Rol's Trading Journal
- Thread starter Rol
- Start date
Leveraged is utilized at times when signals are firing off in great numbers. Of course, the leverage increases % gains as well as losses, i.e., volatility. To my strategy, a signal is just a signal. It does not try to determine if more signals equals higher win rates. I would suspect that the win rates are about the same over time, there are just more trades occuring. If I avoid exceeding overnight BP, I feel I have utilized it effectively. This is my equity curve compared with the SP500 Ytd. I speculate that the curve would find "support" at 25%.
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Total Net Profit ($4,401.82)
(Per Share) ($0.40)
Gross Profit $2,792.45
Gross Loss ($7,194.27)
Profit Factor 0.39
Total Number of Trades 87
Percent Profitable 47.13%
Winning Trades 41
Losing Trades 46
Avg. Trade Net Profit ($50.60)
Avg. Winning Trade $68.11
Avg. Losing Trade ($156.40)
Ratio Avg. Win:Avg. Loss 0.44
Expectancy -0.32
Largest Winning Trade $496.27
Largest Losing Trade ($596.00)
Max. Consecutive Winning Trades 15
Max. Consecutive Losing Trades 15
Total Shares/Contracts Held 11000
Total Commission $185.80
Return on Initial Capital -6.83%
Annual Rate of Return -241.39%
Buy & Hold Return -1.35%
Trading Period 10 Dys
Max. Equity Run-up(Daily) $1,626.19
Date of Max. Equity Run-up 6/9/2011 15:00
Max. Drawdown(Daily)
Value ($5,188.59)
Date 6/8/2011 15:00
as % of Initial Capital 8.05%
Max. Trade Drawdown ($662.00)
[/b][/color]The total net profit is horrendous so far for June. These stats are MTM for open trades. Interference with auto trading probably cost me $1400 extra in losses by not honoring exits fully and messing with position sizing on ZUMZ. However, as of todays close all real world positions match strategy positions. I need to remind myself to give each position equal importance. A stock does not become a higher probability trade because it drops significantly from my entry. The whole point of limiting position size is remembering the negative outliers within the profit distribution. I apologize if this sounds like a broken record, but it is what I constantly have to battle with.
The max DD of 8% doesn't seem too bad based on the initial capital of $64,427 beginning the month. Current capital is $61,635, after a $1,000 contribution.
Hi Rol
I came accross this interesting free online book called "Trading Strategies" by Larry Sanders.
http://www.tradelabstrategies.com/
It explains in simple terms the theory of bootstrap (he calls monte carlo), and effects of varying paramenters. In essence a strategies return is a relationship of risk to a strategy's probability and win/loss ratio. Probability being the most influential of a strategy's characteristics and risk being a trade's position size. The book also points out that there is an optimal relationship between equity return drawdown and risk. Drawdown is in fact desirable. After reading this book, your next strategy drawdown will be an elevating experience that "you are optimized"!
I came accross this interesting free online book called "Trading Strategies" by Larry Sanders.
http://www.tradelabstrategies.com/
It explains in simple terms the theory of bootstrap (he calls monte carlo), and effects of varying paramenters. In essence a strategies return is a relationship of risk to a strategy's probability and win/loss ratio. Probability being the most influential of a strategy's characteristics and risk being a trade's position size. The book also points out that there is an optimal relationship between equity return drawdown and risk. Drawdown is in fact desirable. After reading this book, your next strategy drawdown will be an elevating experience that "you are optimized"!
Mean Reversion systems are doing terrible at the moment. I do fewer trades and hedge the risk and experienced a very moderate DD of 3%. However, I'm not participating on the upside that much.
I think given a history of simulated results on can roughly estimate the expected DD. On should bear in mind that in can get much worse than that. For example, in January 2008 a few banks got absolutely killed and the trend was even less volatile than in the following October. But in my opinion is still better to run an optimization that to adjust parameters by hand. Give a position size of x% the problem is to maximize the sharpe ratio and/or return/DD for all possible x. This is quadratic programming problem which one can solve by enumeration if the calculation is not to time-consuming. No need for complex algorithms. I usually do this making a ranking of sharpe ratio and total return. A small-position size can be to costly, which is why Kelly betting is optimal given the true (unknown) distribution. To cut off tail risk is makes sense to bet a fraction of Kelly (instead of chosen amount which is arbitrary). In my view it is quite important that one uses all the alpha one can get, i.e. use fixed fractions instead of lots and scale position size with strength of the signal if possible.
