Saturday, November 26, 2011

Meta-Trader - Forex Robots 2012

Welcome back Meta-Traders. Happy Thanksgiving to all my readers and wishing you the best of the season!

This week I’m taking a break from the weekly Forex Robots performance horse race commentary and instead focus on my Forex Robots portfolio line up for 2012. Here are the objectives of this exercise:

- Reward and/or add-to the winners
- Cut and/or eliminate the losers
- Consolidate accounts
- Maximize capital growth through use of a deposit bonus
- Include a Worst Case scenario based on Monte-Carlo simulations. This is the point at which we will stop trading the system.

A quick word on what I consider “winners” and “losers”. A winner is an account that has performed according to expectations and behaved consistent with other instances of that system traded elsewhere. A loser is an account which has not performed to expectations or has not traded consistently with same accounts elsewhere, or accounts for which I have no basis for comparison.

Now let's go through each account and comment on its status:

Atinalla #1 had an excellent year and I’m going to add about $1300 from my FXDD deposit to this account to bring the account total up to about $4000. Worst case scenario based on Monte Carlo simulations is a loss of almost 40%

Next up is Atipaq Full Portfolio which was up nearly 59% and has performed consistent with expectations, so I want to add to this one. Where will I get the money from? Read on. It is important to note that Atipaq Full Portfolio has a worst-case scenario loss of almost 85% which is pretty high.

Both Megadroid and FX-Regression had sub-par years. Megadroid has been a disappointment 2 years in a row and both it and FX-Regression suffer from adverse risk to reward ratios. But at the same time, I don't want to totally give up on these systems just yet. So here's what I came up with. Each account has about a $1000 balance, so I will close the one and transfers the funds over into to Atipaq Full Portfolio bringing its balance up to about $4200.

As for the other account, I'm going to continue to trade Megadroid, plus FX-Regression on USD/CHF and USD/CAD. This way I can keep these 3 together and isolated from the Asirikuy Portfolios and NFA compliant with none of the systems fighting with one another. Since I am consolidating the Megadroid/FX-Regression accounts down to 1, it effectively halves the amount of funds traded and demotes their contribution to my overall performance. Worst case loss is 50% of the account based on my own limit.

Next up is Atinalla FE.

Atinalla FE is a good system and has performed fairly well this year, though nowhere close to my 30-60% target. Part of the reason for the underperformance is that the system itself is not NFA-compliant, yet I’m running it on an account which requires NFA compliance.

I considered adding Atinalla FE to my Atinalla #1 account which runs on FXDD and can therefore handle non-NFA compliant systems. But in combination with the systems in there already, its adds too much risk. So my plan therefore is to close the account trading Atinalla FE, and transfer the funds over to my existing account running Atinalla #3.

Next we have Atinalla #3 which has not performed according to expectations. Similar accounts on Asirikuy are all up at least 20%. I’ve concluded that this difference in performance is due to the USD/JPY instance which is performing poorly when compared to the USD/JPY instance included inside Atipaq Full Portfolio. So I’m going to adjust the parameters on USD/JPY to match Atipaq Full Portfolio and go on with the new funds into 2012. Worst case scenario for Atinalla #3 is a loss of about 54%.

Finally we have Atinalla #4. This account has been a disappointment and is not trading consistent with the other AT4 systems on Asirikuy. Also, the account is under capitalized and shares several system-pair instances in other accounts I’m already trading. So I plan to scrap Atinalla #4 and add funds to start trading a new system. In the course of that, I also add a new account bringing my total number of FXDD accounts to 3.

FXDD Account #1 will run Atinalla #1 portfolio and have about $4000 for starting balance.

FXDD Account #2 will run COATL USD-Centered Account and have about $4500 capital to trade. A 11-year simulation shows an average annual return of nearly 57%, but a maximum drawdown of as much as 30%. This portfolio is going to take a lot of patience and long term perspective to trade, but I have an excellent shot of making my long-term performance objectives. This system has a maximum worst case loss of 34.6% of the account.

FXDD Account #3 will run COATL H1 portfolio and will have about $3660 to trade. A 12-year simulation shows an average annual return of about 52% per year with maximum drawdown of about 24% and a worst-case loss of 34% of the account.

