So my results outperformed the pure system signals again, but this time it was by plain dumb luck.  This does not change the fact that the DESword group of currency systems reached a new equity peak last week.

Cable Glider — 1 win, 0 losses, 1 missed win

Euro Ranger — 1 win, 0 losses, 1 missed win

Darth Fader (ES) — 0 wins, 0 losses

Scalp — 3 wins, 0 losses

Last week, the systems were completely idle.  This week, I caught one nice short side move with the Cable Glider, and I nailed a top with a discretionary long side exit with Euro Ranger.  I shut the systems down prematurely for the week, but each system proceeded to have another winning trade that I missed.  It’s actually nice that the systems outperformed my discretion for once…as I’ve said in prior posts, almost all of my gains this year are from discretion, when in fact I’d prefer to trade systematically. 

I’m trying to learn how to scalp trade effectively, and I placed a few positive trades this week.  It’s not really my style at the moment, but it does feel like a solid way to expand my trading skill set. 

I’m at a new equity peak for the year (+30.9%), and thankfully, for the first time since January, so are the DESword systems.  Each new peak is an affirmation that the systems are still working.  I’m a little bit more skeptical about Darth Fader, but at least it has contributed positively to the overall actual (and walk forward) return this year.

Onward and (probably and eventually) upward.

Cable Glider — 2 wins, 0 losses

Euro Ranger — 2 wins, 1 loss

Darth Fader (ES) — 0 wins, 0 losses

More of the same over the last couple of weeks.  The systems’ win percentage is high, but the size of the wins is small.  Almost every trade is offering an opportunity to override the exit signal to improve the result.  Last week I did not override any exit signals, and I had a Cable Glider trade close with a tiny profit that I wanted to take sooner.  I also saw a Euro Ranger trade turn from a profit to a loss last Friday.

This week, I did override a Cable Glider system and took a profit instead of a loss.  I let Euro Ranger run without overrides, and it went 2 and 0, though the second win was quite small.

It’s another new equity peak for the year for me.  Year to date returns now stand at 26.9%…but again, the new peak is driven by these discretionary overrides.  These overrides have been the source of all of my profits this year, but a quick glance back to last August (in the chart below) shows that my discretion isn’t magical, and I’ve not yet been able to translate any of my discretionary exit rules into mechanical ones.

 

I picked up a copy of Larry Connor’s “Short Term Trading Strategies That Work”, because I keep hearing such good things about it.  Hopefully that will help to stimulate some new research ideas.

Today I have the opportunity to review my trading on the June 2009 contracts.  It just so happens that the last time I posted was in mid-March, right after I had rolled my positions to the June contracts.

First things first…the version of Darth Fader that I rolled out at the beginning of the year went SHORT the ES on 3/13/09 at 744…just 4 days after the 3/9/09 low, and it has not covered that position.  If I had simply followed the system, I would have been down almost 200 full S&P points.   Thankfully, that trade always looked and felt wrong to me.  I traded in and out from the short side and actually netted 9.75 points.  I have not traded the S&P since the end of April, and the market has continued to rally.  So that’s one bullet dodged.   I have since tweaked the system a bit and will begin to track the new version’s performance in my walk forward results.

Both the Euro Ranger and the Cable Glider were marginally profitable over the past three months.  There really hasn’t been anything remarkable occurring, except for the fact that both systems’ win percentage has been very high lately, but the size of those wins have been relatively small.  These systems continue to work well together.

I’m now up 25.3% year to date, and 54.3% since the launch of DESword last August.  This is a new equity peak for these systems.  The gains this year are almost entirely due to my discretion in not following the bad Darth Fader signal.  The walk forward year to date results are a paltry 0.8% !

I’m itching to do some new system development, but I haven’t had a lot of spare time lately.  Maybe I need to systematize my life a bit more so that I have more time for development

Cable Glider — 0 wins , 1 loss, 1 scratch (partial loss)

Euro Ranger — 2 wins, 0 losses

Darth Fader — 0 wins, 0 losses

Cable Glider is now the system with the deepest current drawdown.  I took a loss early last week, and scratched another loser before it could reach my stop loss.  Cable Glider is a filtered trend following system, and it had an extremely hard time.  In fact, this month’s loss was the system’s worst ever.  I managed to dodge a good portion of those losses with manual overrides though.  This month’s loss in the Cable Glider snaps a 5 month winning streak for this iteration of the system.

