Sunday, July 3, 2011

Time to scale up







June was disappointing, with a result of -2.17%, bringing our first monthly loss since January.


So overall for the half year we are +34.23%.





Starting from next month, I will be scaling up the system, so from July 1st, starting capital will be US$60,000. I'll probably start the trade log and %chart again, but the monthly profit chart will be able to show percentage performance regardless of the capital base.





I have also made a change to the position sizing of the system, to make the system more aggressive. We are now allocating more capital to each trade, 25% instead of 20%, which means we are maxed out at 4 positions.

6 comments:

LimitBid said...

Hi Nizar,

I stumbled across your blog while surfung the web. Congrats on your performance, so far so good.

I have a question regarding your risk management. You say you allocate 25% of you capital to each trade, maxing you out at 4 positions. Wouldnt you be able to create a smoother equity curve by trading more smaller positions?? Surely 10 positions at 10% each is a better option?

Also, I assume you arent risking 25% of your capital on each trade, just using 25% or your capital to purchase securities. I assume that your risk (entry to stop loss) is only a tiny percentage of your capital??

If that is the case, you could use some gearing to allow you to take more positions. This would allow you to increase your risk and diversification simultaneously, which would probably lead to a smoother equity curve (ie, a higher return to risk ratio).

You could easily backtest a geared scenario with more positons and see how it performs.

Your thoughts on this??

LimitBid

James said...

Hi Nizar,

I just stumbled across you blog and am very interested to say the least in what you are doing. I also live in Melbourne and use Amibroker/IB for my trading and have done for a number of years. I have been interested on automating some of my strategies for some time but would appreciate some input from someone who has actually done it before investing the time. I currently spend around ½-1 hr per day just manually entering orders that have been automatically generated via my system in Amibroker. If you could please send me some contact details (Phone number) to discuss further that would be greatly appreciated. I look forward to hearing from you.

Regards,
James

Jennifer said...

Hi Nizar! Just out of interest, how do you limit your number of positions with IB? Do you manually cancel orders or trust IB's risk control to restrict your number of trades? Thanks! =)

Nizar said...

Hi James,

Thanks for your post. I'll send you an email, I'm always interested in sharing ideas with like-minded traders.

Hi Jennifer,

In theory, once I reach my maximum intraday buying power, IB will not let me put through any more buy orders.

Because of the inherently low exposure of the system, a scenario where I get more than 4-5 buy orders (my max) that hit my trigger price in a single day is quite rare. In testing, it happens about 4-5 times a year. Though its already happened about 6 times so far in 10 months.

Usually IB's risk controls work fine, but on days where it looks like I'm gonna have a lot of action, I often monitor the first half hour or so. There was one occasion where I had to intervene manually.

It seems that once IB realises that you've gone beyond your buying power, they randomly cut you back. Well at least it appears to be random. Sometimes they cut part of a position, sometimes the entire positon. They don't systematically seem to care whether the position is in profit of not, and they don't close the more recently opened position.

To be honest I do prefer selection of stocks on those days to be random. It seems when I discretionally make a choice, then I overlook the stocks that turn out to be champions, and instead ride the dogs hahhahaha.

Jennifer said...

Thanks Nizar! Thanks for your explanations.

Another query on mechanical trading - How do you, or how do systematic traders, monitor your 'edges' in general? When do you know when your system is 'broken'? If you don't mind, can you do a blog article on it one day?

Thanks!

Craig said...

Interested to know how you have done in this recent volatility.