Quiet month in terms of number of trades, but we hit our numbers. +4.53% for May which brings us to +36.40% YTD.
I've also been busy designing a new system, called TPO, another US stocks, mean-reversion based automated system, which is currently being papertraded. I couldn't trust any of my backtests with this one as it really does require intraday data to be accurately tested. So we'll run it for 6-12 months on IB's papertrader and see how the numbers stack up.
5 comments:
Hi Nizar! Just wondering in your testing, what was the max drawdown during the GFC? Thanks
Hi Jennifer,
My system is different to most long-only systems in that it likes volatility, so in that sense, the GFC wasn't a bad period for this system. It was actually a very good period.
To answer your question, from the peak to bottom of the GFC, using 1/11/2007 as the start date and 28/2/2009 as the end date, and using compounding, starting with a $25k account, the system made a profit of $105k, which is 420%, with a maximum drawdown of 18.5%.
More on performance during GFC in this post http://thetrendfollower.blogspot.com/2011/03/correlation-between-volatility-and.html
A "bad time" for the system and where it underperforms the market is during steady uptrends. For example, between 1/09/2010 and 31/01/2011 (5 months) this system made 7.84% whereas the market (S&P500) made about 22%.
Another "bad time" was during the GFC recovery. From 01/03/2009 until 31/12/2009 the market (again the S&P500) made about 56% whereas this system made only 8%.
Thanks for dropping by.
Nizar.
That's awesome Nizar! Does it seem to have an edge in all mean-reverting markets?
I'm intrigued by why you chose the stocks you're trading and why you're just limiting the system to 50 or so stocks. Wouldn't the system return more if you traded the whole NASDAQ100 or S&P100 to increase frequency and take advantage of turning over expectancy?
Thanks! =)
Hi Jennifer,
Thanks for your kind words.
As to your first question, I'm not too sure. What would you consider another mean-reverting market? Besides the US markets, I've also tried it on HK stocks, but it didn't have an edge there. Unfortunately I don't have data for any other markets.
The reason I chose only 50 or so stocks is that I wanted liquidity. The Nasdaq100 and S&P100 obviously are fairly liquid but I didn't want to spread myself thin and I wanted to decrease the effect of random chance as much as I could. To answer your question more specifically, yes the system would return more by increasing frequency and exposure, but also, the variability in the returns (standard deviation) would also increase.
To perhaps explain more clearly, at the moment, my money management dictates that I allocate 20% of my buying power to each individual trade. So I'm maxed out at 5 positions. On days that I get more than 5 triggers, randomness plays a part, and there becomes several possible 5 trades that I may have taken on this day. Such an event has happened twice in the last 9 months. In testing, it usually happens 1-2 times a year.
This would happen much more often if I was trading 100 stocks, so I would either have to just let it be and accept more variability in the returns, or I have to change my money management to accomodate more positions.
You sound like you know your stuff, Jennifer. Where are you based and what do you trade?
Nizar.
Hi Nizar!
Thanks for getting back to me. Makes sense what you wrote and well thought out.
I'm based in Australia. I trade discretionary on the ASX300 and the main currency pairs on the forex. I've just started to look into mechnical systems - bought myself Amibroker and some Howard Bandy books late last year and learning to code ideas - hopefully code an autotrading system too (though I am stuggling with AB to IB DDE and coding). =)
Keep up the good work!
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