The Euro Ranger system went 2 and 0 in the last two weeks and showed a profit for the month.  In January, the system showed a net loss for the first time since December 2006.

Darth Fader was idle.  It would look to sell strength in the stock futures, and there’s been almost no strength whatsover in the last couple of weeks, as the market has fallen to fresh 11 year lows.

My actual results trading the Troika systems in February was a positive 2.1%.  My actual trading return year to date is positive 9.0%

I don’t have much to report on the systems development front.  Although the Darth Fader system has done well for me so far in the S&P futures, I keep tinkering with alternative ideas.  It seems I’m leaving a lot of opportunity untapped…

Cable Glider — 0 wins , 1 loss, 1 scratch

Euro Ranger — 0 wins, 1 loss

Darth Fader — 1 win, 0 losses

The currency systems are both continuing to struggle. I scratched a trade last night in the Cable Glider and pretended to be a scalper there for an hour or so, netting a total of 14 pips on 5 scalp trades…going 4 wins and 1 loss. The loss came last and nearly wiped out my gains. Maybe someday I can add scalping to the mix, but I was really just playing around last night. It’s funny just how much it got my adrenaline going. I should probably stick to systematic position trading if I want more profits than adrenaline.

This is a short month, and the currency systems have only 3 more trading days this month where they will be active.

Darth Fader netted 40+ S&P points on the short side from yesterday to today. But in fact, I completely missed a chance to get short last week at 871, then I got another chance to enter at that price yesterday. An updated backtest shows that I should be setting my take profit points tighter on the S&P trades, and if I had had that in place, I think I would have netted another 5% or so last week as the market swooned downward, completely recovered, and then re-swooned.

So then, that one actual S&P gain, combined with a couple of dodged currency trade losses, have landed me in a position of being up 1.1% for the month of February, and up 8.0% year to date, at a new high for the year.

The tracking error between my actual equity curve and the walk-forward equity curve is pretty large. The systems are showing a 4.6% year to date gain, with a lot more weekly volatility than I’ve actually experienced. I”m sitting at a new high with Troika, but my walk-forward numbers are showing the DESword currency system in roughly a 12% drawdown, with Troika in a 6% drawdown altogether.

It feels like I should be very careful now; DESword hasn’t seen this kind of drawdown since 2005…if it weren’t for all of bullets I’ve dodged, I’d be right there with it.

Cable Glider — 1 win , 0 losses — net positive

Euro Ranger — 3 wins, 2 losses, 1 scratch –net positive

Darth Fader — 1 win, 0 losses — net positive

Okay, in the last 3 weeks, Cable Glider has largely been kept out of the market by volatility filters.  The one trade that was triggered was a very tiny gain of 12 pips.  There have been some huge directional moves to the downside, with the Cable now trading solidly below 1.40, but the system has been unable to capture them.

Euro Ranger has been struggling as well.  The system is showing a net loss for the month, but I did a manual override and scratched the last trade at break even, since it just didn’t seem to set up correctly on the chart.  I’ve had very mixed results when trying to apply my intuition, but in this case my discretion saved me from suffering a relatively large loss.  The Euro Ranger can be a very sensitive system; it was just 3 pips away from triggering a short trade, but then just a few hours later it triggered on the long side.  That’s what prompted me to scratch the trade.  Indeed, if the short trade had triggered, it would have been nicely profitable.  Of course, overall, I’m glad to have dodged the bullet.

I formally launched a two-in-one system for the S&P futures on December 28, 2008, which I have dubbed Darth Fader.  Unlike my FX systems, which are traded on intraday data, Darth Fader is an end-of-day system.  It has a subcomponent that fades extreme moves and another one that relies on seasonal forces.  Darth Fader took one short trade early this month at 921, when there was a lot of New Year’s optimism in the air.  The trade closed out nicely profitable, but I did cut the profit short.  Much like when I launched the Euro Ranger last year, I’m finding that there is a period where I have to get comfortable with the specific risk that a new system takes and the emotions that come with it.  Although I was telling myself not to override the signal practically the whole time that the trade was open, I still did cut the trade short by a day and missed out on an additional 17 full points of profit.

Since I now have more than two systems trading live, I posted a final chart of the DESword (Cable Glider + Euro Ranger) in the sidebar.  The system returned 26.0% in 18 weeks, which comes out to 95% annualized. 

