The equity curve of a trading systems portfolio is a unique asset class. Starting on drawdowns is similar to buying dips in an individual equity or index. What makes this unique is the fact that the equity curve of the trading systems portfolio represents many markets taking long and short trades instead of a representation of the value of a company.
The Portfolio Calculator allows us to create trading systems portfolios as a unique asset class. It has been updated through August 9, 2024. This is an Excel tool that serves as a database for our trading systems. It allows "What If" scenarios to quickly calculate risk/reward outcomes for different combinations of strategies.
The Portfolio Calculator also includes strategy characterization filters such as:
1.) Trend vs CounterTrend
2.) Swing Trade, Day Trade, Session Trade
3.) Dont Trade On FOMC
*Slippage and commission factors ARE included to cover transaction costs.
*We do not trade all strategies all the time and the results are hypothetical.
This week is a prime example of having to be out of the office for something like outpatient surgery. In this case you may miss some gains or losses in a portfolio that was scheduled to trade live. This week we missed some gains. There have been other scenarios where we have missed losing streaks in the portfolio.
After missing a cycle of trading, we typically wait for a drawdown entry alert. This has been the best approach for us. The Stock Index Portfolio 18 had four equity peaks in a row from Tuesday through Friday of this past week for the week ending August 9, 2024. Starting live trading after a series of trading system signals that were tracked but not traded, can oftentimes line up with an immediate drawdown.
It is possible, winning streaks can continue but the goal is to reduce account volatility. Starting live trading after the portfolio of strategies being tracked (but not traded) goes through a series of losers, leading to a drawdown, is the approach that is used. This technique allows us to limit losses if a set of strategies starts to go through a worse case drawdown by using a portfolio level stop loss near the historical worse case drawdown level.
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