.74 21 $1,087 FMC Technologies
 MCK ($4.62) -0.14% 81.12 41 $3,326 McKesson Corp
 BRK.B ($2.93) -0.13% 78.38 28 $2,195 Berkshire Hathaway'B'
 SCG $5.52 0.52% 44.55 24 $1,069 Scana Corp
 DGX $11.78 1.09% 56.89 19 $1,081 Quest Diagnostics
 JOY $11.81 0.33% 84.78 42 $3,561 Joy Global, Inc.
 A $28.86 2.60% 42.72 26 $1,111 Agilent Technologies
 MS $34.26 1.56% 18.90 116 $2,193 Morgan Stanley
 C $48.17 2.18% 32.02 69 $2,210 Citigroup Inc
  ~NOTE: The list is automatically sorted every minute. Last sort on 2/16/2012 at 3:04:53 PM
   
 Symbol Type Filled/Canceled
 GD Sell 02/16/12 02:59:05 PM
 SUN Sell 02/16/12 02:59:04 PM
 INTU Sell 02/16/12 02:59:03 PM
 WY Sell 02/16/12 02:59:03 PM
 MTB Sell 02/16/12 02:59:03 PM
 MCHP Sell 02/16/12 02:59:03 PM
 KLAC Sell 02/16/12 02:59:03 PM
 STT Sell 02/16/12 02:59:02 PM
 NUE Sell 02/16/12 02:59:02 PM
 XOM Sell 02/16/12 02:59:02 PM
 AAPL Sell 02/16/12 01:58:09 PM
 MCK Buy 02/16/12 08:38:25 AM
 MS Buy 02/16/12 08:30:34 AM
 KLAC Buy 02/16/12 08:30:15 AM
 C Buy 02/16/12 08:30:12 AM
 A Buy 02/16/12 08:30:06 AM
 MCHP Buy 02/16/12 08:30:06 AM
 AAPL Buy 02/16/12 08:30:04 AM

Real-time Account Net Worth $30,322.46
Beginning Day Account Net Worth $29,762.14
Real-time Overnight Marginable Equities Buying Power $33,789.19
Real-time Account Balance $3,729.63
Real-time Cost of Positions $26,632.99
Real-time Unrealized P/L ($40.16)
Real-time Realized P/L (Today) $201.23

The market remains bullish, as it is able to shrug off bad news (Greece) and move higher. I feel no need to fight the longer-term trend. I will go short when the averages head below their 200 DMA. I feel better sticking with the bigger names of the SP500, in longer term up trends. I actually got a fill on AAPL today. I was stress testing my new system this week and still working out some kinks with getting too many fills on entry orders, so the exposure was and still is higher than the system should be allowing.

 

[Rol]

[color=green][b]
Initial Capital (2/10/2010)	$30,000 
Total Net Profit	$624.18 
(Per Share)	$0.32 
Gross Profit	$859.23 
Gross Loss	($235.04)
Profit Factor	3.66
Total Number of Trades	73
Percent Profitable	76.71%
Winning Trades	56
Losing Trades	17
Avg. Trade Net Profit	$8.55 
Avg. Winning Trade	$15.34 
Avg. Losing Trade	($13.83)
Ratio Avg. Win:Avg. Loss	1.11
Expectancy	0.62
Largest Winning Trade	$131.85 
Largest Losing Trade	($84.04)
Max. Consecutive Winning Trades	10
Max. Consecutive Losing Trades	6
Total Shares/Contracts Held	1935
Total Commission	$120.66 
Return on Initial Capital	2.08%
Annual Rate of Return	94.02%
Buy & Hold Return	0.53%
Trading Period	8 Dys
Max. Equity Run-up(Daily)	$813.28 
Date of Max. Equity Run-up	2/17/2012 15:00
Max. Drawdown(Daily)	
Value	($519.04)
Date	2/16/2012 8:30
as % of Initial Capital	1.73%
Max. Trade Drawdown	($90.48)
	
