A busy month

I have been pretty busy of late in my 9-5 job, but the portfolio, not surprisingly has been doing well. A few sells in the last month - OKN, SGX, MCC (the only unprofitable one) and ERA. OKN was the big winner in the group (up 137%) - see chart below. I put most of the money back into the market.



Also MCC;


Picked up a Nissan 350z (2006 model the dealer wanted to offload for an excellent price). I tried out a few cars, (Audi TT, Porsche Boxter, BMW Z4) but the Nissan has all that I want and I am not paying for the name.

I am listening to Rich Man's Blues by C.W. StoneKing "I ain't got to think about tommorrow because I drive a brand new car". The rest of the song is worth a listen!

Stevo

Small Caps Rule! (and another sell)

Out of Oakton on a profit exit (140% gain) - but it doesn't appear to be slowing down.

The Small Ords index has outperformed the All Ords by around 10% over the last year. Many people focus on stocks they know, many of them in the top 100. The biggest gains are in stocks outside the top 100 (ASX100) - those stocks we probably haven't heard of until they pop up in a scan of the entire market.

Stevo

System design, discretion and a load of fertiliser

When I designed one of the systems that I trade today back in 2002 / 2003 I used data from 1996 to 2002 when backtesting. One aspect of the system includes a profit exit - an exit that is triggers when the price moves up very fast. Incitec (IPL) did this not long after I bought it and the exit was triggered as shown by the $30.40 sell signal on the chart below.

When I developed the system I tested with and without the profit exit, and the equity curve was a little smoother with the exit than without, but there wasn't a lot in it.

The exit rarely triggers so I have been using some discretion. I didn't take the exit signal on IPL above. In this example it paid off. It is possible that this aspect of the system could be dropped altogether, but I will leave it in for the moment. A bull market is not the best time to take profits. The profit exit might be more useful in a less bullish envirnment - like 2000 through to 2002.

I bought into IPL at $26 (I must have been busy that week since it opened at $25.75) Now it is the biggest % and dollar winner in my Super fund portfolio - up 103%. The trailing exit is still valid. It does surprise me that a fertiliser company can perform so well! Who buys fertiliser in a drought? I guess I should stick to trading my systems and leave the fundamentals to those that understand them.

I have another profit exit signal for this weekend. I don't know how discretionary traders cope with all the decisions that would have to make.

Stevo

ALE property group (LEP)

Another sell.

Whilst I took a slight loss on the trade the dividends offset the loss for a slight gain. I sold LEP on Monday.

Stevo

Monthly Performance for 2007

I am sure that all the traders out there (and I use the term in it's broadest sense) are having a pretty good year. Adding up the monthly percentage gains I am up 31% on the portfolio, including cash in the bank (rather than shares) in the base. Obviously it's best not to leave money sitting in the bank in the current market.

In the Financial Review today (Wednesday 2 May 2007, Page 20) Barton Biggs, a hedge fund manager with a reputation, is tipping that the Dow Jones Industrial Average might rise by 19% this year and that "markets in general are going higher". To quote the Fin. "shares of the largest US companies were "very cheap" relative to other asset classes."

It would be nice if he is right. A blog devoted only to market predictions that people make would keep someone really busy! I have often said that the weather tommorrow is likely to be the same as the weather today, and often enough I am right - the weather does trend.

Stevo

% Gain in a portfolio after adjusting for cash movements

I have tried to get a % gain calculation up based on;
1. The amount in cash and shares at the start of the month,
2. Adjust for withdrawals and additions of cash during the month,
3. Determine the % movement in the portfolio after adjusting for the cash movement.

I get the following graphs as % gains / losses from the spreadsheet, although it is probably not correct to just sum the % moves.



The % gains of my portfolio on a monthly basis are shown below;


It's relatively easy for me to work this out now that I am balancing my cashbook and timing issues over time will be pretty irrelevant.

I better go and check to see if I have to take any action next week.

regards
Stevo

% Profit by trade

Continuing on from understanding my trading results I plotted % profit for all trades since Jan 2003 up to the 1st quarter 2007. The worst % loser in dollar terms was quite small since I use % risk based position sizing. The same goes for the biggest % winner!

What I did find interesting was that I worked out I was turning over my capital 2 to 3 times. So $400,000 worth of capital typically made over $1 million worth of trades in a year. I suspect that this level of turnover is quite low for a trader. For example in 2005 I closed out $1.274 million in trades for a profit of $141,000 (excluding dividends). I averaged around $400,000 of capital in the market so return was around 35% for the year, plus some dividends and bank interest. There were a couple of months in 2005 where I had most of the capital in the bank - as can be seen from this post:
http://drawdown.blogspot.com/2007/01/money-in-market.html

Stevo

Net Profit per Security, Equity Curves & other stats

The charts below are generated from my trading portfolio.


Since I add and subtract cash from my trading portfolio it's a little hard to give % return type figures. So I look at other statistics and graphs - like the equity curve shown above.

137 trades in a little over 4 years means that I am averaging 32 round trip trades a year. This means that I have at least 20 weeks a year where I just watch the portfolio.




Profit per security is an interesting chart above. I know that I stuffed up the KIM trade - my biggest loser in the last 4 years. I bought far to many by using postion sizing for my Super fund rather than my trading portfolio.

I will be happy to keep the win / loss ratio above 3. So far so good. I also am happy with the % winners I am achieving. I know that the systems I am trading could have produced better results. For starters I didn't (or couldn't) take the SMY trade....

regards
Stevo

Sun(land) sets!

I exited Sunland (SDG) yesterday for a 48% profit.

I held it for just over a year - as shown by the little yellow dot on the chart a couple of weeks back. The one year target isn't a big deal since I trade in a company, but at least it was a decent length trade.

Limiting the number of trades per week

Using some code Shutty found on Yahoo I was able to see the impact of limiting the maximum number of trades per week. I added the code in did an optimise and exported the results to Excel to get the graph above.

For a longer term system, like the one used for this test, it is possible to limit the number of buys to one per week and still get reasonable results.

With a shorter term system limiting the number of trades per week would have a bigger impact since the system needs to trade more - see the results for a 4 week system below.