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