Annual Compound Return: 51.43%
Total Trades: 46
Winners: 35 of 46 (76%)
Avg Return per Trade: +1.12%
Profit Factor: 1.63
Breakdown
Long Trades: 27
Winners: 20 of 27 (74%)
Compound Return (Longs only): + 27.76%
Avg. Return: +1.03%
Avg. Return (winners only): + 5.01%
Avg. Return (losers only): -8.28%
Worst Loss: -44.36% (ouch)
Best Gain: +11.90%
Profit Factor: 1.32
Short Trades: 19
Winners: 15 of 19 (79%)
Compound Return (Shorts only): + 35.41%
Avg. Return: +1.86%
Avg. Return (winners only): + 3.55%
Avg. Return (losers only): -4.45%
Worst Loss: -8.36%
Best Gain: +8.69%
Profit Factor: 2.90
All returns above incorporate whether the system was 50% or 100% invested. For example, if the system went 50% long at TNA 40 and sold at TNA 44, it does not get credit for the full 10% gain.
At first glance, it appears my system did better shorting the market and I suppose that is true. But if you play the "what if" game and pretend that 1 bad trade in August didn't happen, my system would've returned well over 110% for the year, the majority of which came from the long trades. Remove that 1 trade and the profit factor for all long trades would've jumped up to 6.60!!! (Which is an insane number). I introduced stop losses in August, so eventually this weekend I will calculate some stats assuming I had stop loss rules in place all year (done - below).
Here's a fun chart tracking my actual trading account throughout 2011. You can see I couldn't keep up with the 51% performance of my system. But after August, I was happy just to finish in the black. I remember praying several times back in Aug. Looks like it worked! :)
Hypothetical August Stop Loss case. CAUTION...almost unbelievable results ahead. :)
If we had the stop loss rules in place in the summer, half of the long trade initiated in July would've been stopped out on July 29th when my model flipped to unhealthy status. TNA closed at 72.71 that particular day. The other half of the trade would've been sold at 44.15 on Aug 11. Stopping half the position at ~72 results in moderate damage versus severe damage like we experienced. The trades that followed in mid-late August were nothing short of amazing (as can be seen in my chart above) and the total loss in August would've been a paltry -6.61% versus the actual -29.44%. Obviously this makes a world of difference. The account at the end of August would still have been up over 41% for the year versus the actual 6%. The difference by the end of the year would've put the system up 100.4% through December versus the actual 51.43%! Like I said, almost unbelievable. So far, my system has flipped to unhealthy status before every recent crash. The process by which a market tops before crashing leads me to believe this stop loss feature will protect assets in a similar fashion in the future. The outlook appears bright.
All-in on the first signal scenario...WARNING...UNBELIEVABLE RESULTS AHEAD :)
Taking a 50% position on the first signal, followed by going all-in on a second signal was a terrible strategy in 2011. While playing with smaller amounts of capital might have lowered my stress levels, it substantially lowered profits... SUBSTANTIALLY!!!
Here is a profit curve with a $10,000 initial investment.
Your eyes are not deceiving you...that is a 268% gain for the year!!!
Late November had back to back losing trades that were pretty big, but by far the biggest blow to the system came in August when it gave back almost 50% on that 1 trade. Can you imagine if I plotted this curve using the stop loss rules? Let's do it!
The loss in Aug is marginalized and the system returns 387%!
I'm going to give my 50% / 100% strategy a few more months to prove its worth before I completely scrap it. But with a profit curve like that, I can't see sticking with it much longer. Especially now that stop losses are built in.
Market Health Section
I've described how I determine market health several times. I only use market health as a qualifier for my signals, but that doesn't mean it can not be used for long term buy and sell signals. Here is a chart showing when my model flipped from healthy to unhealthy and vice versa. Assuming a long only SPX strategy with no leverage, it would be about a 5% gain for 2011.
Last but certainly not least - Strong buy and sell signals. (Defined as when both healthy and unhealthy modes are generating the same signal.)
There were 29 signals that were strong (either buy or short). There were 23 winners, 6 losers for an 79% win ratio. Of the 6 losers, 5 were very mild. The 1 major loss came in the summer. Check out this profit curve assuming you only traded strong buy/short signals using a 100% positioning strategy (TNA).
That's a 200% return despite losing almost half the equity from 1 trade in July. Looking closer at that bad trade, the strong buy signal bought TNA at ~80 on July 14th. A week later TNA was up around 85. So the buy signal was decent, the problem was my system failed to generate a sell when it should have. Neither buys nor shorts had an edge. All strong signals (long or short) should be followed. One possible strategy since strong signals are rock solid is to use 100% positioning for strong signals and 50% for regular signals. Food for thought...
Thanks for reading!!! Let's see if the system can keep producing these kinds of results in 2012. Insert standard disclaimer here about how past results can not predict future performance, and trade at your own risk, etc, etc.... Happy New Year and God Bless!!
To view all the raw signals, click below. On the ensuing page, scroll halfway down and click the gray "Download This File" button.
2011 Signals Excel Spreadsheet
Sorry these links are broken!!! Email me for files!
As a fun extra bonus, here are the old 2010 signals. Keep in mind, the system was still in its infancy in 2010.
2010 Signals Excel Spreadsheet
Sorry these links are broken!!! - jtrader21 at gmail dot com
