Third Quarter 2010 Trading Review

Markets hitched a one-way train in the third quarter. TSX opened in July at 11200. It closed September at 12368. A whopping 10% jump in three months! S&P500 made a similarly impressive 9.7% jump. We simply don't get 10% moves even in most years. I made fewer trades this quarter but held each one for longer to ride the trend. However, I am not as successful as I'd hope. In particular, my worst trade this quarter was in Ventana Gold (VEN.TO). The position was profitable, but the money made was only a quarter as what I should have made. I was too aggressive to go long when VEN.TO was heading into a brick wall. Ironically, my best trade this quarter was one that didn't make money. In hindsight, I was wrong in the direction of a position but managed to escape with just a scratch. If I had been stubborn in this failed Manulife short, my profit this quarter would have been wiped out. It was a close call (technically, it was a put contract). It looks as though I did learn something in the past year. My main focus this quarter has been the backend of my trading work. Namely in quantitative finance study and development. My automated strategy performed well in the Dukascopy JForex contest. I won sixth place in July and first place in August. My win streak (I also won in April) garnered the attention from the people at Dukascopy and they kindly invited me to the Geneva Forex Event for a TV interview. By far the most impressive thing that happened to me this quarter was this trip to Geneva. Quarterly Metric Q3 Q2 Sarting Fund \$9,404.87 \$8,000.00 End of Quarter Fund \$9,630.75 \$9,404.87 Total Net Profit \$225.88 \$1,404.87 Gross Profit \$381 \$1,800 Gross Loss -\$155 -\$395 Profit Factor 2.45 4.56 Net Profit % 2.40% 17.56% Max. Drawdown % 0.85% 3.36% Total Commission 121.1 \$155.1 Commission / Net Return 53.61% 11.04% I've said this in the last quarter, commissions are the bane of my trading. Last quarter it took away 11% of my total return. This time it's 54%! The structure of my equities commission requires that I trade less but punch hard. This isn't my style. My intention is to trade less by being more picky in my RRSP trading account. The 0.85% max. drawdown this quarter is impressive though. I sometimes lose more than that in a single position. Sterling Ratio 0.22 1.44 Excess Return 2.29% 17.46% SDev Return per Trade 1.01% 2.21% Kurtosis 1.89 -0.93 Skewness 1.65 0.72 Despite my modest 2.4% return this quarter, it's not a good number in light of the market liftoff. My low modified Sterling Ratio says so. On the other hand, the statistics from my trades improved. I achieved consistency by lowering the standard deviation of my trades and skewed my trade returns more to the positive. Yet another thing to caution is my high kurtosis value. Which means my total returns are due to big profits from a couple of trades. Other than these, there is not much to add about the rest of the data. 95th Percentile P&L \$193.49 \$421.15 5th Percentile P&L -\$50.37 -\$102.13 Net Profit Mid 90% Only -\$60.56 \$824.07 Total # of Trades 9 14 Percent Profitable 28.57% 61.54% # of Winning Trades 2 8 # of Losing Trades 5 5 # of Break-even Trades 2 1 Average Trade Profit % 0.27% 1.18% Average Winning % 2.01% 2.59% Average Losing % -0.32% -0.83% Ratio Win% / Loss% 6.25 3.12 Max. Conseq. Winners 3 5 Max. Conseq. Losers 3 3 Largest Winning Trade \$228.25 \$464.05 Largest Losing Trade -\$58.19 -\$116.75 Avg. Time Held [days] 8.30 5.17

Goal for the Fourth Quarter

My goal from the previous quarter is to learn and build my first indicator in JForex. I achieved that just this week. However, I plan to change direction in my work by using less JForex and using more custom tools. My goal for the next quarter is to learn R programming and implement a JForex to R data exchange system (done, good old CSV files).

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.

Posted 30 June 2010 in trading.

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.

[Dow tanked 9% in minutes but climbed back up near the end of the day]: ../to-hell-and-back-a-review-of-tsx-after-a-v-day/

Posted 04 June 2010 in trading.

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.

Posted 03 May 2010 in trading.

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