February 2010 Trading Performance Review

I barely traded this month. The total number of trades in February for my forex demo account is ten. That’s far from my regular 150 – 250 trades a month. Ever since my trading system was broken because of technical difficulties, I’ve changed my priorities in trading. I spent most of my time in February learning a new programming language to ramp up my quant and automated trading projects.

I also tried a few longer term trades this month. The results haven’t been uplifting. I am about breakeven by the end of the month with a net gain of …. $2 in a $5550 demo account. As you can see, there’s really not much point in me continuing paper trading at this stage. It is taking valuable time away from me to fix what’s broken so that I can use my previously profitable trading system again. As such, I’m going to put near 100% of my effort to program a semi-automated trading system for the coming weeks, or probably months.

On another note. Seeing that it is tax season here in Canada. I thought about my tax situation and considered opening a Questrade TFSA trading account (affiliate link) to legitimately avoid income taxes from trading. But after considering the cost and benefit of such a move, I concluded that a TFSA trading account isn’t cost effective for me at the moment.

As I’ve spent most of the month doing backend work, there isn’t very much to review for my trading this month. So let’s just dive right into my statistics for the record.

Performance Statistics

Monthly Metric February (January)

Sarting Fund $5,550.02
End of Month Fund $5,551.99

Total Net Profit $1.97 (-$67.42)
Gross Profit $37 ($375)
Gross Loss -$35 (-$442)
Profit Factor 1.06 (0.85)
Net Profit % 0.04% (-1.20%)
Max. Drawdown % 0.50% (3.95%)

Sterling Ratio 0.00 (-0.15)
Excess Return -0.02% (-1.26%)
SDev Return per Trade 0.15% (0.11%)
Kurtosis -1.36 (1.85)
Skewness 0.79 (1.01)

With only ten trades this month, I don’t have enough samples to make meaningful calculations for the above statistics.

95th Percentile P&L $12.55 ($12.23)
5th Percentile P&L -$6.60 (-$8.43)
Net Profit Mid 90% Only -$4.75 (-$117.84)

Interestingly, I noticed that my typical top and bottom 5th percentile profit/loss are quite consistent.

Total # of Trades 10 (186)
Percent Profitable 40.00% (41.45%)
# of Winning Trades 4 (63)
# of Losing Trades 6 (89)
# of Break-even Trades 0 (34)

My percent profitable trades seem to be near 40% month to month. That’s good to know as it’s useful to calculate my statistical return expectancy as I’ve done in my TFSA trading cost-benefit analysis.

Average Trade Profit % 0.00% (-0.01%)
Average Winning % 0.17% (0.11%)
Average Losing % -0.11% (-0.09%)
Ratio Win% / Loss% 1.59 (1.20)

By being more discriminating in my trades, I’ve effectively increased my win/loss ratio. That’s good.

Max. Conseq. Winners 3 (8)
Max. Conseq. Losers 5 (20)
Largest Winning Trade $13.81 ($22.66)
Largest Losing Trade -$7.08 (-$14.30)

Avg. Time Held [hrs] 1.67 (0.73)
Avg. max. unrealized profit/ Realized profit (11.59)

Goal for March

My goal from January is to learn MQL4. I changed my plan since then due my lack of faith with using a proprietary scripting language. I learned Python programming this month and is now learning to use specialized libraries to serve my trading needs.

My goal for March is to write a rudimentary data analysis and visualization program for historical forex data.

January 2010 Trading Performance Review

2010 didn’t begin well for me. I experienced my biggest drawdown so far at -3.95% (see Figure 1 for my account balance graph) in my demo account. Given that I only risk 0.2% per trade, this is a relatively substantial setback.

Ironically, I was in the process of filling paper work to open a live account when this performance setback hit me. Change of plan. Now I’ll have to postpone live trading until I can at least recover my demo account balance.

To do that, I tightened up my risk exposure and focused on playing only my best setup. By the close of the month, my demo account is sitting at -1.2% for January. At least I have made it some way from the bottom with a few good trades. This is also the first negative month for me since beginning trading forex in September, just 4 months ago.

January 2010 Demo Account Balance

Aside from my performance, a notable change this month for my trading is the fact that I’ve been barred from trading during the day. This forced me to trade less, which is a good thing. On the other hand, I’m not able to manage my stops as often as I would have liked. As such, I’ve been helpless at times and watched some profitable positions turn sour. Whereas before, I would have at least moved my stops to breakeven when the price moved away enough. Obviously, this calls for a drastic change to my current trading strategy. For one, I’m looking at higher timeframes for my trading now to catch slower moves. Secondly, my top priority for the next few months is to develop some trading bots to manage my risks while I’m away.

