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Archive for July 3rd, 2008

So one of the reasons why I was late in updating my strategies was an issue with my software – or at least I thought it was – turned out to be my dumb-headed operating of said software.  I had set my commission rate, somehow, to a flat dollar per trade, regardless of the number of shares.  Here’s the equity curve that came out for MR1:

Now, I was very confused to see the backtested curve of MR1 showing about 2x the returns of the normal system.  But it does serve to illustrate a point: namely that in systems that trade frequently with a small edge, you had better have a cheap commission structure or you will be eaten alive.  It also shows just how much of an edge can be taken by commissions – so next time you see someone showing you an equity curve without commissions, make sure you see what one looks like with them added back – you could actually have a negative curve if the edge or expentency is too small.

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Wow – what a June.  I’d like to apologize for being late on delivering this – between my job and my vacation, I just got behind and it usually takes about 2 hours to put together the information for the update.  Anyway, enough excuses – you’ll find the individual strategies pages (MOMO1, TREND1, MR1) have updated equity curves, statistics and current holdings. One update on commissions – all the trading systems below assume an Interactive Broker‘s-like commission plan – for these, it is .01 cent per share with a $1 dollar minimum.

MOMO1:

  • Return for June-08: 2.3% (does not include dividends)
  • Return YTD: 21.4%
  • Current holdings: UNG, DBC, OIL
  • Notes: Wow, dodged a bullet on this one with the rotation on 7/1 – we were in SLX and XME – both of which got hammered by about -9% each.  I’d love to say the system did that – but it was probably some element of luck.  It does, however, illustrate the point “he who lives by the Mo, dies by the Mo” – and points out why this portfolio is only used for a portion of all assets.

TREND1:

  • Return for June-08: 5.3% (does not include dividends)
  • Return YTD: 20.3%
  • Current holdings: UNG, DBA
  • Notes: TREND1 continued to do well – 5.3% is a great month anyway you look at it.  Not much to say about it beyond that.  It held PPA too long and got hurt but still managed a good month on the back of its continued holding of UNG.

MR1:

  • Return for June-08: -4.5% (does not include dividends)
  • Return YTD: 19.6%
  • Current holdings: See blog for position changes.
  • Notes: MR1 had a bad month – no way around it.  It was actually doing very well until the end of the month where it got confused and had several positions down heavily or hitting maximum stop loss.  While the number is bad, it is in the historical range for the system – so I continue to trade it.

Benchmarks: All my benchmarks are from Google Finance – so your results may be slightly different.

  • S&P500:
    • June-08: -8.34%
    • YTD: -13.66%
  • DOW:
    • June-08: -10%
    • YTD: -11.9%
  • Nasdaq:
    • June-08: -7.91%
    • YTD: -15.34%
  • IWM (proxy for the R2000):
    • June-08: -6.41%
    • YTD: -12.62%
  • EFA (proxy for developed foreign markets):
    • June-08: -9.67%
    • YTD: -14.29%
  • EEM (proxy for developing foreign markets):
    • June-08: -10.12%
    • YTD: -14.04%

By any measure another great month with market-beating returns in all portfolios – even MR1, which lost money, still out performed all the benchmarks.  So hopefully we’ll continue with a great July.  Have a great 4th of July holiday everyone and posting resumes on Monday!

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