Rol's Trading Journal

Hey Rol. I'm curious, how does your strat perform when the market is going down for extended periods of time (like when the 50 day gets under the 200 day SMA)?

If it performs poorly in a down trend why not put explicit rules in your program that check if the 50 is under the 200 and if so, not enter any new trades?

BTW, sorry I didn't get back to you about trend following but the closer I looked at the back testing results the more I realized how poorly a long-only approach to trend following performs in a bear market. While it did very well over the last 20 years overall, it did horribly during 2008-2009. So it's certainly something I would not be comfortable trading black-box style & would require a fair amount of discretion.
 
Quote from In2Deep:
Hey Rol. I'm curious, how does your strat perform when the market is going down for extended periods of time (like when the 50 day gets under the 200 day SMA)?
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I have not live traded the strat during extended legs down in the market so I am eager to see how it performs live.

Quote from In2Deep:
If it performs poorly in a down trend why not put explicit rules in your program that check if the 50 is under the 200 and if so, not enter any new trades?
More...

During the experimental phase of strat development, I played extensively with the 50 and 200 dma. What I found was that they only served to remove potential setups from my symbol universe and resulted in a reduction in ending net equity. I believe moving averages as indicators present little edge in the short term as well as long term, IMHO. However, avoiding a stock that is under its 200 dma would likely keep one out of an Enron type company. What I plan to do to avoid these types of situations is to maintain small position size as well as include news when a stock is obviously behaving out of the norm, perhaps looking to reverse my position.

Quote from In2Deep:
BTW, sorry I didn't get back to you about trend following but the closer I looked at the back testing results the more I realized how poorly a long-only approach to trend following performs in a bear market. While it did very well over the last 20 years overall, it did horribly during 2008-2009. So it's certainly something I would not be comfortable trading black-box style & would require a fair amount of discretion.
More...

“While it did very well over the last 20 years overall, it did horribly during 2008-2009.” Bingo! I geared my strategy to weather severe market downturns, in spite of being long only. I figured if I could make a long only strat work during a bear market, then it would perform even better during a bull run. This requires close monitoring of positions, though. Only automation is able to perform this task, IMHO.
 

So far, the strat is monitoring exposure successfully. Intraday dipped into margin BP, but 3 exits today brought it back below to a more comfortable level. It has been day 2 with no manual interference with the strat. Usually, I have no problem avoiding tampering with the system during market sell offs. I tend to go into “survival mode,” letting the strategy control risk for me. The Holy Grail may just be having some slight edge along with automation to execute faithfully.

Intraday exposure: 107%
End of day exposure: 88%
Real-time Unrealized P/L ($676.76)
Real-time Realized P/L (5/17/11) $249.00


Sniffing out buying opportunities during the market correction…

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It turned out to be a very solid day today with the broad markets reverting to the mean; Bailed out of many of my positions at the close. I am holding the bag on 3 stocks, one of them being HPQ. I will be watching HPQ closely the next few days. Shorts will want to cover at some point. It has been my observation that beaten down stocks often will recover on down days in the markets, perhaps as shorts rotate into other stocks to short.

Real-time Unrealized P/L ($435.50)
Real-time Realized P/L (5/18/11) $1,179.08
Exposure: 16%

 

I closed out a couple of losers today. I was stopped out for a 10% loss costing me about $160 on a stock that then reversed as usual and turned higher. I forgot to remove those instructions from my strategy code. After that mishap, I discretionary traded WFC with a bit of size only to be stopped out for a $70 loss.

It is difficult for me to sit on my hands when my system is not generating signals, but more often than not that is what I should be doing. I need to take advantage of these down times when it is slow and do other things. With RTM trading it is easy to get caught in the markets at the wrong time by trying to force the trades. It is ironic, but I actually want the markets to fall, otherwise I will not get any buying opportunities.

Seeing the markets continue to drift higher after exiting many of my positions yesterday is not easy. However, I do not regret missing out on further gains. The market could have just as easily gapped down, and instead of realized profits, I would be looking at unrealized losses.

Current exposure is a bit higher than it should be because I added to my HPQ position outside the strat.