Net Worth	$30,634
Wkly Performance	2.41%
Dollar Gain/Loss	$628
S&P Wkly Performance	1.53%
Cum. Performance	2.41%
S&P Cum. Performance	1.53%
Cum. Correlation to S&P	1.00

Current exposure	41%.
Real-time Unrealized P/L	($94.52)
Real-time Realized P/L (Today)	$366.04
[/b][/color]

The first week of my new strategy turned out well, beating the S&P by almost 1%. I was tempted to close out winning positions on the 13th, but wanted to stick to the plan. While I watched many of the gains evaporate, I did wind up exiting many for eventual bigger gains later on. The peak to trough DD was $519, so equity swings are a given. In fact, I would say at some point in the future, I get a 30% DD. At 2X BP, this would represent being down an average of 15%, on all of my positions.

 

[Rol]

[color=green][b]
Initial Capital (2/10/2012)	$30,000 
Total Net Profit	$952.97 
(Per Share)	$0.36 
Gross Profit	$1,156.25 
Gross Loss	($203.28)
Profit Factor	5.69
Total Number of Trades	99
Percent Profitable	78.79%
Winning Trades	78
Losing Trades	21
Avg. Trade Net Profit	$9.63 
Avg. Winning Trade	$14.82 
Avg. Losing Trade	($9.68)
Ratio Avg. Win:Avg. Loss	1.53
Expectancy	0.99
Largest Winning Trade	$131.85 
Largest Losing Trade	($41.56)
Max. Consecutive Winning Trades	17
Max. Consecutive Losing Trades	3
Total Shares/Contracts Held	2649
Total Commission	$161.66 
Return on Initial Capital	3.18%
Annual Rate of Return	76.15%
Buy & Hold Return	0.65%
Trading Period	15 Dys
Max. Equity Run-up(Daily)	$1,220.83 
Date of Max. Equity Run-up	2/24/2012 15:00
Max. Drawdown(Daily)	
Value	($519.04)
Date	2/16/2012 8:30
as % of Initial Capital	1.73%
Max. Trade Drawdown	($90.48)
	
Net Worth	$33,657
Wkly Performance	1.21%
Dollar Gain/Loss	$324
S&P Wkly Performance	0.37%
Cum. Performance	3.66%
S&P Cum. Performance	1.91%
Cum. Correlation to S&P  1.00
[/b][/color]

I managed to beat the S&P this week, but what I am excited about, is that I did it while keeping my exposure between about 50-70%. My current exposure is 64% on 12 open positions. What I noticed happening is I will enter 3 to 5 positions early in the trading day, and then exit 3 to 5 positions at the close for little net change in exposure, but an increase in net profit. While the numbers so far are better than I could hope for, we still have not had a significant sell off this year. In the current market, which is testing yearly highs, I think it is best to keep exposure around 50%.

I think I will start a new equity curve each quarter rather than monthly. I know I will have losing months, but my new goal is not to have any losing quarters, and of course no losing years. The equity curve by trade number is usually going to be flat to downward sloping at the right edge, as it is reflecting underwater trades that have not yet closed. My current net unrealized P/L is -$23.87.

Just to give you an idea of the number of signals I have to pass up due to BP and system limits, here are daily signals I got going back to 2/13:

2/13	2/14	2/15	2/16	2/17	2/21	2/22	2/23	2/24
27	65	67	74	11	37	98	82	25

This tells me that rather than increasing my leverage usage, I need to patiently increase my working capital through contributions while keeping the number of allowed new positions conservative.

