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).