HuggieBear's Official 2011 Thread of Market Domination

Biggest up week ever...


Performance for Week 29:


Weekly % Return = +3.32%
2011 P/L = +32.6%
Current DD = -0.00%
MDD = -12.05%


A monster week, mostly driven by gains from Monday's huge market up day. As of this week, I have now exceeded the upper range for my full year profit target. I am "ahead of schedule" mostly driven by unanticipated discretionary trading gains. My systems are producing right about on schedule.

I am overcome by the desire to reduce risk and protect profits, but I am trying to fight that and just see how far this might run. I am mindful of Druckenmiller's advice that outsanding returns are best made by grinding it out until you are up 30% or 40%, and then really going for it. But then again, he did condition it on "having convictions", and that is damn tough to do in today's market.


Anyway, looks like these idiots are going to throw a huge monkey wrench into things by letting the country default, so who knows what will happen this week.


Last week I "translated" my futures system against a basket of broad ETFs, with some tweaks. Surprisingly, i found that it actually performs better than my main equity system, so I have divided my capital and am now running two different equities systems. They have different triggers and so may provide some logical diversification. (i am mindful that, irrespective of signal generation, one is only as diversified as their holdings).

Position Exits generated this week:

Exit Long Nikkei (fut)

New Positions entered this week:

Enter Long Soybeans (fut)
Enter Long Platinum (fut)
Enter Long British Pound (fut)


Existing Positions remaining open:

(equities)
Long TLT
Long IWM
Long ILF
Long Gold *need to enter this open signal on a dip

(futures)
Short Crude (fut)
Long Swiss Franc
Long Aussie Dollar (fut)
Long Canadian Dollar (fut)
Long copper (fut)
Long Nazz(fut)








Cheers,
HB
 
Totally off the reservation...


Performance for Week 30:


Weekly % Return = +2.65%
2011 P/L = +36.91%
Current DD = -0.00%
MDD = -12.05%


**This will be an abbreviated post as I'm about to head out to the beach for the weekend. I will post position updates later**


Well, what can i say except that I am making money hand over fist, at a much faster pace than I ever expected and enough so that I am definitely questioning my leverage & risk. I will be reevaluating the interplay of my systems and overall risk over the next week or two and may ramp down my overall leverage.



My futures system has been killing it lately. It is extremely adept at catching short term trends and has profited like mad from this debt ceiling situation.

The gains have been coming so fast over the last few weeks that I did the unthinkable this week and closed some of my most profitable positions, even though the system still has them open. Basically, I am making a discretionary decision to take profits on "debt-ceiling" related positions, and I've opened a bunch of speculative options-based positions that assume the situation is resolved without a default or major disaster.

Although I firmly believe I should adhere to the system 99% of the time, I do believe there are times when some discretionary actions are warranted, and this is one. The smarter decision here might have been to just go to cash, but I think this is an opportunity to profit. And, being up so much on the year, I can afford to take some risk. I would guess, if the worst were to happen over the next week or two, I could lose 10%.


As of the close friday, my futures system is going balls to the wall toward the "default" scenario...long gold, long the swiss franc, short oil, short nikkei, and short some other equities....betting on a default scenario to actually fully come to fruition seems like a major small percentage, risky bet...

although, maybe there is more to it than just default, maybe the system sees a recession/bear market that is coming our way irrespective of the resolution to the debt ceiling?


We shall see!


Position Exits generated this week:

Exit Long Nikkei (fut)

New Positions entered this week:

Enter Long Soybeans (fut)
Enter Long Platinum (fut)
Enter Long British Pound (fut)


Existing Positions remaining open:

(equities)
Long TLT
Long IWM
Long ILF
Long Gold *need to enter this open signal on a dip

(futures)
Short Crude (fut)
Long Swiss Franc
Long Aussie Dollar (fut)
Long Canadian Dollar (fut)
Long copper (fut)
Long Nazz(fut)


Cheers,
HB
 
Hmmm, too early to completely declare victory, but discretion seems to have paid in this case, and honestly seemed rather easy to predict.


Just need one or two of these situations per year, and the restraint not to "see" them too easily.
 
Struck by TOTAL and COMPLETE devestations...


Performance for Week 31:


Weekly % Return = -16.27%
2011 P/L = +9.7%
Current DD = -0.00%
MDD = -16.27%


**This will be an abbreviated post as I am travelling, no position updates this week as i have a lot to sort through***


Last week, I may a jackass decision to override my systems and lean heavily long going into the weekend, on the assumption that the debt ceiling would get lifted and the market would rally.

