Monthly Momentum - ASX300 Super

[Warr87]

This thread will be for my new monthly momentum system that will be traded on the ASX300 universe within a super account.

A few things:

This system is based off code bought from Nick Radge. It is, however, not the original parameters and has been modified to suit my needs. It is not a representation of his turnkey system. The performance for his system is found here: click here . Any questions about his system should be directed towards Radge. I am not running as is, and I will not be posting trading signals for his system (or mine for that matter).

Some differences:
I have chosen to run my system on the ASX300 and not the ASX100 like Radge. I will also be using 10 positions, not 5. I am not running a filter. My system in comparison may be riskier than Radge's.

The system:
Scan will be run first day of the month and placed the next day with buys placed through my Super.
I am not running an index filter
I will rebalance if necessary

I have to be clear about this: this is not an endorsement of The Chartist. I am not paid, nor have I been asked to do this. I have taken the risk to modify a system that was already turnkey, therefore the risk is entirely mine and will not match the original system. You should have knowledge of system design and Amibroker if you are going to modify a system. I will be posting performance but no buy/sell signals will be given. It will be very hard to actually track realistic performance as it is a super account I have money being deposited regularly thus there is that additional compounding factor. This will likely be a boring and slow journal since it is monthly. But I look forward to how this will turn out.

 

[Warr87]

Month 1

Positions entered: 9

I tried to enter into all 10 positions but my fills never came for the 10th position. I tried over 2 days and it kept running away. Since this is monthly I am not worried too much about slippage. On a monthly scale, a few % here and there on one particular day should not be a concern IMO. This means I will place orders with a wide limit order to ensure fill.

No performance metrics given this is the first month.

 

[Cam019]

Month 1

Positions entered: 9

I tried to enter into all 10 positions but my fills never came for the 10th position. I tried over 2 days and it kept running away. Since this is monthly I am not worried too much about slippage. On a monthly scale, a few % here and there on one particular day should not be a concern IMO. This means I will place orders with a wide limit order to ensure fill.

No performance metrics given this is the first month.

Why not just use market orders if you're trading on a monthly basis?

Surely just hitting a market order on the first of each month for each position as opposed to adjusting limit orders if the price is creeping away from you each additional day is negligible, right? Wouldn't it be much easier to use market orders?

 

[Warr87]

Because of work I had to enter orders after the close on the first day, meaning market orders wouldn't be accepted only limit orders. Sometimes my work schedule means this is my only option. Not an issue for my weekly system but obviously a potential issue for this.

 

[Warr87]

Month 2

The first month wasn't the best. Days after I submitted my orders things got more volatile. I also made some mistakes with entering this months buys/sells. The ING platform is simple but obviously not a proper broker interface. Limited control over orders, etc. This is to be expected though as not many people are likely using their services to run a system. I wasted a bit in brokerage but I expect to make mistakes with a new platform and a new system.

I have entered into a full 10 positions. Some of the mistakes I made were selling a few positions that I shouldn't have. They were re-entered. Also have to wait until my orders are cleared before I can enter into my next positions (due to waiting on the cash from the sale).



I have only completed 1 month of a monthly system, so almost any stats given would be pointless right now. I expect my metrics to even out to backtested results after a few months. Though things are going good this month. Happy so far with the system.

 

[Warr87]

Month 3
Overall, not bad month especially given the uncertainty. The system was powering through until last week. Overall it has faired better than my other systems.

I cycled out 2 positions, no balancing on the remaining positions.

It's hard to give statistics on a monthly system at the beginning of the third month. I am really liking this system and I believe long term it will likely do just as well if not better than my others. It is also scalable. (My own modications and backtesting show that the system is more profitable with more positions. Radge provides the default of 5 which performs well but more highs and lows. I noticed the more positions the less susceptable you are to bad months as risk is spread. But I am also running it on the ASX300 not the ASX50. These are important differences of the turnkey system providing by Radge and my own modifications.)

