Weekly Portfolio - ASX

[Warr87]

System 1 (EMA Cross Strat):
Week 20:
Buy: None
Sell: None

Like last week, nothing going on here.



Open Positions: 15

System 2 (MAP Strat):
Week 7:
Buy:KMD and MOE
Sell: FLC, DCG and AQZ



Open Positions: 18, 2 to be opened with 3 to be sold. Will have 17 positions as of Monday.

Notes: I am once again a little frustrated that my systems haven't made more. It is obviously early days and expected, but the annoyance and lack of patients is definitely there. The fact I am not in a drawdown should be good enough, especially since most systems will be down in the beginning, but obviously I want more success! (Who doesn't?) Will have to do a comparison soon on my performance vs. backtesting to the systems start date.

 

[Wyatt]

@Warr, I think you're doing very well.
Your thread P/F missed out on easier gains from earlier in the year, so now it's all about being patient and consistent and just letting things be. Not that what I do is all that great and prolly doesn't have to be, but here is a few comparative charts which may indicate you're on track. So i'm in DD atm by around 6-7% at a guess.
XAO 4/8/19 til present

and XKO 4/8/19 - present

Keep up the good work.

 

[Newt]

Agreed - I think you'll find the level of trend follower exuberance on the forum will taper for a while, as most medium-long term trend traders will be wallowing in DD to some extent, or even not trading due to market filters keeping them out or stopping new positions.

Jan to May this year should be treated as a bit of an outlier for unusually good performance.
Still doesn't make it any easier drifting sidewise or down, possibly for many months....

I always thinks of Brett Penfolds at times like this. He points out the reality that, for a lot of the time, trend following can be downright "miserable". Plus the market always seems to find some new way to test you with "maximum adversity".

https://www.amazon.com.au/Universal...cessful-Trading-Essential-ebook/dp/B0041D8VGC

 

[peter2]

@Wyatt and @Newt Thanks, you beat me to it.



Our market (XAO) has been going sideways for more than 7 weeks. Most trend following systems are experiencing a draw down at the moment. Especially after the two huge down days two weeks ago. Prices go down faster than they go up.

There will always be portfolios that are doing better than ours but there will be some doing worse. You've got to ignore the others and focus on the process.

 

[Warr87]

Thanks @Wyatt , @Newt , and @peter2 . You guys are right, and I know this intellectually. I know when I backtested my systems previously had almost all my gains from Feb - Apr. Such is the nature of trend following. This is obviously why understanding the psychology of trading is important. My battle is also the fact that I want to prove my systems so I can start actual trading. My impatience at times almost gets the better of me. I think everyone who has been working on developing systems has the tendency to want to jump in.

I've put all this here, as well, for anyone watching my thread to so they can see the potential (trading psychology) problems when starting out.

Thanks for the encouragement!

 

[Warr87]

System 1 (EMA Cross Strat):
Week 21:
Buy: PGH, ALG
Sell: ECX

Mistakes: When I went through the update the prices on my open positions, I noticed a few positions had crossed below and should have signaled last week. I don't know what I did wrong, but when I ran my system for last week as well, sure enough there are sell signals there. I think I may have had the wrong filter on as System 1 trades ASX 300 whereas System 2 trades the All Ords. A less to be learnt that if you aren't careful, you loss (virtual in this case) money.

Late sells, EHE & VEA.



A lot of stop losses were raised as well, which is always good with my open risk reducing.

System 2 (MAP Strat):
Week 9:
Buy: IFN, RMC, FSA
Sell: None



Open PL on System too is now $1275 (+2.6%).

A much better week for both of my systems .

 

[peter2]

I like the look of the System 2 open results. There's three big winners and all the losses are much smaller.
How do you feel about this portfolio? How do you feel about your management of the total portfolio heat? Can you see the potential for overall profit if you manage each trade well?

 

[qldfrog]

Errors do happen and that is why backtests rarely match exactly
Even when your code is right and you start being used to the weekly routine,you miss a sell, use the wrong data..and can be lucky or not as for the error outcome.
We are human, this happens
Great result this week

 

[Warr87]

I like the look of the System 2 open results. There's three big winners and all the losses are much smaller.
How do you feel about this portfolio? How do you feel about your management of the total portfolio heat? Can you see the potential for overall profit if you manage each trade well?

Yea I'm liking System 2 a bit more right now. The open profit on System 1 is still $334 (+1.7%) which still isn't bad. But you are right, there are a few big winners while the losers are small. This system trades a lot more. The portfolio heat is managed better in this system too, since if the index goes down all of my stops tighten to 10% which means my open risk will drastically reduce. Otherwise, as you have probably noticed, my portfolio heat is high in all of my systems.

