June and Second Quarter 2010 Trading Review

Market volatility continues in June. I took a more aggressive approach this month and executed more trades in my RRSP trading account. The monthly return is excellent but I noticed a few issues with my trading. These will be the main topic of this post.

Let’s go over some performance data. Seeing that it is the end of the second quarter, I will do a quarterly statistical report. I couldn’t do a monthly review like I used to because I trade much less frequently now.

Note that the October data is from last year’s forex trading. That was the best month I’ve had. I am attaching the data here just for comparison.

Quarterly Metric Q2 October
Sarting Fund $8,000.00
End of Quarter Fund $9,404.87

Total Net Profit $1,404.87
Gross Profit $1,800
Gross Loss -$395
Profit Factor 4.56 1.75
Net Profit % 17.56% 4.19%
Max. Drawdown % 3.36% 2.32%

Total Commission $155.1
Commission / Net Return 11.04%

This highlight the bane of my problem trading my RRSP. Although Questrade offers the best commission in Canada as far as I know, it is still much higher than those offered by brokers in the states. However, this is a self-directed RRSP trading account, so it’s not like I can just switch broker. I will just have to stop being so active in my trading for this particular account.

Sterling Ratio 1.44 0.65
Excess Return 17.46% 4.14%
SDev Return per Trade 2.21% 0.79%
Kurtosis -0.93 8.53
Skewness 0.72 2.49

These statistics above show my second problem. Although I am very profitable so far, my return per trade is not consistent. The distribution is too flat and not skewed enough to the positive for my liking. A standard deviation less than 1%, a slightly positive kurtosis, and a skewness above 1.0 would be ideal.

95th Percentile P&L $421.15 $70.11
5th Percentile P&L -$102.13 -$33.60
Net Profit Mid 90% Only $0.29 $46.34

Total # of Trades 14 34
Percent Profitable 61.54% 44.12%
# of Winning Trades 8 15
# of Losing Trades 5 19
# of Break-even Trades 1 0

Average Trade Profit % 1.18% 0.12%
Average Winning % 2.59% 0.66%
Average Losing % -0.83% -0.30%
Ratio Win% / Loss% 3.12 2.21

Max. Conseq. Winners 5 4
Max. Conseq. Losers 3 6
Largest Winning Trade $464.05 $171.79
Largest Losing Trade -$116.75 -$44.17

Most of my winning are due to this Cenovus short in May and this CIBC short in June.

Avg. Time Held 5.17 days 2.18 hours

Aside from trading my RRSP account, I have finally opened a live forex account at Dukascopy. My time remains split between developing automated strategies for trading forex and manual equity trading as usual. My JForex contest strategy in June ends up near the bottom again as I took the wrong side of the move on USD/CAD.

The JForex contest will start with a new set of rules for July. Namely that strategies need to be fully automated and winnings from each trade cannot be excessive (50%) to prevent an all-in approach that’s been dominating the contest. My revised strategy is ready. It is now version 2.14 since the first release in April.

Goal for July

My goal for July is to learn the indicators part of the JForex API and to program my first custom JForex indicator from my other collection.

I will be away in Hong Kong for two weeks in July for some family matter. So there’s not much time to work.

May 2010 Trading Review

May 6th was a historical day in the market. The Dow tanked 9% in minutes but climbed back up near the end of the day. We have since closed below that level later in the month. The bears seem to have finally awoken.

I closed two trades in May totalling a decent gain of 10% in my RRSP trading account. The first was shorting CVE.TO, which made me 10%. The second was long TCK/B.TO, which ended in breakeven. I took the second half of the month off for my wedding in Dominican Republic.

I opened two positions before leaving for vacation. I shorted CM.TO and bought some HND.TO. The market made a roller coaster run up and then down while I was away. So I wasn’t able to cash in on the move.

As for my forex endeavour, I bombed the JForex contest this month. I started well with a 60% gain in the first week but I got greedy and tried to go for higher. My contest account (demo only, not real cash) whipsawed around breakeven a few times afterward. Then I just gave up on this month’s contest. I verified with the official that my startegy wouldn’t have qualified anyway because I was manually intervening too many times.