Both COATL account are going to be very difficult to trade psychologically and will take a long-term perspective to be successful.

Here is a summary of the new asset allocations:

$4000 - FXDD - Atinalla #1

$4500 - FXDD - COATL USD-Centered

$3660 - FXDD - COATL H1 portfolio

$4200 - - Atipaq Full Portfolio

$1050 - - Megadroid EUR/USD and FX-Regression USD/CHF and USD/CAD

$3419 – – Atinalla #3

Total accounts now 7, after restructuring, 6. I’m adding one FXDD account bringing the total FXDD accounts to 3. At the same time, I am deleting 2 accounts bringing the total account across both brokers to 6.

Total funds now, nearly $13,000, total funds after restructuring about $20,000.

Let’s see how it goes. Take care all.

Saturday, November 19, 2011

Meta-Trader - Tale of 2 Robots

Welcome Back, Meta-Traders.

It was the best of times, it was the worst of times we might say about this past week. You'll see what I mean when I get to the Forex accounts. That said, it was a rough week and we look losses on both the Forex and Equities side.

The super-committee on deficit reduction deadline coming up on Monday loomed heavy on the markets with Republicans and Democrats as polarized as ever.

It begs the question, if the full House and Senate can't agree on how to reduce the deficit together, why would 12, highly partisan politicians be able to pull it off? What about the 'Sequester' automatic, across the board spending cuts? Will congress actually let that go ahead? It brings up a lot of questions, and that equals sell.

Europe did us no favors either this week, but it shines a light on the fact that things are pretty dysfunctional right here in the old USA, never mind what's going on in Europe.

My Amazon position turned against me. I failed to sell the calls last week at 9.60 as I planned, and the position turned hard against me and I'm down about 16 points. Ouch. Surgical Equipment maker Mako Surgical sold off hard and I took a hit on that as well. Double ouch.

On the bright side, my OIH 130 calls expired worthless and I collected $660 per account on that one. Offsetting that somewhat was my AKAM Nov 30 calls expired worthless, lost about $220 per account on that one.

Interesting development in OIH, the ETF is re-organizing and I have received an offer to exchange these shares and exchange them for new shares as of about mid-December. Important to note since I can't have any short calls against the shares during this transition. Pharmacy Benefit Manager SXCI continued to recover from its sell-off and close the gap.

As for the robots, let's go from worst to best.

Atinalla #4 continued to draw attention. On the bright side, the USD/CHF instance took a nice winning trade. On the bad side, I had a nasty string of 5 consecutive losses across Teycanani, God's Gift, and Sapaq. These system are supposed to offset each other, but instead they all lost as a team. I checked Asirikuy and this performance was matched across the other instances. That all added up to just over 11% lost in one week, nasty.

More importantly, I had a breakthrough on this account and that is the the starting balances are way off. I went through the systems and found that the starting balances are in the $2600 range. I never traded this account with that much money, so this seems like an obvious problem and is another reason why this account is getting crushed. More to come on this and another reason to stop any further trades until this is worked out.

Megadroid had a large losing trade and cut its yearly take from 16% to 9% in one fell swoop.

On the plus side was Atipaq Full Portfolio which gained a stellar 9% on the week and is up an impressive 51% on the year.

On the development side, FXDD paid me the 5% deposit bonus. What other business gives you a 5% up-front bonus on deposited funds other than the forex industry?

And that's enough for 1 week. Enjoy your weekend.

Saturday, November 12, 2011

Meta-Trader - The Slop and Chop

Welcome back Meta-Traders.

It was a wild week in world markets. US equities gapped back and forth, but closed positive on the week despite a 3.5% plunge on Wednesday.

Events in Europe ruled the day with a power shakeup in Italy causing a spike in Italian Interest rates. Political theatre continued in Greece and was described in an interview with Niall Ferguson on Bloomberg radio as "more farce than tragedy."

Equities were positive and I didn't do much. I've had my eye on Amazon since it plunged back to $200 after earnings. Since then its been climbing back, coming ever closer to closing the gap at $225 but still well off the all-time high of $246. It traded strong on Monday and Tuesday and finding support at about $215. Wednesday's opening gap down brought it under $215 and I went long 100 shares in each account just south of $215.

