More MSv9 Trading System Data

In my last post I shared the launch of a significant update to the MultiStage Trading System.  The back-tested results from that post were actually my out-of-sample test, which was from 2012.  Results from the prior 11 years were even more impressive.

	Version 8	Version 9
Max Drawdown%	36.82%	22.81%
Sharpe Ratio	2.95	3.30
Ulcer Perf. Index	66.13	103.97
Worst Month	-16.7%	-11.0%
Annual Return %	297.57%	315.51%

As mentioned last time, risk management is the primary benefit of the update, but overall reward is not penalized for the extra measure of caution.

Good Trading…

MultiStage Trading System Version 9 Coming Soon!

It’s time for an upgrade!  I’ve alluded a few times in this blog, and the SnapTrader blog, that I am working on improving the MultiStage Trading System.  That’s an ongoing effort and will likely continue.  The latest revision (version 9) is a substantial upgrade.  It incorporates some new criteria for the development of signals, as well as a slight change to the exit rules.
Before I go into the changes, let me first share some of the results.  There are a few reasons why I like this version better.  First and foremost is risk management.  Version 9 incorporates a simple dynamic stop that protects us from the extreme downside.  I haven’t been shy about my concern with stops.  For the most part stops have always hurt us, both in returns risk management… until now.
The results show the benefit of the new system by trimming drawdowns, and improving risk/reward measures immensely.  For example, for the 2012 trading year compare the numbers below:

	Version 8	Version 9
Max Drawdown (trade)	35.14%	28.21%
Sharpe Ratio	2.19	2.62
Ulcer Perf. Index	27.67	32.97

It’s pretty clear that we’ve improved the risk management, but what about performance.  I’ve added another row to the table with the total return for this year, through 11/26.

	Version 8	Version 9
Max Drawdown (trade)	35.14%	28.21%
Sharpe Ratio	2.19	2.62
Ulcer Perf. Index	27.67	32.97
Net Profit%	59.51%	58.74%

Now, please don’t get silly and expect you can duplicate these returns.  There are many reasons why it’s virtually impossible to match them exactly, but I’m sure it’s easy to see why I much prefer this latest version to the trading system. There is very little difference in return, yet measurable risk improvements.
The signals for this new version will go live on 12/1/2012.

New Exit

All of these improvements come with a price.  It’s not required, but without using this new exit back-tested results are much closer to the version 8 results.  It’s a simple exit, but does require a daily look.  Here is the rule:
If the stock’s closing price is below the 200 day simple moving average, enter an order to exit on the open for the next day.
That’s it. It’s simple, but it does require you to assess this each day.  I find that the easiest way is to just click through my positions with the 200-day MA line on the chart.  If you have been following the system you will know that there are rarely more than a few positions, so this isn’t really a big time sink.  And again, it’s not required, but without it the improved results don’t test out.
Good Trading…

October Trading System Results

Happy Halloween! It’s time for an October wrap-up the day after the biggest candy eating day of the year. 

Both statistical and implied volatility remained low, as it has been in the past few months. In fact, as I reported last month, volatility is about as low as it’s been in the past five years. This isn’t a bad thing, and in fact has been mostly good for that long buy-and-hold part of your portfolio, but it’s not the greatest for our trading system.

The MS8 system thrives on volatility, so when its slow, we don’t necessarily lose money, but it’s also not very active.  October had a nice little bump in volatility starting around the 19th, and in fact about 2/3 of our trades took place just after this.  Aside from that it was still pretty quiet.

Our overall exposure was about as low as I have seen, at just 9.35% (meaning that’s how much time we had cash in the market). Below are a few of the key statistics:

Net profit for the month	5.87%
Total number of trades	14
Average return per trade	2.54%
Win ratio	71.43%
Exposure	9.35%
Total time invested	Less than 10 minutes a day!

Low volatility means fewer trades.  The average return per trade and win ration was just about typical for the system, so we just needed some more trips to the plate. As I said last month, we could really use some volatility! All in all, it’s hard to complain about a 5% month, however, and if I can do it with only 9% exposure it’s even better.

Good Trading…

September Trading System Results

Volatility continues to be soft, as in recent months.  In fact, volatility is about as low as it’s been in the past five years.  As you can see by the picture below, there are only a couple of spots that have rivaled this one.

Implied volatility isn’t making the future look bright either.  The VIX is also at it’s lowest point in the past 5 years or so:

Why all this talk about volatility? As you may remember from past articles, my own trading model, the MS8 Trading System, depends on, and even thrives on, volatility. All this “calmness” spelled a stinky month for the model.

Our overall exposure was lower than usual, at just 11.46% (meaning that’s how much time we had cash in the market).  Below are a few of the key statistics:

Net profit for the month	-1.73%
Total number of trades	14
Average return per trade	-.74%
Win ratio	57.14%
Exposure	11.46%
Total time invested	Less than 10 minutes a day!

At the end of the day, the small number of trades and low winning percentage tells the story.  With such a small amount of trades, the law of averages can’t work in our favor.  It only takes a bad trade or two to mess up the month, and that’s exactly what we had.  Hey guys, we could really use some volatility!

Good Trading…

August Trading System Results

August volatility settled down quite a bit, so overall results were somewhat typical.  The VIX high-point was the beginning of the month, and it just hovered in the teens from there.

An interesting side-note is that volume in August was down significantly.  The trading volume on most major indices was down 10-15% from last month, and was the lowest we have seen in several years.  Is it the calm before the storm?

Regarding my own trading model, August turned into a nice month for the MS8 Trading System. Our overall exposure was lower than usual, at just 7.55% (meaning that’s how much time we had cash in the market), and we ended the month with no open positions.  Below are a few of the key statistics:

Net profit for the month	6.61
Total number of trades	13
Average return per trade	3.31
Win ratio	84.62
Exposure	7.55
Total time invested	Less than 10 minutes a day!

Most notable was the high win rate. Out of a total 13 trades, 11 (84.62%) of them were profitable. This is much better than our average win rate, so we’ll take it when we can get it.

Good Trading…