The first chart shows monthly performance based on open equity, whilst the second chart shows quarterly performance of closed trades.
Both charts show 2 views of the same portfolio. The closed trades chart (although the yellow bars of the chart include any open trades in mid December) is similar to the charts that TradeSim generates. The chart only looks at closed trades. It ignores the daily gyrations of the portfolio and only looks at profits made when the stock was sold.
So the top chart shows how much was given back before profits were taken, whilst the bottom chart totals profits made on closed trades. It's hard to imagine that the charts show the same portfolio and that the data was taken from the same source.
I am really only concerned with the closed trades profits. Note that the bottom chart shows quarters whilst the top chart is in a monthly time frame. I prefer quarterly (or yearly) charts, since I am looking long term performance.
stevo
3 comments:
I try and implement a strategy I classify as conservative/hyper.
I attempt to be extra conservative with the risk on closed equity for each trade (I do this very well), but hyper aggressive in regards to open profit on each trade (I do this less well), this means ideally never raising the intitial stop or closing the trade before the end of the day for my day trades.
My testing says that even though it's tough psychologically to give back lots of open profit in the long run you will end up ahead doing this as the name of the game is not to chop off your positive tails.
Those open equity draw downs look very reasonable for a trend follower, 12-13% or so is just sweet if that's all you get. The bull market corrections have been sudden, sharp and over relatively quickly in the last four years, the real tester of a long only trend follower will be a grinding bear market, something I haven't traded through as of yet.
Interesting post, thanks for sharing.
Andrew
www.humblemoney.com
Thanks for your comments Andrew. I find it really interesting that the 2 graphs I posted paint such different pictures.
The real test is going to be how a trader goes over 5, 10, 20 years plus. Long term results, whether a day trader or a trader using monthly charts, is what it is all about.
Hopefully the advantage a longer term trader has is that they are looking at the bigger picture when it comes to performance, whilst a day trader may get discouraged rather quickly.
Your post on the Return of Volatility on your blog highlights the current uncertainty of the markets.
stevo
Yes well said. Results are what really matter.
I regard your results and time frame as having a quality advantage over day trading results as well in that there is a screen time and stress factor to consider as well.
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