Monthly Momentum - ASX300 Super

[Warr87]

Made a rather stupid mistake. In my sleepy stupor yesterday I entered in my 4 new buy orders. Later in the day I had a look and noticed that I re-entered into the positions I had closed. That is, when I entered the list of buys it was from my Sell list. I have sold those again and will have to wait another 2 days for settlement to enter into the correct positions. Thankfully it is only a minor loss as there was only small changes in prices.

Either way, a stupid mistake. Thankfully not a catastrophic.

 

[qldfrog]

this happens: 2 buys, buy vs sell, orders forgotten.this is why we will rarely match our backtest.
Do not be too hard on yourself

 

[Warr87]

Month 8

Beginning of month 8. Like my weekly system, and CFD trading, I lost half of my open profits recently. I am liking this strategy though. I look forward to the EOM to adjust the portfolio and see how it is going. While technically doing worse than the XKO now, I think it will be a short setback. Still at approx 10% returns. Talking to friends, they find this return to be amazing. It s nice to talk to non-traders and have it in perspective that with just a few trades at the end of the month I can do better than most. I am confident that my system will end the year closer to 20% return. All speculation but I genuinely think it is doing well.

I did have to liquidate all positions and re-enter them all. This was because they had become too out of balance (had some big winner so it through out the equal balance by too much).






For those that are wondering, I haven't provided any updates on my weekly strategy due to tracking errors and not being able to work on it due to other commitments. Though it has performed similar to others around here who have lost half of their open profits since Jan.

 

[Warr87]

Beginning of Month 9

In checking my buy signals and seeing what I needed to swap out, I got real confused until I realised that I only had 9 positions currently going. The mis-match of buys to sells (since its always 10 positions they should balance out) had me scratching my head for a bit. I'm not sure how I managed it, maybe a position didn't get a fill and it canceled (and I never noticed).

The last 2 weeks wiped out a lot of open profits. The system itself was doing great but is susceptible to market changes and slow to act. I am changing out 6 out of the 10 positions. That's a large change out. Meanwhile, the XKO actually did well for the month (up 4%). It's a little disappointing to see the index beating me for the second month in a row, but I am still happy with the system. Yearly return is projected as %15.5, and a possible sharpe ratio of 1.10 (though I need to double check it, seems high).

 

[Warr87]

Beginning of Month 10

Month 9 is completed, and month 10 begins. Slight improvement this month. I am still surprised that I am below the benchmark of the XKO. The broader index is gaining more momentum than my strategy.

I believe there were a few symbols that left the ASX300 as I was holding approx 4 that no longer even appeared in the list. I ended up replacing these 4 with new positions. I also sold part of my best position as it had grown to 15% of my portfolio, so a re-balancing was needed.

The annual return is still at approx 15%p.a., while I'm currently sitting at +11.54%. A solid return thus far and the current annual return will be on the lower end of what I was estimating as a return. Given I have 30 odd years or so until retirement, an annual return of 10-15% is obviously quiet good.

 

[MovingAverage]

@Warr87 Just found this thread and great to see you posting your results. Good luck and I look forward to see this playing out.

A question for you and you may not be able to answer it given your use of Radge code and the T&Cs that go with using that code, but very curious about whether you're using any particular strategy to mitigate the risk of the relatively long period before running an explore to decide whether you need to exit a position (e.g., drawdowns). Think you're only doing month end explores. Also note you're running this system on ASX300 which tends to have a little volatility in it which might exacerbate the risk of such long times between entry/exit scans. How's your drawdown? Hope this makes sense.

I looked closely at trading monthly systems a while ago and I found I did not have the stomach for long times between buy/sell explores. For me, watching stocks take a massive beating in week one and then knowing I've got to sit tight on those positions for another three weeks just did my head in. As a result I gave away the thought of trading anything longer than weekly systems. I did subsequently speak to several experienced traders who've been trading on a monthly time frame for many years, but they restrict to stocks to ASX50 (to manage the volatility) but they also employed hedging strategies.

