RYAAY and performance thus far

I have noticed that this system trades RYAAY a fair bit more and disproportionately compared to the percentage of the stock universe this ticker represents (I trade about 50 stocks).

Looking at the chart, it's not hard to see why. RYAAY does like to gap around.

Overall, while the performance so far for the last two and half months is unlikely to lead to an onrush of investors wanting me to trade their money, the system has so far been performing in line with expectations.

This system, by design, thrives on intraday volatility. The more volatility there is, the better it performs. As we all know, intraday volatility is the highest in bearish times. In makes much more moderate profits in times where the market is slowly going up.

To illustrate this, let's look at 2009 performance.

From 1st March to 31st December the general market rose almost 50%.

My system in that time "only" returned 27%.

However, in January and February, where the market fell about 10% per month, the system made 30%+ in each of those months.

Note that I only include the market performance for the purposes of comparison. It is not a benchmark we are trying to beat. To make -5% when the market is -20% is not a good year for me. I aim for absolute returns.

COST did wonders for me, S not so!

And we're off! Finally!

Finally got this system trading on a live account! After more than a year of testing, coding, and paper trading.

I'm still amazed at seeing the trades execute by themselves and though I don't need to, some nights I just sit and watch the system to do its thing.

For interests sake - had I started at the beginning of the month, I would have done 14 trades and end of month result would be +$2,472, or 9.62%.

US mean reversion system

I haven't been able to paper trade this new system of mine as initially attended because LOO and MOC order types simply don't work on IB's paper trader.

The guy at IB told me that I "can't expect" the paper trader to be able to execute such specific order types - but he would fully expect that I would have no problems with a live account.

So instead of paper trading this system I will start live trading with a small account until I'm happy that performance is broadly in line with expectations before scaling up.

The above table shows performance of the system so far this year, from 1 Jan through to 21 May. Monte carlo simulations were run 1000 times.

Re-defining equity

Since the last update, five trades have been closed out. Three losses and two winners. Overall slight dip in closed equity since that October chart.

Portfolio is currently fully invested in the market.

I've also decided to use another method to determine my position sizing. I previously was using the TradeSim method which is available cash + open positions at the price paid. While the intention of this method is to be conservative (not count chickens before they hatch) in practice I have found it to be rather aggressive and to take on more risk than necessary as you are increasing your size in what could be the beginning of a drawdown.

Big winning trades are usually closed out when the market is correcting or experiencing a downturn of some sort, which is precisely when you DO NOT want to be increasing your position size.

The other obvious alternative to this is to use pure open equity marked-to-market, which I think is too aggressive and will result in too many fluctuations. Plus I don't really count open equity as my own.

So what I have opted for is what I consider to be a middle ground and to calculate my total equity as available cash + open positions at their trailing or initial stop loss levels (whichever is the greater). I think this method is conservative initially but as your winners start moving and stops are raised, it allows you increase your position sizes more dynamically.

The downside is I have not been able to test this method. But common sense tells me that it won't get me into too much trouble.

I have also been reading some of Ralph Vince's work, and I have been impressed. There are some areas which I have marked down for re-visiting down the track once I have time.

In other news, I've been busy trying to automate my US mean reversion system through Amibroker and IB.