A Shocking Comeback…

After feeling completely defeated from the beating I took in May (Thank you PUDA), I was happily surprised to see that I was in the Covestor.com top spot for the month of June with only 4 days remaining.  It’s a tiny consolation after the downdraft, as I'm still not back from the drawdown.  We’re once again on the “gain train”.

There are 170 models, so it feels good to occupy the #1 position once in a while.  And although I didn’t highlight it, if you look closely you’ll see I’m also in the #5 spot.

Good Trading…

Can I Trade the MultiStage Trading System

When I describe my trading strategy to someone, and especially if I share past results with them, one of the first questions I get is something like: "How can I get a piece of the action?" While I am very careful to tell interested parties that there is no guarantee the future will look like the past, there is a way to participate in the MultiStage Trading System. The answer is called Covestor.com.

I have mentioned several times that all of my trading activity is being tracked by a service called Covestor.com. It's very cool and allows others to follow along with what I'm doing. Most important for all SnapTraders, is that it doesn't require any additional work on the trader's part, or on the followers part.

Covestor.com has the ability to link directly to my brokerage account. Whenever I make a trade it is reflected in their system. Likewise, all of my performance history is based on my real trading account, and I don't have to do anything other than just... well... trade. It just looks at my account and reports my trades. I suppose this also prevents anyone from "doctoring" the numbers, since they are based on actual trades and I can't "mis-report" them.

Up at the top of the right hand column of this blog (quick, look now!) is a live performance graph. It compares my portfolio performance with the overall market (in this case the SP500). If you click on it, you can see more details about my portfolio. It shows actual trades, current holdings, and other performance statistics.

And now for the really cool part, and how you can participate: Anyone interested can open an account with Covestor.com and "mirror" my account. In other words, whatever I do happens in your account as well. People are able to link their accounts to the Covestor model managers in this way and have matched performance without doing anything. I've seen services before where you could get a list of trades and then enter them yourself, but this takes it a step further. It's really an amazing service.

How much money do you need to open a Covestor account and mirror the MultiStage Trading System? Covestor has several different levels for models and each has it's own minimums. The minimum for mirroring this particular system is $5,000. It's pretty reasonable. There is not advantage or disadvantage to account size, since all commissions are on a per share basis. And position sizing is calculated based on account size, so any amount form $5k and up will work just fine.

Good Trading...

A Personal Investing Note...

One of the questions I get asked from time to time is, "Do you invest your own money using your trading system?" There are many variations of this question that I've heard...

• "How much of your own money do you put in your system?"
• "Do you use Covestor.com?"
• "Do you trade real money with your trading system?"
• "What portion of your portfolio do you trade in this system?"

And a few others. The short answer is this: I keep virtually all of my liquid assets available to this trading system. Now... that might sound like a slippery answer (like what does available mean) to the question, so let me explain.

If you follow the system you will know that we spend a huge amount of time in cash. In fact, my money is actually in the market only about 1/4 of the time. But that's the system as I've tested and trade it. Sometimes prices are perfect for going "all in", and sometimes we have a lot in cash. As I write this I am 100% in cash, which is not unusual, especially during less volatile times. That's what I mean by available.

Trading is not the only way I invest. I have real estate, and other long term investments. But when it comes to investing my cash I practice what I preach... not because of any principle, but because I can't think of a better place to keep my cash. Bottom line, when I have extra cash it goes into my trading account for this system.

Good Trading...

Introducing MultiStage v7 Trading System

I have spent much time on this blog posting information about the MultiStage v6 Trading System, which I use to trade my Covestor.com model. Today I am ready to migrate trading to the next generation of the model, version 7. This updated model retains all of the characteristics and benefits of the previous version, but improves it slightly. As usual, a picture tells the story most clearly.

As you can see, the new version has many of the same performance numbers. Average gain per trade, win rate, and Sharpe are fairly similar. Improvement, however, is significant in two areas: CAGR and drawdown. The CAGR is a little blinding, and there are a number of reasons NOT to look at the overall number (I address these in other posts). Improvement in excess of 20% is real however. This happens mainly because we increased the number of trades, which ever so slightly increases the exposure. In short, we are able to increase the amount of time we have money in the market, which is earning at the same rate. Said another way, version 7 finds us more good trades than it's predecessor.

The other big improvement, and one I am much more excited about, is a 24% reduction in the Max Drawdown. That's big for those who want to sleep at night. How did we do it? As you can see, we are taking a few more trades, but something more must have changed if they continue to earn at the same rate with reduced volatility. This was primarily attained through a new position sizing algorithm which places a premium on risk. It penalizes position size when the edge is lower and rewards it when the edge is greater.

I will gradually introduce v7 trades into the Covestor model, increasing them as I validate the accuracy and quality of the system. This is normal with any system I trade. There is only so much you can do with computerized backtesting, and then the real money comes into play. I step into it very gradually, validating each trade manually, to be sure the system is working as expected. Only after many completed and validated trades do I increase the automation.

Good Trading...