 

[Warr87]

Hey mate. Yea, I can't talk too much about the specifics given the code was bought. But i don't have a particular strategy for the drawdowns intra-month. If I had a market crash like March/April last year, it would be a discretionary intervention to withdraw the money to at least avoid the 30-40% hit to the market. But I removed index filter that comes standard with the code, and as you mentioned the ASX300 is more volatile. Radge's code is not meant to be run on the ASX300, which is an important distinction I like to make to others. I am young enough, and acquainted with my own risk tolerance, to know that this is something I can handle. My CAGR is also higher because of this. One downside I found with the defaults of the code is that you can be out of the market for several months at a time. This is a protective measure, obviously, but it also meant the system missed out on the rebound. I am only doing month-end explores but I am also avoiding checking in on it too much during the month (to avoid that burning want to interfere with the code). Riskier? Yes, definitely. But for the moment I can deal. I have had times that I've bought and all is well, and all of those gains (plus the month before) lost in the weekly chop. At least with a superaccount I have my employers contributions that soften the blow (and allow for greater compounding, though this is taken into account with my calcuations of returns).

Those traders you spoke to who trade monthly probably have a good idea of whats going on. They probably have smaller drawdowns than me, though perhaps there CAGR isn't as high. The ASX50 also has high liquidity and ability to absorb large positions. When my system gains more capital, I intend on expanding from 10 positions to 20. I found the DD is reduce with more positions, and the returns are smoothed out. I believe this is because its unlikely all 20 positions are going to have a bad week, whereas just having 3-5 positions with a bad week in a portfolio of 10, can greatly impact the performance. This system is meant to be relatively hands-off, simple, and long-term focused. I am open to reducing the exposure to the smaller indexes (ASX50, ASX100, or ASX200), but that will come at a time when I want to reduce my risk. I have also thought that by trading a portfolio with momentum, in the ASX50 and 10-20 positions, is more like a high-beta type strategy. Certainly useful for many.

 

[MovingAverage]

Hey mate. Yea, I can't talk too much about the specifics given the code was bought. But i don't have a particular strategy for the drawdowns intra-month. If I had a market crash like March/April last year, it would be a discretionary intervention to withdraw the money to at least avoid the 30-40% hit to the market. But I removed index filter that comes standard with the code, and as you mentioned the ASX300 is more volatile. Radge's code is not meant to be run on the ASX300, which is an important distinction I like to make to others. I am young enough, and acquainted with my own risk tolerance, to know that this is something I can handle. My CAGR is also higher because of this. One downside I found with the defaults of the code is that you can be out of the market for several months at a time. This is a protective measure, obviously, but it also meant the system missed out on the rebound. I am only doing month-end explores but I am also avoiding checking in on it too much during the month (to avoid that burning want to interfere with the code). Riskier? Yes, definitely. But for the moment I can deal. I have had times that I've bought and all is well, and all of those gains (plus the month before) lost in the weekly chop. At least with a superaccount I have my employers contributions that soften the blow (and allow for greater compounding, though this is taken into account with my calcuations of returns).

Those traders you spoke to who trade monthly probably have a good idea of whats going on. They probably have smaller drawdowns than me, though perhaps there CAGR isn't as high. The ASX50 also has high liquidity and ability to absorb large positions. When my system gains more capital, I intend on expanding from 10 positions to 20. I found the DD is reduce with more positions, and the returns are smoothed out. I believe this is because its unlikely all 20 positions are going to have a bad week, whereas just having 3-5 positions with a bad week in a portfolio of 10, can greatly impact the performance. This system is meant to be relatively hands-off, simple, and long-term focused. I am open to reducing the exposure to the smaller indexes (ASX50, ASX100, or ASX200), but that will come at a time when I want to reduce my risk. I have also thought that by trading a portfolio with momentum, in the ASX50 and 10-20 positions, is more like a high-beta type strategy. Certainly useful for many.