I was right, for about 10 minutes monday morning. For the remainder of the week, I was struck by an unbelievable series of unfortunate coincidences. I overruled my system at one of the worst possible times in the last several years, my charting/trading software crapped out for an entire day causing me to be helpless, and I was at the airport travelling Thursday when I needed to be doing damage control.

All problems of my own making, but for all of this to happen on a week where the market plunges nearly 10% has been devastating.

But I will learn a lesson here.


When I finish travelling I will be reevaluating and reducing the use of leverage in my systems. Probably will focus primarily on a reduction in the amount of futures contracts/positions I hold open.


While I have totally F'd up this week, I am still up decently for the year, particularly versus the broad market indices. Most of my big positions move to cash Monday, so that should take some heat off for a while.
 
which trading software/broker are you using that didn't work a whole day!!!

I really like your journal - very good, well organized and disciplined method of making few % gains every week or so.

I don't think you should reduce the leverage though. If in your backtests, this leverage is optimal or a bit less than optimal, it doesn't make sense to reduce the leverage after a big loss. Using the same leverage going fwd, will also mean that you come out of this drawdown sooner, compared to if you reduce the leverage now. Also, pls note that 5% market meltdowns are rare events, which statistically happen once every 3-4 years. Your leverage should get determined by both the centre part of the distribution and the tails. Its not correct to get too influenced by the "tail event" that markets just experienced and change your system leverage. It might make your compounding ability much lesser.

Please identify the true reason for 16% drawdown this week. From your post, it seems that most of your losses happened because you did not follow your system. Also, it seems to me that you will be well served to have a more extensive back-up plan in the case operational issues happen (like non connectivity to broker etc.).

So, pls identify the real culprit, and work on that rather than reducing leverage (which might not be the right reason for this loss).

Just trying to give a perspective, even though you are the best judge of your situation. Will follow your progress with curiosity. GL
 
With VIX at 25, a 5% one-day move is about a 3 standard deviation move. Assuming normal distribution, they will happen 0.3% of the time, or approximately once a year. And with a fat-tail distribution, even more frequently.

So, you do have to plan for days like this. It will happen again, and again, and again. That said, you're still having a great year. Now you're just being tempered by fire. What doesn't kill you could, should make you stronger.
 
Quote from gmst:

which trading software/broker are you using that didn't work a whole day!!!

I really like your journal - very good, well organized and disciplined method of making few % gains every week or so.

I don't think you should reduce the leverage though. If in your backtests, this leverage is optimal or a bit less than optimal, it doesn't make sense to reduce the leverage after a big loss. Using the same leverage going fwd, will also mean that you come out of this drawdown sooner, compared to if you reduce the leverage now. Also, pls note that 5% market meltdowns are rare events, which statistically happen once every 3-4 years. Your leverage should get determined by both the centre part of the distribution and the tails. Its not correct to get too influenced by the "tail event" that markets just experienced and change your system leverage. It might make your compounding ability much lesser.

Please identify the true reason for 16% drawdown this week. From your post, it seems that most of your losses happened because you did not follow your system. Also, it seems to me that you will be well served to have a more extensive back-up plan in the case operational issues happen (like non connectivity to broker etc.).

So, pls identify the real culprit, and work on that rather than reducing leverage (which might not be the right reason for this loss).

Just trying to give a perspective, even though you are the best judge of your situation. Will follow your progress with curiosity. GL
More...



GMST-

Thanks for the feedback -- i'm glad you are finding the journal at least interesting!


You make a great point -- it was not my systems that caused my massive loss, and i am not reducing leverage due to the loss.

If you check my post from a week ago with my results, i stated that I was making money too fast and results did not seem in line with my backtest results. Due to the nature in which I use futures in combination with equities, actual leverage at any given time is a little tricky to compute. So, I had already planned to reduce leverage a bit, but DAMN unfortunate I didn't get it done before last weeks crash.


As for why I lost soo much money, it was all my fault. I was up huge on the year (35%+) and decided to swing for the fences. The Friday before the debt ceiling compromise I predicted and bet there would indeed be an agreement, but the market did not rally as i expected.

My systems actually weathered the storm exxtremely well -- unfortunately I closed all the short positions my system had me in and went balls long.

I've no one to blame but myself....there were other factors involved, but that was the main one.


This week, I am focusing on adjusting all my positions to be "back on track" with my system signals. If my systems continue to perform well, it will only take me six months to recoup last weeks losses.

Ha!
 
Quote from heech:

With VIX at 25, a 5% one-day move is about a 3 standard deviation move. Assuming normal distribution, they will happen 0.3% of the time, or approximately once a year. And with a fat-tail distribution, even more frequently.