 

[Rol]

[color=green][b]
Initial Capital (2/10/2012)	$30,000 
Total Net Profit	$1,319.36 
(Per Share)	$0.35 
Gross Profit	$1,694.72 
Gross Loss	($375.36)
Profit Factor	4.51
Total Number of Trades	130
Percent Profitable	77.69%
Winning Trades	101
Losing Trades	29
Avg. Trade Net Profit	$10.15 
Avg. Winning Trade	$16.78 
Avg. Losing Trade	($12.94)
Ratio Avg. Win:Avg. Loss	1.3
Expectancy	0.79
Largest Winning Trade	$131.85 
Largest Losing Trade	($54.01)
Max. Consecutive Winning Trades	17
Max. Consecutive Losing Trades	7
Total Shares/Contracts Held	3801
Total Commission	$209.66 
Return on Initial Capital	4.40%
Annual Rate of Return	71.45%
Buy & Hold Return	0.64%
Trading Period	22 Dys
Max. Equity Run-up(Daily)	$1,622.82 
Date of Max. Equity Run-up	3/1/2012 15:00
Max. Drawdown(Daily)	
Value	($519.04)
Date	2/16/2012 8:30
as % of Initial Capital	1.73%
Max. Trade Drawdown	($90.48)
	
Net Worth	$33,960
Wkly Performance	1.12%
Dollar Gain/Loss	$303
S&P Wkly Performance	0.28%
Cum. Performance	4.82%
S&P Cum. Performance	2.20%
Cum. Correl. To S&P	1.00
Current Exposure	74%
[/b][/color]

I outperformed the S&P this week while continuing to keep exposure well under 100%. The gains so far remain consistent, but I need to see how much I end up giving back in a protracted downtrend. I noticed the Russell 2000 has been weak for February and is mostly flat for the month. It lost 1.85% just today. I have not done any discretionary trading since 2-10-12, but may start shorting the indices next week to hedge my longs, if there is a catalyst to trigger bearishness.

I have been very reluctant to place any discretionary trades. If I am to consider myself the "House", then I need to allow the system to place many small bets across the spectrum of stocks and etfs I track, allowing the edge to play out.

 

[tihfa]

Rol,

thank you for keeping the journal. It is very inspiring and motivating!

I have couple of questions:

1) you mentioned way back that it took you 4 years to develop the system - was part of that figuring how to setup tradestation on a server, internet connection etc...

2) i am thinking of renting a decidicated server with goddady to run tradestation. would you say i am better off buying a server and run it from home with comcast as ISP or am i better off running tradestation off of goddady?

Thanks,
tihfa

 

[Rol]

Quote from tihfa:

Rol,

thank you for keeping the journal. It is very inspiring and motivating!

I have couple of questions:

1) you mentioned way back that it took you 4 years to develop the system - was part of that figuring how to setup tradestation on a server, internet connection etc...

2) i am thinking of renting a decidicated server with goddady to run tradestation. would you say i am better off buying a server and run it from home with comcast as ISP or am i better off running tradestation off of goddady?

Thanks,
tihfa

Hi tihfa, thanks for checking in. I’m glad my journal inspires and motivates you . One reason I am keeping this journal is to hopefully help others prevent blowing up, as well as be organized and systematic. It took 4 years, because I was new to code writing, and the code did not exist yet in Tradestation to do what I wanted to accomplish. Also, the TS trade server has improved much since then. It was so bad at one time, with regular disconnects, and hangs, that I thought of switching. TS would often blame the user’s ISP and computer, but I could surf the net with no problem while TS was down.

I’ve heard of people running TS offsite, but I don’t know much about it. I personally would be paranoid about my strategy code being stolen. I have TS loaded on two computers at home in case one crashes. I use to have DSL as well as Comcast cable, for redundancy, but now I just have cable and TS trading desk on speed dial. I’ll likely add roaming internet , and DSL back when I get bigger. I would use the wireless if there was a power outage. Internet connectively has improved greatly over the years, at least in my area. I had a Gotomypc account at one time, but I decided when I left the house, it was a good time to get away from the TS platform, instead of always checking in on it. My trading style generally doesn’t require close monitoring , unlike futures.