Performance Statistics

Monthly Metric January (December)

Sarting Fund $5,617.44
End of Month Fund $5,550.02

Total Net Profit -$67.42 ($148.33)
Gross Profit $375 ($591)
Gross Loss -$442 (-$443)
Profit Factor 0.85 (1.34)
Net Profit % -1.20% (2.71%)
Max. Drawdown % 3.95% (1.91%)

Sterling Ratio -0.15 (0.41)
Excess Return -1.26% (2.66%)
SDev Return per Trade 0.11% (0.12%)
Kurtosis 1.85 (17.38)
Skewness 1.01 (3.30)

95th Percentile P&L $12.23 ($11.97)
5th Percentile P&L -$8.43 (-$5.73)
Net Profit Mid 90% Only -$117.84 (-$46.96)

Total # of Trades 186 (276)
Percent Profitable 41.45% (40.77%)
# of Winning Trades 63 (95)
# of Losing Trades 89 (138)
# of Break-even Trades 34 (43)

Average Trade Profit % -0.01% (0.01%)
Average Winning % 0.11% (0.11%)
Average Losing % -0.09% (-0.06%)
Ratio Win% / Loss% 1.20 (1.94)

Max. Conseq. Winners 8 (9)
Max. Conseq. Losers 20 (18)
Largest Winning Trade $22.66 ($47.44)
Largest Losing Trade -$14.30 (-$11.64)

Avg. Time Held [hrs] 0.73 (0.26)

Goal for February

My goal from the previous month is to think more and trade less. Well, I managed the latter part but the former still requires work as evident by my negative return this month. For February, my strategy is to keep trading with half the risk exposure (i.e. 0.1% per trade) to recover my account back to its all-time high in beginning of January. I’m just about 2% away at this moment.

My goal for February is to get acquinted with MQL4 so that I can begin to develop expert advisors to manage my risks during the day and overnight.

December 2009 Trading Performance Review

I have set 2 goals back in November for December. 1) Think more, trade less; and 2) Be more aggressive on winners. With 276 trades in December, I have failed miserably for goal #1. I couldn’t meet my second goal either as I’ve missed most of the big moves from failing to recognize the bigger picture. Nonetheless, I ended up the month +2.71% in my demo account by picking pennies here and there and with the help of some decent risk management to limit my risks. Overall, it was a bad month for me because of too much time spent trading with little reward to show.

I noticed my over-trading tendency early in the month. My solution was to limit myself to the longer timeframe to reduce moving in and out of trades too frequently. Reviewing that particular post, I was spot on with identifying my problem. However, my over-trading problem lingered on for the rest of the month (i.e. “staring at the trading screen too much once I am in a position and tried to micro-manage my trades to minimize my risk”).

While this can be attributed to the more volatile market in December (discussed later), the real downside of my over-trading can be seen in Figure 1 showing my demo account balance graph for December.

December 2009 Account Balance

Notice the following characteristics in Figure 1.

1. two up-spikes in the month (around the 8th and 17th)
2. a slow, barely-upward grind in the middle of the month (from 9th to 16th)
3. a marching drawdown at the start and end

#1 was mostly luck. I was in the right position at the right time.

#2 was the grind as it should be. I intend to delegate this type of trading to my automated trading system once it’s developed (haven’t even started yet though). But for the moment, it’s all manual.

What’s most concerning is #3. Sometimes it’s just better to not trade at all. That is something which I still need to learn to do. Evidently, I still need to work on narrowing my trading setup to filter out these erroneous trades. I outlined the new steps for that in my previous post already. I just need discipline to follow my own advice.

Performance Statistics

Monthly Metric December (November)
Sarting Fund $5,469.11
End of Month Fund $5,617.44

Total Net Profit $148.33 ($166.90)
Gross Profit $591 ($598)
Gross Loss -$443 (-$431)
Profit Factor 1.34 (1.39)
Net Profit % 2.71% (3.15%)
Max. Drawdown % 1.91% (3.44%)

The above stats look consistent with the previous month’s data in brackets. My maximum drawdown actually improved significantly down to 1.91% from 3.44%. That is due to the fact that I took a lot more small trades to rake in pennies rather than bet big on big moves. Frankly, I would prefer the latter strategy as I don’t typically have so much time.

Sterling Ratio 0.41 (0.41)
Excess Return 2.66% (3.10%)
SDev Return per Trade 0.12% (0.19%)
Kurtosis 17.38 (3.45)
Skewness 3.30 (1.54)

Comparing my performance statistics using my new modified Sterling ratio, it’s coincidentally exactly the same as November. My maximum drawdown improved but its benefit in the equation is cancelled out by the increased volatility in December. My ultimate target is to achieve a consistent monthly modified Sterling Ratio of 0.50 or above.