 

[galumay]

Out of interest, how do you comply with legal SMSF requirements using it as a speculative trading vehicle?
I would have thought it would be non-compliant with an investing strategy?
Or does the monthly nature of the trading get around the compliance issue?
Did you get a ruling or professional advice about using an SMSF in this way?

 

[Warr87]

I am using ING and their direct access, so its not a SMSF. And I was under the understanding that even in a SMSF you can trade using systems? I've seen deeds that permit the use of futures, options, currencies, etc. So if its not legal to trade in this way in a SMSF, then that is news to me. FYI I intend on moving to a SMSF with at least $100,000 in my super. But I will see if its worth it at that point (there is enough paperwork with what I am trading now, let alone with adding my super to it. benefit of being with ING is that they take care of all paperwork. i just buy/sell.)

 

[galumay]

Ok, its one thing to put investing strategies in SMSF Deeds, that doesn't make them compliant though. Mind you, I suspect there is almost no oversight and there are far more illegal things going on without people being caught, so I am probably being over cautious!

 

[Belli]

Bloody heck, this focus on what a SMSF can or cannot do. It's way more than that. The role and legal obligations of Trustee for a start. Adherence to Corporations Act if Corporate trustee, adherence and compliance with the provisions of the Income Tax Assessment Act, such as residential status, compliance with Superannuation Industry (Supervision) Act and associated regulations.

It should be considered in the totality not on some words on what may be in a Trust Deed - which may not necessarily be compliant.

 

[Warr87]

i haven't seen anything to say you can't trade like this in a SMSF. in fact members here do. if you have something to share that would indicate that this would make there SMSF non-compliant I'd be happy to have a look. otherwise i'm not really sure what you think is non-compliant about it?

 

[rnr]

Out of interest, how do you comply with legal SMSF requirements using it as a speculative trading vehicle?
I would have thought it would be non-compliant with an investing strategy?
Or does the monthly nature of the trading get around the compliance issue?
Did you get a ruling or professional advice about using an SMSF in this way?

Hi @galumay,

Have you considered the possibility of an SMSF running a business (Share Trading) that is allowed under the trust deed and operated for the sole purpose of providing retirement benefits for fund members.

Cheers,
Rob

Running a business in a SMSF

 

[galumay]

The advice I have had is that the "running a business" is what allows the investment of SMSF funds into shares for the long term retirement benefits of members, and that it does not allow for the activity of speculative day trading as an example. I understand where the regulators used the terms "running a business" and "share trading" they were talking about what we would call investing - the irregular and infrequent buying and selling of shares as a long term investment strategy.

Anyway, I think its really off-topic on my behalf, as Belli points out there is much more to being compliant than just saying you can do something in an Investment Strategy or within the Deed. This thread just triggered my wondering about the compliance of such high risk activity in an SMSF. I should probably start a new thread if I want to discuss it further!

Apologies to Warr87 for derailing his thread, carry on!

 

[Warr87]

Well I guess the issue comes with 'speculative day trading'. That seems a rather lose term. Day trading itself is not 'end of day' trading like most of us do here. And I have no doubt that the ATO would rather not have people setup a SMSF to do day trading as its notoriously volatile and plenty of stories of people being in ruin (not going into a debate about the pros/cons of that here).

Below is an exert from the ATO website. As you can see, you just have to have it within your trust deed, pass the sole purpose test, and not against super laws. There is mention of share trading on the ATO website so share trading per se isn't prohibited. If you have an incorporated trustee I think you will be fine. I would be interested what is in the super laws in regards to trading frequency. If you trade a weekly system I'm sure you would be fine. Mine is monthly and so would not be a problem either.

And no need to apologize mate. I'm sure others who read this thread may have the same concern. This is an educational thread. Clarification on this would be for a lot of peoples benefits (though financial and/or legal advice should be sought before doing anything. I know I am neither lol.)