 

[Rol]

[color=green][b]
Initial Capital (2/10/2012)	$30,000 
Total Net Profit	$1,118.63 
(Per Share)	$0.23 
Gross Profit	$1,899.91 
Gross Loss	($781.28)
Profit Factor	2.43
Total Number of Trades	163
Percent Profitable	71.78%
Winning Trades	117
Losing Trades	46
Avg. Trade Net Profit	$6.86 
Avg. Winning Trade	$16.24 
Avg. Losing Trade	($16.98)
Ratio Avg. Win:Avg. Loss	0.96
Expectancy	0.41
Largest Winning Trade	$131.85 
Largest Losing Trade	($81.70)
Max. Consecutive Winning Trades	17
Max. Consecutive Losing Trades	11
Total Shares/Contracts Held	4882
Total Commission	$265.09 
Return on Initial Capital	3.73%
Annual Rate of Return	46.11%
Buy & Hold Return	0.29%
Trading Period	29 Dys
Max. Equity Run-up(Daily)	$1,622.82 
Date of Max. Equity Run-up	3/1/2012 15:00
Max. Drawdown(Daily)	
Value	($727.33)
Date	3/7/2012 8:30
as % of Initial Capital	2.42%
Max. Trade Drawdown	($90.48)
	
Net Worth	$33,760
Wkly Performance	-0.73%
Dollar Gain/Loss	-$200
S&P Wkly Performance	0.19%
Cum. Performance	4.05%
S&P Cum. Performance	2.39%
Cum. Correl. To S&P	0.79
Current Exposure	53%
[/b][/color]

I suffered my first losing week since implementing latest system. Still, 4% gain in one month is acceptable. Exposure got up to around 130%, but gains were not enough to offset losses this week.

 

[Rol]

Symbol Open P/L Open P/L % Average Price Quantity Total Cost Description 
 JCP ($158.79) -4.43% 39.37 91 $3,583 Penney (J.C.)
 EXPE ($49.45) -1.38% 32.96 109 $3,593 Expedia Inc
 MSI $0.07 0.01% 50.44 24 $1,211 Motorola, Inc.
 RRC $5.70 0.49% 61.72 19 $1,173 Range Resources
 EMN $6.44 0.54% 51.51 23 $1,185 Eastman Chemical
 PXD $18.59 1.59% 106.24 11 $1,169 Pioneer Natural Resources
NOTE: The list is automatically sorted every minute. Last sort on 3/13/2012 at 3:04:29 PM    
 Symbol Type Filled/Canceled 
 V Sell 03/13/12 02:59:18 PM
 AIZ Sell 03/13/12 02:59:03 PM
 CPB Sell 03/13/12 02:59:03 PM
 NBR Sell 03/13/12 02:59:02 PM
 EWZ Sell 03/13/12 02:59:02 PM
 RDC Sell 03/13/12 02:59:02 PM
 VIAB Sell 03/13/12 02:59:02 PM
 CCE Sell 03/13/12 02:59:02 PM
 RRC Buy 03/13/12 08:46:58 AM
 V Buy 03/13/12 08:46:43 AM
 PXD Buy 03/13/12 08:44:36 AM
 EMN Buy 03/13/12 08:40:40 AM
 VIAB Buy 03/13/12 08:32:25 AM
  
Real-time Account Net Worth $34,224.31
Real-time Unrealized P/L ($169.85)
Real-time Realized P/L (Today) $258.59

Exposure went up to about 73% today, but closed the day for a current exposure of 35%. Biggest unrealized loss is JCP. I started including a 10% stop on a full position which would be $360 on a $3600 position. This is the current extreme of my comfort zone on a loss. I also added some rules on a loss that would have previously exited without regard to the percent loss. Now I will follow it each day with a stop if a trend reversal can gain some traction for a while. I will post how it goes with JCP. I slept through the whole morning and then checked the platform briefly before heading off to work today. I was up late watching the series on Netflix “How the Earth was made”. The Great Lakes were formed from Ice glaciers during the last ice age only about 12,000 years ago. I feel like a glacier slowly carving a profit out of the market’s landscape. You may not see much change on a day to day basis, but over a vast span of time, the evidence of change becomes apparent.