Thanks for the response. It is great to see you understand and are comfortable with your risk appetite and know the in's and out's of your system and its application. That's so important. As Radge often says....it's not so much about timing the market, it's more about time in the market. So with youth on your side you can take the risk for the greater return. Old farts like me need to adopted a slightly more conservative approach I reckon your whole approach to this is very pragmatic and great to hear. Looking forward to your further posts.

Your assessment of the monthly traders I spoke with is spot on. They are professional traders and they have a pretty rigorous risk management framework imposed on them.

 

[Warr87]

I like to understand my risks. That being said (and as mentioned in my journals on here), only makes the DD's slightly easier lol.

I lost out on a lot of super income as I spent most of my adult life thus far in lower paid jobs or overseas (so wasn't contributing into it). So a little catch-up I guess. But I'm confident I will have enough by the time I reach retirement phase within the super.

Also, talking to my parents, I have thought about trading something similar for them though likely using a more risk adverse strategy. This is why I've thought about how this may look on a less volitale universe, such as the ASX50 (and would be closer to what those other people trade with monthly).

 

[Warr87]

Month 11

Beginning of month 11! I do love the EOM to check on this system. Still behind the XKO which is disappointing. The success of the XKO still surprises me as those are great returns. I am still happy with my 14.6% return thus far, 17.5% yearly return (and if my math is correct, 1.33 sharpe). Such a simple strategy, requires a lot of patients, but it's doing well. I've discussed its shortfalls in this thread, but I still think if you want to be hands-off it is the way to go.

I was hoping to get approx 20-25% return/yr. I may get to 20%. On a super account, I think that is a pretty good ROI. Not beating the index but I am still happy with what I have. This strategy has also tested better with more positions, so once it grows some more I will be able to smooth out its equity curve.

 

[MovingAverage]

Month 11

Beginning of month 11! I do love the EOM to check on this system. Still behind the XKO which is disappointing. The success of the XKO still surprises me as those are great returns. I am still happy with my 14.6% return thus far, 17.5% yearly return (and if my math is correct, 1.33 sharpe). Such a simple strategy, requires a lot of patients, but it's doing well. I've discussed its shortfalls in this thread, but I still think if you want to be hands-off it is the way to go.

I was hoping to get approx 20-25% return/yr. I may get to 20%. On a super account, I think that is a pretty good ROI. Not beating the index but I am still happy with what I have. This strategy has also tested better with more positions, so once it grows some more I will be able to smooth out its equity curve.

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Nice work ? is that 14.6% return on only closed positions or is it the combination of closed and open. How invested is your system at the moment ?

 

[Warr87]

It's from open and closed positions. from just closed positions its still positive. it's also 100% invested. one of the ways I modified this system compared to Radge's is that I'm not using an index filter. a more conservative approach would be to use an index approach to stop being 100% in a falling market. downside is lower returns as you don't get the rebound.

 

[edman79]

I also sold part of my best position as it had grown to 15% of my portfolio, so a re-balancing was needed

Hi Warr,
Is rebalancing part of the system? If so have you tried not rebalancing, does it improve or degrade performance?

 

[Warr87]

Hi Warr,
Is rebalancing part of the system? If so have you tried not rebalancing, does it improve or degrade performance?

If someone gets a few too many % out from the 10% goal, then I rebalance. I had to sell some of my best performing last month as it had grown too much. Will probably have too next month tbh as some were close. Being 2-3% out is fine, but anything more than that means my newest positions get less invested.

Unsure how this would improve/degrade performance. Backtesting is done on a complete re-balance at the EOM. I might do this if I had my account with IB. It's too much hassel, and brokerage too big, with just my ING account.

 

[edman79]

But i don't have a particular strategy for the drawdowns intra-month. If I had a market crash like March/April last year, it would be a discretionary intervention to withdraw the money to at least avoid the 30-40% hit to the market

Hi Warr,
This sentence above worries me. If your trading a systematic system you should have a systematic (backtested) exit. You need to play solid defense when trading. Focus on what you could lose and not what you can make and that will put you in good stead.

Thanks for posting. I know it takes time and effort to do so and your thread is informative and valuable.

