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System Lab: March 2012 Performance

The system closed the month of March with a modest gain (+2.5%).  With the exception of a few days, most of the market’s movement continues to be in the gaps, with relatively narrow intraday ranges.   Again and again the market gaps up/down and then just lays there.  Everyone seems to be guarding their chips and waiting for the other guy to make the first move.

So why all the caution?  My personal view is that the ever-looming Euro debt crisis has instilled quite a bit of fear into the markets and the retail investor (after loosing all of his home equity and most of his 401K) has run screaming, fleeing equities for the foreseeable future.  Thus, what we seem to have now is a listless market comprised largely of HFT bots trading money back and forth.  A zero sum game and a difficult environment for the retail day trader, to be sure.

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System Lab: February 2012 Performance

February saw the market continue its slow trickle up, “climbing-the-wall-of-worry” behavior.  Movement in the gaps and anemic intraday ranges were the order of the day, and unfortunately such an environment doesn’t offer intraday systems many opportunities.  The system’s equity curve saw most days coming in under +/- 0.50% and many offered no trades at all, leaving the system flat (-0.40%) for the month.  Yawn.

It seems this system is not alone, as a fellow algo trader friend of mine joked “Welcome to the $300 club!” after listening to me complain about February’s returns.  His system has been seeing anemic returns as well, yielding him pocket change of plus/minus a few hundred dollars a day (vs the thousands per day he was seeing last Fall).  I guess misery loves company, lol.

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System Lab: January 2012 Performance

January was a fairly moderate month and its limited volatility offered pretty slim pickings.  The system had some nice returns right out of the gate, but these were pared back as the month progressed and most days were under +/- 1%.  The good news is that the system was still able squeeze out a modest gain of +1.8% for the month.  Not earth shattering, but I’ll take it.

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System Lab: December 2011 Performance

December yielded some nice gains for System A, but it was a bit of a strange month.  Most of the movement (if any) occurred in the gaps, and thus the intraday range/volatility was almost non-existent, leaving the system on the sidelines much of the time. But fortunately there were a few decent positive days, with one nice outlier of nearly +9% that allowed the system to finish the month with an 11% gain.

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System Lab: November 2011 System Performance

System A didn’t give me much to crow about for November;  It ended the month flat at +0.5%.  The system started the month out with some nice gains, booking over +8%, but then was spanked by the market mid month and gave them all back.  The last two weeks of the month offered the system very few trades and it sat on the sidelines for nearly seven straight trading days.

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System Lab: Trading System “B” Backtest

In a prior post I discussed the performance of a system I’ve been trading live for over two years (and whose algobot is running as we speak).  For the purposes of this discussion, I’ll refer to this system as “System A”.

As mentioned in the post, System A performs well but has a known weakness: It is very susceptible to Black Swans (outlier market shocks) and can generate some uncomfortable drawdowns when they hit.  The system usually recovers from these drawdowns reasonably fast, but they’re certainly no fun to sit through when you’re trading with real $$$.

These Black Swans seem to be hitting the market with increasing frequency, so after surviving the most recent crash (August 2011), I started experimenting with a variation of System A (we’ll call it “System B”) that temporarily moves to the sidelines the moment it senses a crash is imminent.

The backtesting results of System B are encouraging.  Here is the equity curve from an 8-year trading simulation run (click to zoom):

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System Lab: Live Intraday System Details

I’ve been trading an intraday system live (with real $$) for just over two years now.  Its based on mean reversion principles with a few extra wrinkles of my own design.

Here’s my live actual net returns as of yesterday (click to zoom):

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