And I do see potential if I trade it well. Probably more in System 2 than System 1. I think System 1 would still be profitable but would likely take longer to prove.

Errors do happen and that is why backtests rarely match exactly
Even when your code is right and you start being used to the weekly routine,you miss a sell, use the wrong data..and can be lucky or not as for the error outcome.
We are human, this happens
Great result this week

Yup. I screwed up and its a reminder that mistakes do happen (plenty of more seasoned members here have made trading mistakes as well). And you are right about backtests. My backtests show that some years I could make 40%, or higher, but the proof wont even be in this journal but rather when my money is on the line. From what I understand its good to take 10% away from your backtests annual return, and add 10% to DD. But we will see.

And a great result indeed .

 

[Warr87]

System 1 (EMA Cross Strat):
Week 22:
Buy: SSM
Sell: None

Had a few buy signals but only room for 1. I went through all of them and choose the one I saw with the greatest uptrend and potential (VCX, EHL, GOR were the other choices).

Also, with the positions closed this week, EHE was closed with 0.9R which is the first winning trade closed.

DCG also gapped down and triggered a stop loss, so it will be sold (at -1.3R which will hurt!). The bonus is that it will open up another position.

GOR will take it's position.

Open PL = -$46 or -0.2%



System 2 (MAP Strat):
Week 10:
Buy: None
Sell: None

No sell signals and fully invested, therefore cannot act on any buy signals.

The open PL is $2834 or 5.7%. Another good week for this strat. A few SL's raised as well which I always like to see.

 

[peter2]

That's it. Collect those winning trades. When you've got a bag full of winning positions it's easier to get rid of the losers quickly. I like the mindset you're starting to show. Good habits reinforce good habits. Let those winners get bigger and cut the losers makes you a profitable portfolio manager.

About your portfolio heat. It only matters to you. If you can trade with it big (like skate) then you'll get the most out of your system. You may be smelling the roses soon but beware, the market has a habit of shoving your nose into the manure. It's what you do at that time that will determine if you've turned the corner into a profitable trader.

 

[Warr87]

both portfolio's are collecting winning trades, which is great. System 1 has been a lot slower to accumulate any positions at all. Not necessarily a bad thing. System 2 does look good, but as System 1 has proven twice now, a quick gap down or drop can take away any profit.

And thanks. I really enjoy this, though it's still a bit of a chore at times haha. I look forward to Friday's so I can update and run my scans. I still want to jump in, and I'm getting to the point where I think I should probably do so. I have learnt a lot by doing this journal, including what mistakes can be made and where I need to improve. Not to mention the importance of trading psychology even for a systematic approach. I owe a lot of what I have done so far to the members here, including @willoneau , @Skate , @peter2 , @qldfrog , @Newt and @Wyatt (sorry if I've missed anyone).

 

[Warr87]

Also, @peter2 , with your current thread I've been wondering if a system could be applied to the leveraged ETF's you have mentioned in your thread. I had been thinking about for a little bit now, but your recent posts have had me looking at the 3x ETF's. Also, given all of Clenow's books that I've read, futures still remain in my mind when I build up a bigger account. At some point I've got to get some free data to at least test some code and test some ideas.

Some of the recent reading on Leveraged Trading (a kindle book I started before) has resparked some interest in coding an EA for FX. I'd like to test some of my new knowledge on this. My focus is still the systems I have been trading in this thread but I like to look at other ways to diversify. My question to those who read my thread is this: is there is easy way to construct a simple MA crossover bot for FX ? I have searched and it is surprising how hard it is to find something simple or at least free.

 

[Newt]

Also, @peter2 , with your current thread I've been wondering if a system could be applied to the leveraged ETF's you have mentioned in your thread. I had been thinking about for a little bit now, but your recent posts have had me looking at the 3x ETF's. Also, given all of Clenow's books that I've read, futures still remain in my mind when I build up a bigger account. At some point I've got to get some free data to at least test some code and test some ideas.

Some of the recent reading on Leveraged Trading (a kindle book I started before) has resparked some interest in coding an EA for FX. I'd like to test some of my new knowledge on this. My focus is still the systems I have been trading in this thread but I like to look at other ways to diversify. My question to those who read my thread is this: is there is easy way to construct a simple MA crossover bot for FX ? I have searched and it is surprising how hard it is to find something simple or at least free.

Warr, from personal experience, I would sit tight and bed down your ASX system trading for a couple more years before you risk losing focus and shooting off sideways into Futures etc. If trading is starting to show its mandane "boring" side and the equity curve is climbing you're on the right track, but expect the learning to continue pretty much forever.