My experience with mean reversion is that I prefer a steady decline, rather than a volatile one. A volatile decline often is related to news and therefore the outcome is not as predictable. Most trades focus on changes of prices (the Dow is down by 1%, or worse, the Dow is down by 100 points). But the significance of the ROC is related to volatility. In some periods 1% is a lot and in others it is not. Unfortunately I have never had any success with volatility adjustment. To me it seems it just to noisy. Betas are notoriously unstable.
The beauty of the equity market is that there is always a small probabiliy that an inefficiency occurs in 1 out of 5000 stocks. It is easier to trade from a small capital base, because more stocks are available.
The real, hard problem with automated trading, if one wants to make a business out of it, is, that you really need a multi-system approach. You can't rely on one system, because markets change, and alpha always can dry up. So even while I make a living of mean-reversion, I am working very hard to diversify into other areas, which are not correlated. For instance trading volatility is such an area. Or trading announcements and news is another area. So not only does one need good models, one has to be able to continously come up with new ideas. My guideline is simple things work best. No need for higher mathematics, except for some basic statistical knowledge and some insight into optimization (what a convex function is and stability of parameter choices).
I think given a history of simulated results on can roughly estimate the expected DD. On should bear in mind that in can get much worse than that. For example, in January 2008 a few banks got absolutely killed and the trend was even less volatile than in the following October. But in my opinion is still better to run an optimization that to adjust parameters by hand. Give a position size of x% the problem is to maximize the sharpe ratio and/or return/DD for all possible x. This is quadratic programming problem which one can solve by enumeration if the calculation is not to time-consuming. No need for complex algorithms. I usually do this making a ranking of sharpe ratio and total return. A small-position size can be to costly, which is why Kelly betting is optimal given the true (unknown) distribution. To cut off tail risk is makes sense to bet a fraction of Kelly (instead of chosen amount which is arbitrary). In my view it is quite important that one uses all the alpha one can get, i.e. use fixed fractions instead of lots and scale position size with strength of the signal if possible.
My experience with mean reversion is that I prefer a steady decline, rather than a volatile one. A volatile decline often is related to news and therefore the outcome is not as predictable. Most trades focus on changes of prices (the Dow is down by 1%, or worse, the Dow is down by 100 points). But the significance of the ROC is related to volatility. In some periods 1% is a lot and in others it is not. Unfortunately I have never had any success with volatility adjustment. To me it seems it just to noisy. Betas are notoriously unstable.
The beauty of the equity market is that there is always a small probabiliy that an inefficiency occurs in 1 out of 5000 stocks. It is easier to trade from a small capital base, because more stocks are available.
The real, hard problem with automated trading, if one wants to make a business out of it, is, that you really need a multi-system approach. You can't rely on one system, because markets change, and alpha always can dry up. So even while I make a living of mean-reversion, I am working very hard to diversify into other areas, which are not correlated. For instance trading volatility is such an area. Or trading announcements and news is another area. So not only does one need good models, one has to be able to continously come up with new ideas. My guideline is simple things work best. No need for higher mathematics, except for some basic statistical knowledge and some insight into optimization (what a convex function is and stability of parameter choices).
Had I not discretionary traded the past month or so, my strategy would be punching thru new equity highs today. The dead cat bounce was what I needed to exit several positions to bring my market exposure down to 50%. I am still down $1200 dollars for the month, so the strategy still has some work to do in order to go green for the month ( if only I would get out of the way!)
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Real-time Account Net Worth $64,633.70
Real-time Unrealized P/L ($1,046.11)
Real-time Realized P/L (Today) $1,320.53
Current Draw Down -1.62%
YTD Return 33%The ugliest profitable trade of the day has to go to JCP. I was just thinking the other day if only Ron Johnson, the former Apple senior VP of retail, would take the helm of J.C. Penney, then the stock would skyrocketâ¦
I am really surprised by how well you held up from your equity high until your last post. It seemed like you were down about 7% in a DD around the 9th but made it all back on the 14th?
Quite remarkable. Even if today turns out a bad day for you I am quite surprised by how well you fared after your initial 7% DD. Care to shed some light on some of the reasons why?
Quite remarkable. Even if today turns out a bad day for you I am quite surprised by how well you fared after your initial 7% DD. Care to shed some light on some of the reasons why?