Real-time Unrealized P/L ($124.03)
Real-time Realized P/L (Today) ($378.10)
Exposure: 20%
 
Code: 
[color=green][size=2][b]
Total Net Profit	$1,010.61 
(Per Share)	$0.16 
Gross Profit	$1,907.62 
Gross Loss	($897.01)
Profit Factor	2.13
Total Number of Trades	38
Percent Profitable	55.26%
Winning Trades	21
Losing Trades	16
Avg. Trade Net Profit	$26.60 
Avg. Winning Trade	$90.84 
Avg. Losing Trade	($56.06)
Ratio Avg. Win:Avg. Loss	1.62
Expectancy	0.45
Largest Winning Trade	$406.00 
Largest Losing Trade	($160.00)
Max. Consecutive Winning Trades	6
Max. Consecutive Losing Trades	5
Total Shares/Contracts Held	6300
Total Commission	$118.80 
Return on Initial Capital	1.64%
Annual Rate of Return	82.64%
Buy & Hold Return	-0.16%
Trading Period	7 Dys, 4 Hrs, 30 Mins
Max. Equity Run-up(Daily)	$1,469.95 
Date of Max. Equity Run-up	5/20/2011 15:00
Max. Drawdown(Daily)	
Value	($459.34)
Date	5/17/2011 15:00
as % of Initial Capital	0.75%
Max. Trade Drawdown	($244.00)
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The strategy is up for the week, but due to revenge trading Wells Fargo, WFC, I am m2m breaking even, down 1% or -$972. This is my only open position. I saw buying interest 3 days ago, but it could not hold above the 200 dma. I am "hoping" it will find support at $28. If not, I could be in a world of pain. I will be monitoring this "position trade" closely next week.

I should be grateful because their were several underperforming positions paper trading took the past week or two that I avoided due to scaling into my positions over a period of days. In addition, the S&P is flat going back to mid February, but I am still up nicely.

Glancing back over my exits over the past week, it turns out it was the profitable thing for the strategy to be doing. The percent profitable is lower than average, but the Ratio Avg. Win:Avg. Loss picked up the slack.

I decided to start posting curves by date as well as trade number for comparison/contrast. Both curves start at point A and end at point B. They just take differing routes to get from A to B. The composed equity curve at close will generally correlate with the overall market. The curve by trade number will often taper off as the strategy takes losses on net losing positions.
 

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Very nice performance.
What's your profit factor and annualized return % from 12/30 (when you started)?
 
Quote from d08:

Very nice performance. What's your profit factor and annualized return % from 12/30 (when you started)?
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Hi d08, I saw your gains for the week, congrats! These are my ytd numbers. I plan to update them at the end of each month, but since you asked, here they are so far. The % returns are based on the initial capital of $48753.


Code: 
[color=green][size=2][b]
Total Net Profit	$19,380.29 
(Per Share)	$0.17 
Gross Profit	$41,450.51 
Gross Loss	($22,070.22)
Profit Factor	1.88
Total Number of Trades	981
Percent Profitable	64.73%
Winning Trades	635
Losing Trades	345
Avg. Trade Net Profit	$19.76 
Avg. Winning Trade	$65.28 
Avg. Losing Trade	($63.97)
Ratio Avg. Win:Avg. Loss	1.02
Expectancy	0.31
Largest Winning Trade	$1,936.09 
Largest Losing Trade	($796.50)
Max. Consecutive Winning Trades	29
Max. Consecutive Losing Trades	9
Total Shares/Contracts Held	112191
Total Commission	$2,447.12 
Return on Initial Capital	39.75%
Annual Rate of Return	86.55%
Buy & Hold Return	-1.12%
Return Retracement Ratio	3.31
Trading Period	4 Mths, 19 Dys, 5 Hrs, 50 Mins
Max. Equity Run-up(Daily)	$20,260.94 
Date of Max. Equity Run-up	5/20/2011 15:00
Max. Drawdown(Daily)	
Value	($3,831.77)
Date	2/23/2011 15:00
as % of Initial Capital	7.86%
Max. Trade Drawdown	($1,511.50)
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