The kurtosis and skewness statistics got a lot worse this month. These are expected from the large number of small trades and the few big profitable trades as seen in Figure 1. However, what’s alarming is the data below.

95th Percentile P&L $11.97 ($23.20)
5th Percentile P&L -$5.73 (-$10.31)
Net Profit Mid 90% Only -$46.96 ($33.82)

As you can see, it would have been a losing month if it weren’t for the outlier trades. This is definitely the most worrisome statistic this month. I need to stop picking pennies and concentrate on bigger moves.

Total # of Trades 276 (153)
Percent Profitable 40.77% (46.36%)
# of Winning Trades 95 (70)
# of Losing Trades 138 (81)
# of Break-even Trades 43 (2)

As I’ve said before, I took the most number of trades this month since my short forex career. My percent profitable drifted farther below 50% to 40.77%. I might as well throw random dart to make my pick. This has once again proven that I over-traded and didn’t spent enough time with my analysis.

The large number of break-even trades is also a sore-sight in the data.

Average Trade Profit % 0.01% (0.02%)
Average Winning % 0.11% (0.16%)
Average Losing % -0.06% (-0.10%)
Ratio Win% / Loss% 1.94 (1.61)

Max. Conseq. Winners 9 (12)
Max. Conseq. Losers 18 (14)
Largest Winning Trade $47.44 ($41.88)
Largest Losing Trade -$11.64 (-$20.34)

Avg. Time Held [hrs] 0.26 (0.56)

Goal for January

There’s only one goal for me for January and it’s the same as November‘s.

Think more and trade less! Refer to my post on Focusing on trading my timeframe to reduce over-trading to see my plan to achieve that.

November 2009 Trading Performance Review

This month has been a roller coaster in both the markets and my account balance (see Figure 1). Here’s a quick recap of my paper trades in the forex markets for November. I started out by cashing the carried over long yen and dollar positions from October. Those trades could have been better as I have lamented in a post. Nevertheless, it was a good start for the month.

Then, things went downhill for me; literally, as you can see from my account balance at the first half of the month in Figure 1. I tried my luck day trading EUR/USD with horrible results. I marked this particular period of drawdown from these EUR/USD day trades on Figure 1 with a red band.

The fear lingered on and I gave up all the initial gain of the month to scrap just below the opening balance. Fortunately, I was able to realize my problem and clean up my act. I recuperated by documenting each of my entry like I used to to force myself to think more and trade less. The turnaround didn’t happen immediately. Not until I became even more stringent on myself and stuck with using only my best setup, the FTC setup. I marked this period on Figure 1 with the green bar and arrow.

As you can see, I happened to be in the right markets and at the right times to make a full recovery back to the top. In fact, I made my first 400+ pips trade and my best EUR/USD day trade during this comeback.

I thought I could finish the month above the critical $5500 level (10% gain). But a couple small losers on the last day pulled my account below it yet again. However, one lesson I became even more aware of from the draw-down is to forget about your account balance. Focus on making good trades, manage your risks, and the money will take care of itself.

November 2009 trades graph

Performance Statistics

Attached below are my performance statistics for November. The first number is this month’s and the second number in bracket is from October for comparison.

I will highlight and comment on the few discrepancies that I find important.

Sarting Fund $5,089.06
End of Month Fund $5,302.21

Total Net Profit $166.90 ($213.15)
Gross Profit $598 ($499)
Gross Loss -$431 (-$285)
Profit Factor 1.39 (1.75)
Net Profit % 3.15% (4.19%)
Max. Drawdown % 3.44% (2.32%)

This draw-down is horrible to say the least.

Kurtosis 3.45 (8.53)
Skewness 1.54 (2.49)
Sharpe Ratio 16.64 (5.21)

The kurtosis and skewness are surprisingly good. A low, but not near-zero numbers are preferable. The Sharpe ratio is also surprisingly good too. This isn’t because my return is good, is just that the standard deviation return of my trades have been very consistent. Ironically, that’s mostly because of steady small losses (see Figure 1).

95th Percentile P&L $23.20 ($70.11)
5th Percentile P&L -$10.31 (-$33.60)
Net Profit Mid 90% Only $33.82 ($46.34)

I failed to meet my goal from last month to increase my mid-90% return. It would have been easily met if I didn’t go crazy with the day trades and loose a bundle.

