Sunday, August 5, 2012

Weekend thoughts...

On Friday I commented that my recent run of good fortune probably won't last. 14 winning trades in a row, and 18 winners of the past 19. I'm not saying this to boast. I'm actually in a precautionary mode, trying to lower my (and to some extent your) expectations. All good things come to an end, as the cliche goes. I should probably just stop trading the rest of the year, but what fun is that?!! :)

An admirable suggestion was made that I track the recent performance of each system and bias my trading decisions toward the better performer. I've tossed this idea around in my head the past few days and have decided not to do that at this time. The main reason for that is the JT Composite system. The purpose of the JT Composite is to hedge bets and reduce risks. When you start pitting the JTS up against the CCI trying to find which one may perform better in the future, you're right back at square 1. There is no guarantee that recent performance has any bearing on the future.

I will offer more support for strictly following the JT Composite. The chart below represents the daily balance of my actual trading account. (It doesn't go back to Jan 1, 2012 because I'm not using my trading computer right now and don't have the numbers.) The % gain/loss does go back to Jan 1. I did not have the best January so the chart starts below 0%. I've marked where the CCI and JT Comp systems went live. Until the JT Comp system came online, every good stretch was followed by an equally depressing drawdown. As soon as I recovered all my money for the year, I went right back down. Now, I'm not saying the JT Composite system is perfect, but results so far have been outstanding.

The biggest reason for the increased returns has probably been a mean reversion environment vs a persistent trend. It will be interesting to see how my systems (and specifically the JT Comp.) perform when stocks move in just 1 direction. That has to happen sooner or later. For now, I'll enjoy what appears to be a 3rd wave up in my account. (Shout out to all the EW'ers!!) lol

Final thoughts: I went heavily short Friday so I'm back in the bear camp. It's odd flipping back and forth so quickly. It can really screw up your thinking. Just days ago, I wanted desperately for the market to rally.... Now I have to purge all those thoughts. Anyway, have a good remainder of the weekend. I'll be pulling for Tyson Gay tonight to take down The Bolt. Cheers!


  1. First, thanks J for the observations. As always, they're great food for thought.

    But, I do have a question. I'm trying to understand the disparity between your actual trading account and the returns of the J-Trader and CCI systems. Until June of last year, when the Composite System was inaugurated, your account was essentially flat for the year, whereas the J-Trader and CCI systems were each up around 35%. Could you help me figure this out?

  2. A,

    They were up ~35% by the end of June not the beginning. By then I was up about 10%. But you're right, I've been lagging my systems all year. The biggest issue I have is using 100% of my capital in a 3x leveraged fund. Honestly, I rarely find myself all-in. So I end up not catching all of the bigger moves. I may never beat my JT Comp system and I'm ok with that. I prefer the lower stress levels. My blood pressure is already high enough. :)

    Looks like I need to update the stats for Aug. Maybe tomorrow...Too tired.

    Oh, and props to the Bolt. Good race! My guy couldn't even muster a bronze. At least Gatlin produced.

    Thanks and good night.

  3. That makes sense.

    I'm interested in what you said concerning the JT Comp system's possible performance in non-mean reversion markets. Since you've done backtests, you could look at how it did between mid-December 2011 and around April 2012, which was a pretty relentless bull run.

  4. I think it did ok, but have a look for yourself.