Only one person's opinion. Others may have different advice.....

 

[peter2]

You're well ahead of the people who don't record their trading results. You're gaining experience with the business of trading by documenting your progress. This experience is real because you're doing it as it happens. You're making mistakes because it's easy to make them and each mistake is not costing you money. You're learning that it's boring at times and you''ll learn that there's times when all hell breaks loose. The media will add to the hysteria and you've got to learn to ignore the headlines and sell what you have to, when you have to. You're learning how much portfolio heat you can tolerate. This changes as you get older, but by then you'll be financially independent.

You haven't managed a portfolio through a bear market yet. Believe me you'll want to do this when your money isn't on the line.

You're trialing two systems side by side. In another six months you'll probably favour one more than the other. This may be due to the differing workloads or simply the performance. The system that you prefer should be the one you plan to start with your hard earned capital.

As Newt states the learning never stops. By all means start to learn about other financial instruments. They all have their advantages and disadvantages. You must understand them before starting to use them.

MA systems. There's a stack of freebie FX MA EAs out there. All of them backtest poorly. I mean they're crap. The futures and FX market move differently than the ASX stocks that you're getting familiar with. It's been mentioned that the US stocks move differently than the ASX stocks. This is because the two markets have a different mixture of participants. The FX and futures markets move differently to stocks because the major players are producers that are hedging their production and large commercial consumers that are hedging their costs.

Leveraged ETFs: Not much different to stocks just a lot more volatile. Great when it goes in your direction and sell when it doesn't.

 

[Warr87]

thanks @peter2. I always wish I was doing better, but then this is partly why we track results: compare your work to your backtests, and remind yourself that +5.7% in 2 months is good! Before I started looking at TA and system design, I was going to be happy getting 10% in my managed fund. If I can get 10% p.a. then it will prove to myself that I don't need to pay someone and I'm capable myself. As it currently stands, I do believe I am capable of getting greater than 10% returns and outperforming a managed fund. I think either 1 of my systems could get at least 10% in a year.

You are right that I haven't managed a portfolio through a bear market. While I can tell myself that I can do it, and stick religiously to my system, the proof will be in the pudding. Even now I avoid or ignore market analysis on the TV as I tell myself, "it doesn't matter, I only care about what happens at the close each week". I've even told mates this at work. I tell them the beauty of a weekly system where the only thing that matters is not where the price is mid-week, but rather where it finished on Friday. I can only hope I can hold this mentality in a 2008 event. I have backtested my systems through bear years, and 2008, and while they lose they still perform well. But if I lose 14% one month, and then another 10% another month, then gain 5%, then lose the next month .... that will be an emotional rollercoaster! No one wants to see that kind of hit to a portfolio. It'll be a little easier with my smaller account (ironically) but what's a $6000 loss on a $30,000 account? sure, it's a big hit, but not as much a $20,000 on a $100,000 account! I also like to remind myself that the year after bear markets my backtesting is phenomenal. Huge gains (like most trend/momentum systems).

I'm actually trialling 3 systems (I just haven't put up results for the 3rd). At the moment I am definitely favouring 1 over the other (system 2 over system 1). But even with that being said, I haven't given up on system 1. I still think its viable, even though I think I wont implement it. I think it will have to be reworked. It was my first system so not surprising it may not make the cut! I also want to trade 1 system on my personal money, and 1 system within a SMSF that I intend on starting (when I have a system I begin the process to start the SMSF). This is also partly why I started a 3rd system in the background.

@Newt is right, learning never stops. I certainly haven't. I mention the other instruments as I have a few ideas for other trading systems for other instruments (not including the other ideas for systems in equities that I have mentioned before). I have definitely been influenced by Clenow and his works and his rather simple momentum strategy, or even his MA crossover for futures. It would likely be 3-5 years, if not longer, before I started with any real money on those. Knowing this, I will eventually get proper data, backtest, and then forwardtest/incubate as I am doing now. But my first goal is, first and foremost, to be profitable and consistent trader with my currently designed systems.

You are definitely right about different markets moving differently. I know that any system I design for a US market will be different to an ASX system. Different participants, environment, etc., means different market forces and therefore different market behaviour. Whatever I design will be robust enough but still tailored to the market I want to be in.

So many possibilities .... but so little capital hahahaha.

I was actually rather ignorant in regards to leveraged ETFs. I knew you could use margin to buy ETFs, but I had no idea that some ETFs were already leveraged before you bought them. It certainly opens up a whole new realm of possibilities.

