Saturday, June 27, 2015

Three year performance review

The end of June marks the completion of the third year since I changed my stop rules back in the summer of 2012. The results achieved I think speak for themselves - despite getting into winning trades only a third of a time, and enduring a horrible run of losing trades last year the annualised return over the three years equates to just under 80%.

What makes the performance is that the average size of the winning trades is, in terms of R, more than five times bigger the average size of the losing trades. Proof that, even if you lose more often than you win, and providing you remained disciplined and committed, you can still come out ahead overall.

Central to that performance is strong risk control, as well as continuing to work on controlling my emotions and mental discipline.

Over this period, there have been periods of weeks at a time where my exposure may have been limited to maybe a single trade, or even some weeks where there was no trading activity at all. I don't seek to trade every day - only when a set up which meets all of my criteria gives me a signal, and all the other factors I look at give me the green light. I want to avoid trading for trading's sake. If that means I have to stay on the sidelines for a bit, then that's fine - I'd much rather do that than suffer chewing up my equity on a bunch of sub-optimal setups, or when conditions are clearly not favourable towards my style of trading.

While I am delighted with the returns, there is always something that can be improved upon - be it trade selection, risk control or mind control, or further increasing my trading efficiency. That is the goal going forward. You should never stay still - improving as a trader is a lifelong process.

People who chop and change from one system to the next never reach this stage - after a while they will change their approach and have to start from scratch again, whereas they may only need a small refinement to what they are doing. Most traders never even end up with a number of completed trades that would constitute a reasonable sample, from which they can review their results and put plans in place to improve and their returns. And if those traders do not have strong foundations (i.e. good risk control) and do not work to improve their trading mindset, the problems are magnified.

Who knows what the next three years will bring? I have no idea. But it will be fun finding out...


  1. Nice work! A few questions: What was your position sizing like when you started vs now with increased equity? Your turnover was much higher in prior years coincident with great results. Is there any relation here or have opportunities become less frequent? Your thoughts. Thanks, Barton ...enjoy reading your blog

    1. Thanks Barton - glad you enjoy the blog.

      My position sizing has remained the same in percentage terms, although I did mention in a recent post that if it started to become an issue then I may look to reduce it.

      You are quite correct about the volume of trades. I think it is partly down to a lack of opportunities in recent months, and this is also partly learning from previous experiences, such as going through a non-trending, higher volatility phase like Q4 2011

  2. How did you change the stop rules back in 2012?

    1. Hi Marco - I simply became even more aggressive in cutting losing trades - as a result the average size (in R) of my losing trades was significantly reduced. You will see on my trades list that very few of the losses suffered equate to 1R or more. It is set out in more detail in the addendum to my ebook.

    2. Thank you Steve, thats some great results.