Correlation between volatility and performance

As a system (AGT is what I call my system) that trades intraday, its no surprise that it performs well in times of volatility where the intraday range expands, which is what typically happens during bearish times.

So it has got a bit of an insurance mechanism built-in to protect from Black Swans. But unlike the techniques employed by funds like Universa, AGT is not too shabby during uptrends either.

The peak of the GFC, which is from September 15th 2008 (Lehman Brothers collapse) until March 9th 2009 which was the bottom, when the VIX went crazy, is also the time AGT went nuts, and tacked on 83% in under 6 months.

When it rains, it pours

January performance

December performance

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%.