 

[Warr87]

System 1 back tested for previous 22 bars: -6.54%
System 2 back tested for previous 10 bars: -3.01%

Not a completely fair comparison. In both of my systems my performance includes my current Open PL whereas the backtests gave me those results based on final account amount. Either way, I appear to be performing a little better than my backtests. Sample period isn't big enough to make any real comments though.

 

[Warr87]

I flew back to WA the other day, and the flight from QLD to WA is long. I took the opportunity to finish one of my books (Trading in the Zone), and even got to re-read parts of other books I really enjoyed. I thought I would list the books I have read and think others should read if they haven't already.

In no particular order:

Nick Radge, 'Weekend Trend Trader'
Nick Radge, 'Unholy Grails'
Kevin J. Davey, 'Smart Portfolios'
Kevin J. Davey, 'Stock Market Investing for Everyone'
Kevin J. Davey, 'Introduction to Algo Trading'
Kevin J. Davey, 'Building Winning Algorithmic Trading Systems'
Andreas F. Clenow, 'Trading Evolved'
Andreas F. Clenow, 'Following the Trend'
Andreas F. Clenow, 'Stocks on the Move'
Mark Douglas, 'Trading in the Zone'
Robert Carver, 'Leveraged Trading'
Anna Coulling, 'A Complete Guide to Volume Price Analysis'*

I am a big fan of Clenow, and I think the first book I read was his 'Trading Evolved'. I have also enjoyed Davey's work as well. Radge is worth a read too, and I just listed to an old podcast of his which I also loved. *I have also been reading Coulling's book. I think it's good but I'm finding it's not for me. Those who like reading charts and are more discretionary will find her book more useful. As someone who has drifted much more towards mechanical/systematic, I haven't completely taken to her book.

I also have a road trip coming up so I went and downloaded some podcasts. After listening to a number of episodes, I strongly recommend people have a listen themselves!

https://chatwithtraders.com/podcast-episodes/

 

[Warr87]

System 1 (EMA Cross Strat):
Week 23:
Buy: DCN
Sell: AWC

Open PL has this system at 1.9%. Was surprised to see this system still positive as a number of positions closed a little lower this week.



System 2 (MAP Strat):
Week 11:
Buy: None
Sell: None

A LOT of sell signals. None of my heard positions triggered from these sell signals though. No buy signals due to my index filter. And none of my current positions were triggered with the current 10% trailing stop, however some are very close!

Open PL $3406 or +6.8% since inception



With a lot of driving the past couple of days I am getting through a lot of podcast's from ChatWithTraders. It's a great resource to hear others start and how they got to where they are now. A number of cautionary tales (it's surprising how many of them blew up there accounts!). Also good if you are after some new trading ideas. Plenty of different approaches to spark something.

 

[Warr87]

System 1 (EMA Cross Strat):
Week 24:
Buy: None
Sell: None

Fully invested. System is sitting at +2%. Nothing particularly exciting but at least it is accumulating more winners than losers. Though at 24weeks you would expect much more performance than this. Oh well.




System 2 (MAP Strat):
Week 12:
Buy: DCN
Sell: TGP

Plenty of buy signals. TGP triggered a sell signal so plenty of more opportunities to take its place. With the index back up, my index filter switches back on, thus my system will take on more trades when it has the positions to fill. It is sitting at 6.1% at the 12 week mark. The average profit % and expectancy are matching almost perfectly to backtests! This is obviously a good sign. 12 weeks is still probably a little early to call it, but system 2 is looking good.

Next week a few positions will be evaluated for a 'stale exit' so I may get an opportunity to let other positions take over.




As I have learned a lot since running System 1, I had the feeling that the system design was flawed from the get go. I think this is a normal thing when starting out. I still think the concept of an EMA cross has validity and haven't let go of this idea. But evidence is mounting that system1 may have been curve fitted or more subject to luck than I would like. For example, when backtested and starting this time last year, my system made huge profits as it caught a couple of big winners from Feb to April. More than enough to wait out the year. So that brings me to the predicament. Do I begin to face the music that System 1 is a failure, or do I chaulk it up to the unfortunate fact that I actually started to test this system as the market started to range (which is a killer for a trend system). I will continue to monitor it for the moment. Things to keep in mind, while I haven't beat the index with this system, I have also not gone into a drawn down and my goal that was set from the beginning was to stay alive. I have learned a lot too along the way. Another point, the system hasn't accumulated enough positions to inform a proper decision (sample size isn't big enough IMO).

A small note, I decided to slight modify (though still keep mostly intact) system 2 and applied it to other sectors (separate from the All Ords) and the system performs very well on those. I was just tinkering as I wanted to do a bit of coding and was curious. Good to know it is robust, and also that it will work on a wider universe (or rather, separate) of stocks.