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250K Trading Systems Portfolio Update - Reset for January 2024 - Four Factors to Adjust and Reset



We go over some weekend research on this cold Martin Luther King holiday Monday in January with blizzards in the north and snow and sub-freezing temperatures in Dallas, Texas.


The Stock Index Portfolio 27 held worse case drawdowns while the Portfolio 53 did not and will be "reset" and adjusted.


We are "resetting" our live trading systems portfolio for 250K accounts based on four factors:

1.) The "Dead VIX" environment

2.) Worse case drawdown (but still profitable in live trading in January)

3.) Out of sync with hypotheticals (but still profitable in live trading in January)

4.) New research - New portfolio


The first three factors are discouraging but the last factor, the latest research and new portfolio, is encouraging.


One - Dead VIX Environment

The VIX continues to have some of the same characteristics that it did at its lowest VIX levels in 2017. It is difficult to trade momentum in a dead VIX environment. We go over historical regime changes and volatility patterns. We don't want to predict that the VIX is about to expand before it does. We prefer to trade what is working in a low VIX environment instead of staying with strategies that are highly profitable in higher VIX environments while losing when the VIX remains low.


Two - Worse Case Drawdown on Portfolio 53

We released Portfolio 53 on December 12 in anticipation of starting on a drawdown and the potential "energy" in the New Year. The low VIX has persisted into 2024 and we endured a worse case drawdown, after starting during a drawdown alert. We were able to exit on the bounce with slight profits on the year so far as of January 12th. Once a portfolio makes a worse case drawdown, you have to protect against degradation and a "broken" portfolio setup.


Three - Out of sync with hypotheticals

The trading system signals between research platform and live platform as well as automation errors and synching up again have been greater than normal. While we are slightly up on the year through Friday, January 12th, the fact that we have some new research, enables us to reset and move forward.


Four - New Research, New Portfolio

We are encouraged that making a minor adjustment of removing six strategies and adding three strategies, without adding any new strategies or optimizing or changing parameters, gives us one of the best portfolios to trade with respect to Net Profit over Max Drawdown that we have seen in a while. We look at how poorly Adaptive Moving Average has worked in this type of market environment with multiple reversals and losing trades intra-day.


Conclusion

It is critical to wait for a hypothetical drawdown entry alert of at least 10K before we start live trading. The New portfolio had four days in a row of equity peaks through January 11th and went into a 2,645 drawdown on Friday, January 12th. This represent a strong portfolio in a low VIX environment and the recent runup is due for a "cooling" cycle. We will work to enter on an intra-day or end of day drawdown of 10k (or 7,400 more that were it is now).


Profits since August 2023 have been small as we work to sync up with 2017 VIX characteristics and get more out of sample results by transitioning to a portfolio that works well in low VIX and high VIX levels.


​Trading is hard and it is easy to get discouraged. It has always been challenging to actively day trade such low VIX environments. Research allows us to remain optimistic as going through many cycles of change has enabled us to find a portfolio that is one of the strongest setups for a range of VIX environments (low, medium, and high) with a 12,123% Total Profit/Drawdown in the hypotheticals going back to 2008.

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