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. [caption id="" align="aligncenter" width="580" caption="November 2009 trades graph"][November 2009 trades graph]November 2009 trades graph[/caption]

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.
Sarting Fund \$5,089.06 \$5,302.21 End of Month Fund \$5,302.21 \$5,469.11 Total Net Profit \$213.15 \$166.90 Gross Profit \$499 \$598 Gross Loss -\$285 -\$431 Profit Factor 1.75 1.39 Net Profit % 4.19% 3.15% Max. Drawdown % 2.32% 3.44% Kurtosis 8.53 3.45 Skewness 2.49 1.54 Sharpe Ratio 5.21 16.64 95th Percentile P&L \$70.11 \$23.20 5th Percentile P&L -\$33.60 -\$10.31 Net Profit Mid 90% Only \$46.34 \$33.82 Total \# of Trades 34 153 Percent Profitable 44.12% 47.06% \# of Winning Trades 15 72 \# of Losing Trades 19 81 Average Trade Profit % 0.12% 0.02% Average Winning % 0.66% 0.16% Average Losing % -0.30% -0.10% Ratio Win% / Loss% 2.21 1.57 Max. Conseq. Winners 4 12 Max. Conseq. Losers 6 14 Largest Winning Trade \$171.79 \$41.88 Largest Losing Trade -\$44.17 -\$20.34 Avg. Time Held [hrs] 2.18 0.56