My belief is that even trading futures would be acceptable. Same with currencies. If those are allowed, it would be odd if share trading is not.

Your self-managed superannuation fund (SMSF) investment strategy | Australian Taxation Office

How to develop your self-managed super fund (SMSF) investment strategy and achieve your investment objectives.

www.ato.gov.au

Are there any restrictions under the super laws with respect to my SMSF investments?

You are free to choose what type of assets you may invest in, providing those investments:

• are permitted by your fund’s trust deed
• are not prohibited by the super laws
• meet the sole purpose test.

For instance, you need to be aware of the in-house asset rules and acquisitions from related party rules. You also need to be aware of the non-arm’s length income rules for income tax purposes.


Where your investments breach the super laws, we can take compliance action against you. Depending on the severity of the breach, we may apply penalties and potentially disqualify you as trustee.

 

[Warr87]

Month 4

Beginning of the 4th month. How time flies by.

System did ok last month. While some days its gains were high, overall it didn't really gain as much as my weekly and daily systems. Overall I am happy. There is a marked improvement. One thing with the system is that obviously with a market that was up and down, and entering at the beginning of the month, can get caught out by sudden moves. The first month, for example, had a large loss days after starting. In the most recent month, the market starting becoming stronger in the past 2 weeks. With a more steady market things will get even better. Having a look at the next list of buys, there are some differences as the market shifts.

The portfolio needed some rebalancing as some positions were larger than the designated percent. Given the changes needed I liquidated all positions and will re-enter when the money is cleared. This is a downside of my current broker, that I need to wait 2 days for any sells to clear (brokerage is a bit high too, but I dont have to deal with paperwork so that is the tradeoff).

Stats below are noticeable better than last month.




It may seem far fetched, but I am aiming for +20% return by the end of the 12months. I think this is doable (barring any new flash crash). 1.8% may not seem like a lot but the increasing win/loss ratio and profit factor mean its just a matter of time.

 

[Warr87]

My backtest over the same period is very encouraging too. I can't share backtests, but things are looking good.

For those that are interested, Radge has another momentum system that is being released next year I believe. (I'm not affiliated with Radge, FYI. Just a headsup for those that might be interested.)

 

[Warr87]

10 new positions opened.

For those following, when this account eventually gets bigger the plan is to increase max positions. the increase in positions brings down the risk and should give greater return. the original system by Radge, with my understanding, is meant to be minimal since its monthly and 5 positions. Taking on more positions is more work than most who buy his turnkey system are willing to spend.

 

[Warr87]

Month 5

Cycled out of 4 positions this month. They got entered into late due to the public holidays and settlement. Overall the strategy is picking up momentum. Probably not surprising given the current market. With my revelation of my spreadsheet tracking being off with my MAP strategy, obviously this tracking was off too. But I'm pretty sure I have corrected it. Either way, I have greater gross profits over gross loss.

Don't take the win%, profit factor, etc., too seriously. Barely into trading this. It is at +11%. This is better than I was getting previously when I was just in a fund.

 

[Warr87]

Month 6

Beginning of month 6. After 5 completed months I think the strategy is going well. Like most strategies it lost a lot of open profits last week. Last week it was at +20% before I lost around 7% (similar loss to my weekly strategy!). As of today I have already recovered most of those losses from last week. But considering I am now at +13.74%, which is a yearly return of 33%/yr, it's not bad at all! With my contributions and the return I am confident with how this will play out. I am also looking for accumlating enough capital to make it worthwiled to move into a SMSF.

 

[Warr87]

Month 7

The beginning of month 7. a strong month for this system. Though it did loss around 3-5% in the week gone. Still up and going strong. I am noticing that it may need to be rebalanced at the beginning of month 8.

There will be 4 buys/sells month.

Now at +18%, or approx 37%/yr.

Being at +18% after 6months for any system is pretty good effort.