Ed Mamula.com

Results since last update (3 weeks): 

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.

Results since last update (4 weeks): 

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!