 

[Warr87]

hey edman.

its a momentum based monthly system. It's backtested to not have an 'exit', as it only keeps the 10 top positions based on its scoring methodology. I agree that a 'strong defence' is important, and in all of my other trading I have a very well defined and systematically approached exit, but trading is also about the strategy employed. Using HFT style trading in a weekly system just doesn't make sense. As I've pointed out in other posts, this strategy is always in and has been backtested so. I am comfortable with the results I got.

Now, like any trading, if there is a scenario that I could not possibly code in and test, and this scenario occured, then I always retain the discretion to intervene. It is, after all, my money.

I started my weekly system last year at the beginning of Feb. By the time it got fully loaded with positions the market crashed and I lost a lot straight up. I still traded systematically and kept in the market until my system told me otherwise. I approach this strategy the same.

 

[Cam019]

Hey @Warr87,

I know this is a turnkey strategy that you purchased from Nick. However, since you have modified some of the parameters, can you tell us what your expected average, mininum range and maximum range are for annual return and drawdown from your updated Monte Carlo simulations. It would be interesting to see if you don't mind posting those figures.

 

[Warr87]

Hey @Cam019, even though I've modified some of the parameters I can't give backtest results. I explain in my first post as to the extent in which I have varied my strategy compared to Radge's.

Over the past 5 years I got an average of approx -15% DD. COVID threw a spanner in that, as this strategy is 100% in. Returns are an average of 30% (it was 2018 that ruined it as other years were much higher). When backtesting since September when I started this, these numbers are the same. My actual life results are 15% so far. I expect yearly returns of 15-25%. Obviously test results are never as good as real results.

 

[Cam019]

Thanks @Warr87.

It's interesting that you quote the average returns and DD over only 5 years when this is a monthly strategy. I understand that you can't and won't post backtest results here, and that's cool - no problem. However, I am slightly concerned that you are quoting average backtest results over such a short backtest period using a monthly system. Not a very large sample size.

Nicks results which can be seen here, show a CAGR of 18.54% and a MaxDD of 28.30% over a 20+ year period and this is using the index filter and the ASX100 constituents. You are not using an index filter and are using the ASX300 constituents. This surely would have to increase both CAGR and MaxDD over 20+ years.

Even if you can't post the results here, I hope you have backtested your amended system to see what the CAGR and MaxDD would be over say.. 20+ years and not just 5 years. This is going to give you a much better look into the performance of your system as you would have been holding through the whole GFC since you are no longer using an index filter.

Nevertheless, good luck.

 

[Warr87]

Thanks @Warr87.

It's interesting that you quote the average returns and DD over only 5 years when this is a monthly strategy. I understand that you can't and won't post backtest results here, and that's cool - no problem. However, I am slightly concerned that you are quoting average backtest results over such a short backtest period using a monthly system. Not a very large sample size.

Nicks results which can be seen here, show a CAGR of 18.54% and a MaxDD of 28.30% over a 20+ year period and this is using the index filter and the ASX100 constituents. You are not using an index filter and are using the ASX300 constituents. This surely would have to increase both CAGR and MaxDD over 20+ years.

Even if you can't post the results here, I hope you have backtested your amended system to see what the CAGR and MaxDD would be over say.. 20+ years and not just 5 years. This is going to give you a much better look into the performance of your system as you would have been holding through the whole GFC since you are no longer using an index filter.

Nevertheless, good luck.

well I gave an average because that's what you asked for. The min is 7% and max 109% over the 20yr period.

you tell us what your expected average, mininum range and maximum range are for annual return

I have only, in the past 2 months, upgraded my norgate package so when I originally started trading this I didn't have the historical constituents and no real reason to test beyond 5 years. You are right in that you should test on a longer period given that it is a monthly system.

Testing from 2000 with my parameters gives me similar results. It's an average of 27% instead of 30%. The hit it takes in 2008 was similar to the hit taken in 2020 covid crash. (except it was more drawn out and not in 2 months like 2020).