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 somedecent 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.

[caption id="" align="aligncenter" width="580" caption="December 2009 Account Balance"][][][/caption] 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][limit myself to the longer timeframe to reduce moving in and out of trades] 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.

Monthly Metric December Sarting Fund \$5,469.11 End of Month Fund \$5,617.44 Total Net Profit \$148.33 Gross Profit \$591 Gross Loss -\$443 Profit Factor 1.34 Net Profit % 2.71% Max. Drawdown % 1.91% Sterling Ratio 0.41 Excess Return 2.66% SDev Return per Trade 0.12% Kurtosis 17.38 Skewness 3.30 95th Percentile P&L \$11.97 5th Percentile P&L -\$5.73 Net Profit Mid 90% Only -\$46.96 Total \# of Trades 276 Percent Profitable 40.77% \# of Winning Trades 95 \# of Losing Trades 138 \# of Break-even Trades 43 Average Trade Profit % 0.01% Average Winning % 0.11% Average Losing % -0.06% Ratio Win% / Loss% 1.94 Max. Conseq. Winners 9 Max. Conseq. Losers 18 Largest Winning Trade \$47.44 Largest Losing Trade -\$11.64 Avg. Time Held [hrs] 0.26

[limit myself to the longer timeframe to reduce moving in and out of trades]: http://www.quantisan.com/focusing-on-trading-my-timeframe-to-reduce-over-trading/