Since the formal addition Darth Fader to my stable of systems on December 28th, 2008, I am up by 6.9%  I am dubbing this combination of systems Troika, since I love to use the first thing that pops into my mind.  I suppose that there are better uses of time than thinking of catchy names, but they are fun.

It seems to me that the conditions in the market are still absolutely treacherous.  Small position sizes and multiple strategies on multiple instruments have allowed me to realize some respectable profits.  I’ve written before about the low correlation (about 0.05) between the weekly returns of the Cable Glider and Euro Ranger…that’s one reason why they work so well together as DESword. 

Well, it gets even better.  The two sub-systems that make up Darth Fader have a weekly correlation of -0.03, and the combined correlation between DESword and Darth Fader is also relatively low, at 0.17 since 1/1/2004, though the correlation has been higher over the past year, at 0.28.  The backtest page has been updated to reflect the combined results posted by Troika from 1/1/2004 to 1/23/2009.

Cable Glider — 1 win , 0 losses

Euro Ranger — 2 wins, 0 losses

S & P System — 1 win, 0 losses

The two currency trading systems had a perfect December.  This is the first month that I’ve ever gone without a losing trade.  The high volatility in the markets propelled the systems to a 20.7% gain for the month of December. 

I make it a habit to step away from trading over the Christmas and New Year’s holiday week.  I’ve been working on various systems for the S&P 500 index futures during that time, and I’m nearly ready to go live with an end-of-day system based on ideas I’ve read about over at MarketSci.  In fact, I ran a little test trade over the last week, which closed for a small gain.

2008 was a rough year for my trading systems;  I suffered a 45% loss for the year.  Who would have thought that a loss of that magnitude wouldn’t seem so bad, given what stock indexes all around the world returned in 2008…

Anyway, most of that loss was suffered during two horrendous weeks in January 2008 when I was still trading with a suicidal level of leverage.  Luckily, that suicidal leverage served me well on the upside in 2007, and it looks like that even after the drawdown for 2008, my original stake has increased by approximately 70% over the 2007 – 2008 time frame,  Even after all the crazy ups and downs, the model portfolio has returned over 125% since inception on October 1, 2008. 

Since August 22, 2008 , I have been trading at much more conservative level with two uncorrelated systems (Double Edge Sword), and I’m up 26.5% since that date.

For 2009, I’d love to keep the leverage per system low, and develop more systems for my arsenal.  That certainly seems preferable to relying on Cable Glider and Euro Ranger to keep on working forever and ever…

Good luck to all in 2009!

Cable Glider — 1 wins , 1 loss

Euro Ranger — 4 wins, 0 losses

The DESword systems are now showing an actual return of 18.4% since August 22, 2008. 

The volatility had been scaring the hell out of me, so I missed trades and invented new filters to keep myself out of the market during most of November.  I was lucky to eke out a 0.4% gain last month.  This week has been the best in more than a year….I didn’t override or miss any signals.

I guess that there’s not much more to say right now.  I’m glad to be up and I hope that it continues.

Cable Glider — 1 win , 0 losses

Euro Ranger — 0 wins, 0 losses

Over the past two weeks, the account had a net gain.

This month, the Cable Glider is showing a net gain.

This month, the Euro Ranger is showing a net loss.

This month, Cable Glider has been more profitable.

More gut wrenching volatility and unbelievable range expansion occurred this week.  The British Pound moved in a range of just under 23 cents against the Dollar this week.  It wasn’t too many months ago that I instituted a volatility filter in the Cable Glider that shut it off after the market moves in a range greater than 3 cents! 

From open to close, the British pound lost over 1400 pips against the Dollar…and the only trade entered by the Cable Glider was a long trade that profited 7 pips.  Then the floor absolutely fell out of the market, but the Cable Glider was on the sidelines due to the volatility filter.

It is worth noting that the version of the Cable Glider system that I was running last year, which doesn’t have volatility filters in place, captured gigantic pieces of this downward move (over 1300 pips) and is now sitting at a new equity peak (when traded on a one – contract per trade basis).

Volatility filters also kept the Euro Ranger sidelined for all of the last two weeks.  Instituting this filter has been a net losing proposition so far, as the Euro Ranger (unfiltered) would have been a perfect 4 and 0 this week, netting over 250 pips.

So, on one hand, I missed out on a big opportunity.  On the other hand, I acted prudently to protect my trading capital (recall that I cannot cut my position size without switching trading instruments).

Surely it’s possible to make a killing in this environment, but surely it’s just as easy to get killed.