|
PureBytes Links
Trading Reference Links
|
Nicholas
Our "minimum" goal is a 100% annual return on total capital. Now you have
to take into consideration that using the money management techniques
garnered through this list, we only invest a third of our capital in the
futures market. Sometimes we realize our goals, and other times, when we're
revising the system, we don't. Last year, for example, we netted 65% on
capital. Not a bad year, but one that we weren't happy with. We had two
bad months when we lost a bunch while we were revising our trading rules.
If we had just broken even in those months, our return would have been 150%
net on capital. Now a 65% net return on capital (after commissions and
fees) using our money management rules means an actual ROI from 150% to 300%
on our investment (margin). Not too shabby, but, again, with the volatility
involved in trading futures and the unlimited risk, you need these returns
to protect yourself. In addition, you have to determine what type of
investing is right for your personality.
We trade futures, period. Now that's not quite true anymore. My brother's
company was sold to Lucent last June and he walked away with a cool $1mm.
Since July, we have been applying our futures trading techniques to the
stock market. I can always go into that if you're interested. Now we trade
on margin and have netted approximately 10% a month for the last 2 months.
We were ahead a net of 30% in January but gave 2/3 back in the last week.
We think we're now trading a little smarted, but this stock business is all
new to us. In the last 5 months of 1999, when we first started trading
stocks, and when we made several mistakes developing our approach, we netted
almost 30%. Our target for the stock trading is 40% for this year, and
we've already reached 20% in two months, so I don't think we'll have a
problem with that goal. When I say we've already reached 20%, I mean on
closed trades with the profits in the accounts. We never count paper
profits or losses (mark to market) until we realize them as you can go crazy
here. Again, we're trading stocks from a short term approach, getting in or
out depending upon our S&P futures trading signals. A long term capital
gain to us is 30 days. :)
Now, this is how we do it with our futures trading. We maintain comparisons
of various trading rules in order to determine which rule set should be
used. By constantly monitoring various rule sets, we're able to determine
which one is working best at that time. For our comparisons, we use a
running total showing YTD profitability, a moving six months profitability,
and a moving 30 - 45 days profitability analysis. That was how we were able
to determine that Bonds had decoupled with stocks for about a year or so,
and that they are now coupled again (at least for our system).
Maybe I should explain a little more. While we may change trading rules,
our basic system doesn't change. We're playing probabilities, so we know
for a mathematical certainty, that if certain things occur, then we have an
X% chance that the market will do Y. Our basic rule set changes only in the
values we use to trigger a signal and the bias we might apply (for the last
many years, we have had a bullish bias, but we're now running a neutral
bias). Our signals run from +/- 2 to 10 for what we call SP39 (taken from
the fact that the summary calculation was the 39th formula in MetaStock).
In actuality, we have two SP39 calculations. They are our Original SP39 and
our MS SP39. The reason there are two is because I was forced to revise a
couple of our calculations because MS was unable to handle the computations
(it does now, BTW).
Up until recently, we traded whichever SP39 signal came first (and met some
other criteria as well). We dropped the Original SP39 from our signal last
December after our big loss in November, since it appears that it was too
sensitive for the current volatility. We still monitor all of our signals
and will reinstate it as soon as it makes a positive contribution to our
trading. This is how we monitor which rule set to use for our trading.
Using this technique, we're able to stay on top of what works and what
doesn't. We're also realistic in looking at the market. We know that it is
a constantly changing beast and that no signal works forever. We're
overjoyed that our core signals have worked for as long as they have.
I hope this might give you some ideas to use in developing your own approach
to trading.
Regards,
Guy
Fax (630) 604-1589
-----Original Message-----
From: owner-metastock@xxxxxxxxxxxxx [mailto:owner-metastock@xxxxxxxxxxxxx]On
Behalf Of Nicholas Kormanik
Sent: Tuesday, February 15, 2000 7:05 AM
To: metastock@xxxxxxxxxxxxx
Subject: RE: Trading goals
Guy: "With the type of trading we do, since it is very risky with a large
exposure to loss, we look for a high return on investment."
Guy, what does this roughly mean in your case in percentage terms?, and over
what period of time?
I wonder if 'Trading Goals' could be arrived at through system testing ---
one we find/establish a system we like to trade, if the MetaStock system
tests indicate the trading system ought to be generating a return of xxx per
year, perhaps we should be shooting for something along those lines?
That is, just a benchmark to shoot for, from a technical, non-emotional
vantage point.
Nicholas
|