Total # of Trades 153 (34)
Percent Profitable 47.06% (44.12%)
# of Winning Trades 72 (15)
# of Losing Trades 81 (19)

I started to make use of scaling in and out of a trade. So sometimes one trade would be counted as 2 or 3 small ones. Still, I made too many trades this month. Even if I consider a 2 for 1 ratio of trades (i.e. 153 / 2 = 76), it is still more than twice as many as last month. My net profit is lower too. Wasted time and effort for lower return. Lesson for the month is clearly to think more and trade less.

Average Trade Profit % 0.02% (0.12%)
Average Winning % 0.16% ( 0.66%)
Average Losing % -0.10% (-0.30%)
Ratio Win% / Loss% 1.57 (2.21)

This could be the most worrisome statistics for me this month. My average winning percentage from a trade is significantly less. I need to be more aggressive when I am right to reap the most reward from it. Stash in the cash as the position gets greener!

Max. Conseq. Winners 12 (4)
Max. Conseq. Losers 14 (6)
Largest Winning Trade $41.88 ($171.79)
Largest Losing Trade -$20.34 (-$44.17)

Avg. Time Held [hrs] 0.56 (2.18)

Goal for Next Month

Let’s start by saying what I did well this month. I think my comeback was phenomenal, but definitely with luck on my side. I approached my huge draw-down systematically and rationally by reducing position size, trading less, and restricted myself by using my best trading setup only. Then when the time was right, I was able to pound on the winning positions. I will need to remember this the next time I’m experiencing a draw-down (hopefully not as much as this month’s).

On the other hand, I made many trading mistakes this month. Most were just short-term problems and I have already written about them in my lessons. Upon further review of my performance this month, two major problems are evident as discussed.

1. Think more and trade less. Limit my trades to approximately one a day and know when to NOT trade at all. Not even with tiny positions to “test the water” as I like to do.
2. Be more aggressive when the position is right. Achieve this by improving on my scaling in and out strategy by accelerating the scaling in and decelerating on the scaling out.

October 2009 Trading Performance Review

October is the first full month in which I traded forex. Naturally, this is the first of my monthly trading performance review. Note that all the trades were on a demo account with imaginary money only. But I still took this seriously.

My goal is to double this demo account starting from CAD$5000. Once that is accomplished, I will start live trading with real money. Who knows how long this might take. Hopefully by then, I will have a respectable set of trading setups, strategies, and quant tools developed.

Anyway, let’s get on with the monthly review.

As this is only my first month trading currencies after spending 8 years in stocks and futures, my trading this month is marked by a lot of experimentation. As can be seen in my trading log, I performed abysmally for the first couple of weeks. The last of my bad string ended when I took an uncalled for trade based on what I thought rather than what I saw.

Not all is lost this month as I managed to write out the first of my forex trading setups from the trials and errors. Since then, I had a string of winners to push my monthly tally deeper into the positive.

While this is definitely good, I am cautious and doubtful to my initial success because I am just at the right place, at the right time. Because we might very well be witnessing the printing of the top from this epic V-shaped rally since March. The moves in the markets were very strong and very rapid this last week. I just happen to be on the right side of the trades.

Performance Statistics Review

In any case, I’ll get down to business with discussing the performance statistics below. On first sight, the Sharpe ratio at 5.25 is impressive for this month. However, looking a few lines below, see that if we account for only the middle 90th percentile profits and losses, the net profit is reduced by a magnitude. (So as to see what would happen if we truncate the biggest (un)lucky wins and losses.) That means much of my profit for this month was because of a few big trade. In fact, it was this lucky trade when I made +500 pips in one week.

Goal for Next Month

What I’ve learned from analyzing these numbers is that I lack consistency (like all new traders), and was perhaps just lucky. So the goals for the coming months are simple:

1. achieve consistency by bringing up this mid 90% net profit value; and
2. maintain good Sharpe ratio rating by improving my risk management techniques.

Performance Statistics for October 2009

Total Net Profit $213.15
Gross Profit $499
Gross Loss -$285
Profit Factor 1.75
Net Profit % 4.19%
Max. Drawdown % -2.32%
Sharpe Ratio 5.25

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

Total # of Trades 34
Percent Profitable 44.12%
# of Winning Trades 15
# of Losing Trades 19

Average Trade Profit % 0.12%
Average Winning % 0.66%
Average Losing % -0.30%
Ratio Win% / Loss% 2.21

Max. Conseq. Winners 4
Max. Conseq. Losers 6
Largest Winning Trade 171.79
Largest Losing Trade -44.17

Avg. Time Held [hrs] 2.18
Avg. max. unrealized profit/ Realized profit 3.15