Nevertheless, I updated my automated trading strategy for June before going on vacation. I will be back at it again competing in June.

But not until my wife and I can settle down in our new home first. We are still unpacking, buying furnitures, and tidying up our new place as of this first weekend in June.

April 2010 Trading Review

I made my first RRSP trade to short Cenovus Energy (CVE.TO) using puts in April. I also made my first careless mistake in my RRSP by buying more contracts instead of closing the CVE.TO position as I intended. As of this writing, I am still holding my puts options as the slow decline seem to be underway. China’s decision to hike reserve ratio is also helping by strengthening the dollar and putting another warning on recent risk appetite.

Despite putting my real money on the line, my main focus lately has been the Dukascopy JForex Strategy Contest. According to their rankings page, I finished at 4th place for April’s contest. Which means I may receive a USD $1,000 credit to my trading account at Dukascopy. Even if I were to trade a $5,000 account as I have done in my paper trading, I couldn’t have earned 20% in a single month based on my past performance. This contest is a great way for me to fill my forex account with no monetary risk.

Frankly, I was just hoping to squeeze in a top 10 because I started late in the April contest. So I am very happy to finish at such a good position and receive (hopefully) a decent sum of prize money!

For anyone interested, I have discussed about my winning automated strategy previously. Feel free to take a look at it to see what got me a 4th place finish.

I will be away on vacation in the last two weeks of May. I don’t expect much to happen with my trading this month as I’m inundated with personal matters. My primary focus is still the JForex Strategy Contest. I will be using a new semi-automated strategy this time. My goal is to finish in the top 6 again.

Visualize and Grow Rich

I just read Think and Grow Rich (affiliate) for the third time last weekend. One of the key ideas presented in the book is to set realistic long term goal and stick with it every single day. This reminded me of something that I’ve done lately which I think is very helpful in disciplining myself in my trading.

That something is this table below.

This is a table of my planned deposit and return for my trading account. The table shows:

• the amount that I plan to deposit into my trading account each year
• the accumulated principal at the end of each year
• the expected yield, which is based on my historical trading performance from the past 10 years of trading, minus the couple of blowups I’ve had (which is a reason why I am starting from scratch in this table)

Estimating future values is nothing new. What I find particularly useful in this table is the fact that they show the following.

1. My minimum savings goal for each year (deposit column). So that I can project an annual budget.
2. Effect of compounding. A reminder that I don’t need to perform exquisitely in my trading to reach my goal. This helps keep my trading expectation realistic and not over-trade.
3. I can trade for a living after 16 years even with my conservative expectations. This is my ultimate goal.
4. I can update this table at the end of each year with real data so that I can see where I stand with respect to my goal.

This is a simple and easy to do trading goal visualization. I visualize this table often to remind myself what I need to do. Both in terms of setting a bar above to push myself as well as limiting my expectations to realism.

A problem many new traders have, myself included, is the need to perform, and in a big way (making it big in that one trade), or conversely, afraid to miss opportunities. This table helps me keep a realistic mentality just so I don’t back up the truck in any particular trade. As the table clearly shows, I don’t need to take unnecessary risk to reach my goal of trading for a living.

What is your trading goal? What is your plan to achieve it? How do you keep yourself motivated? These are some fundamental questions that this table can be helpful in answering.

March 2010 Trading Review

It is that time of the month again when I do my trading performance review. However, I did not make any trade this month. Not because I was procrastinating, but I spent all of my time this month to work on my quantitative projects. This review will be a recap of my backend trading development.

I said in my last month’s performance review that my goal for March is “to write a rudimentary data analysis and visualization program for historical forex data.” Well, I finished half of it and then realized that I need a better design for the software. So I studied yet another programming book (finished 3 programming books this month), on object oriented design and analysis.

The other major event for me this month is that I finally opened a self-directed RRSP account at Questrade because the tax benefit is too good to pass. Consequently, I am starting to study the Canadian stock market for trading with a conservative, intermediate-term manner (not buy and hold though).

Lastly, it seems that I might be back to trading forex sooner than I have thought. I signed up for an automated trading contest at Dukascopy earlier this week. Since they are offering a cash prize, I thought I might as well reschedule and work on my forex stuff now. I will write more on this topic at another time.