So, you do have to plan for days like this. It will happen again, and again, and again. That said, you're still having a great year. Now you're just being tempered by fire. What doesn't kill you could, should make you stronger.
More...

Heech-


Indeed, i learned a valuable lesson. Actually, two different lessons.

I won't soon forget them....i lost 16%, but its likely that will be valuable tuition paid, because had the market dropped 10% last week, it would have been a true calamity. Better to learn these lessons now at 16% than later at 50% or worse.

HB
 
A near tragedy of immense proportions...


Performance for Week 32:


Weekly % Return = +5.56%
2011 P/L = +17.7%
Current DD = -11.5%
MDD = -16.3%


After an extremely difficult and costly week last week, things took a major turn for the worse this week. Much like a climber tumbling down a mountainside, I knew what the right technique was, but market events moved so swiftly I never got a chance to steady myself in order to right my positions and establish a roped harness and toe-holds.


The decision two weeks ago to override my system and lean heavily long into the last weekend of the debt debate was unbelievably bad timing. The only time I have overridden my systems in the last year and it just so happens to be going into one of the worst 10 day periods in market history.

I very nearly completely blew up my account during the huge collapse on Monday. It was only through unspeakable and desperate acts that I was lucky enough to recoup my losses. I suffered a nearly 35% intraday (actually it was after market close when futures tanked another 3%) additional drawdown, on top of last weeks collapse.

Had those losses not reversed, the impact would have been quite serious. It would take many years to replace that level of funds. While I realize the sequence of events that occurred was unusual and coincidental, I have to be able to "do the right" thing when this occurs, as eventually I will not be so lucky.

In any case, by taking on enough risk to easily wipe my account out, I was extremely lucky and managed to get back out of the hole. This allowed me to course correct and move all to cash and reset myself. For the rest of the week, I traded discretionarily using reasonable size, and was able to do well buying at support around 1100.

As I move forward, I do so with a renewed seriousness and focus on risk management. I am in a pretty good position going into the end of the year, and I plan to let my systems dictate most of my trades.


A note about the performance of my systems this year. While I have not followed them religiously, I can now "forward test" against this years data. As of today, the generated returns for each system are as follows:

Equities = 6.8%
Futures = 3.4%

These are cumulative returns, so if I had followed the system religiously I would currently have a 10.2% aggregate portfolio return, achieved with very minor drawdowns. Not a bad performance given the crazy market this year. Also, because my equities system is weekly based, this huge intraweek drop created an unusually large drawdown for this system.



** I moved into all cash on Friday, and will take new signals going forward. All of the positions my system is in are extremely extended (gold, treasuries, and swiss franc). Because i sold these positions a couple of weeks ago, I will not attempt to reenter them at this point.****

Position Exits generated this week:



New Positions entered this week:



Existing Positions remaining open:

(equities)

(futures)

Long British Pound








Cheers,
HB
 
The End of the Line...


Performance for Week 33:


Weekly % Return = +1.33%
2011 P/L = +19.7%
Current DD = -10.3%
MDD = -16.3%


Due to some upcoming life changes that will devour all of my free time, HuggieBear's market domination will come to an end for the near term. I simply will not be able to dedicate the time needed to manage these systems going forward.

I've decided, in order to give myself better peace of mind, to move 80% of my assets into a passive portfolio with a conservative stock/bond mix. I will continue to trade 20% of my assets against my two "slow" weekly ETF systems, mostly to see if their outperformance continues over the next few years.


While I could continue to trade for the next couple of months, I don't want to risk being in a deep(er) drawdown when I have to shut things down. Therefore, I closed all my system positions this week and just traded, very lightly, some discretionary trades. I did buy in pretty big end of day friday hoping for a bounce early next week, but that will be a quick trade.

I will begin transitioning my assets over to the passive portfolio over the next couple of weeks. At that time, I will proceed to do everything i can to forget about them and to return my life to some sort of normalcy not dictated by 5AM considerations of how the market is going to open.


In truth, this change is already somewhat of a relief. While my returns over the last two years have been very good, and only 3 or 4 years more of them would make me adequately wealthy, I have nearly blown up a couple of times. I have a deep-seated fear that the risk of something terrible eventually happening is pretty high. I might make it 5 more years with really high returns, but I could go bust. In my own head, those odds are 80%/20%....but who really knows?


Anyway, I may or may not keep this thread up with updates on my basic equities systems, depending on how much time i have. These threads over the last two years have been helpful for me turning from an unprofitable trader to a profitable trader.


Position Exits generated this week:

All positions closed.






Cheers,
HB
 
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