This turned out to be a mistake since AMZN moved lower on the day. I learned something here which is if you are going to trade against the general direction of the market, don't do so first thing in the morning. Wait for the day to play out since, if the direction of the day continues, you will like get a better price later in the day. Anyway, I stuck with it and it closed the week above $217. I'm going to let it go a few points higher, then sell to open the Dec 220 calls at $9.60 or better.

Also on the plus side, we had a nice recovery in the shares of pharmacy benefit manager SXCI. We also had a nice bull-elephant candle with a breakout to a new all-time high in health care cost containment stock HMSY and I'm loaded long in that stock.

Forex Robots were positive with gains in all accounts except for Atinalla #4 and FX-Regression. One interesting observation is that Atinalla #1 had winning trades, but the lot sizes were small, just 0.01 when earlier in the year it was trading 0.02 and even 0.05. I think this is due to the lot sizing algorithm and the relatively high level of the ATR.

It also raises the issue of account capitalization, and that at certain high levels of ATR, the account can appear to be under capitalized and it holds back the performance of the system. At certain dollar amounts (say less than $1000) it makes more sense to trade a 'penny' account. Well it turns out as the ATR increases, the amount of $ needed to exceed 0.01 lots increases as well. Help is on the way, however, as plan to add funds to all accounts shortly as soon as FXDD finds the 5% deposit bonus they promised me.

Atipaq Full Portfolio continues to chug along moving its way upward. Atipaq is probably my favorite system overall because of its simplicity and universality - it works on so may different currency pairs. Megadroid also took a pair of winners.

FX-Regression continues to disappoint. This system suffers from a number of problems and I'm getting close to throwing in the towel on live trading. This is worthy of an entire post - to analyze the failure and try to learn from it.

My AT#4 account had a bad week as well. First, it had a string of losing trades in both God's Gift ATR for both EUR and GBP pushing it deeper into the hole. Secondly, it stopped reporting to MyFxbook on Tuesday 11/8 and my efforts to restart it thus far have failed. I'm pretty close to pulling the plug on this portfolio, and re-positioning it for 2012 with more funds and a new system, probably of the Coatl portfolios. Failure is part of the business and I don't want to let these systems do any further damage on what has been a positive year overall.

That's all I have for your now. Enjoy your weekend and go do something you enjoy, preferably outdoors.

Saturday, November 5, 2011

Meta-Trader - The Wash and Rinse

Welcome back Meta-Traders.

It was a wild week in equity and currency markets. Last week's euphoria regarding an agreement among Euro-zone countries was thrown into doubt when Greek Prime Minister Papandreou made a shocking announcement that the Greeks would hold a referendum on the bailout plan itself.

This shocking news trashed Equities and brought funds flooding back to the USD. The EUR/USD tells the story perfectly. Last Thursday's rally in EUR/USD broke the 1.40 mark decisively to the upside setting up up for further gains, right?

Wrong. News of the referendum trashed the rally and EUR/USD sold off right back to the bottom of the range and found support at the 1.36 level before closing the week at 1.3790. It was a setup for the EUR longs, the false breakout followed by a throw-back of the breakout and then some. Shows how hard it is to trade currencies manually and why I don't even bother to try.

I did make a few trades this week and we had some good action with the Forex Robots, so let's get to that.

I was feeling pretty bearish on Monday and felt that last week's rally had gone too far, too fast. So I bought 1 of the SDS Nov 19 calls in each account for about $2.15 or $215. SDS is the Proshares double-short ETF - so this is a derivative on a derivative. All I can say is - is this a great country or what?

Anyway, that trade worked out and I sold the contracts a day later for $305 or about $80 profit each, but after E*Trade's $11 commission each way, only $58. Some day, I'm going to grow up and get Interactive Brokers or Tradestation where the same trade would cost me 2 bucks.

One more thing about this trade - why just 1 contract? I seem to have a psychological block about playing the short side. For some reason, I have a hard time making money on the bear side. Perhaps its because the odds are against me in that stocks rise about 66% of the time. But stocks fall faster than they rally, and to become an all-season trader, I have to learn to embrace the bear.

We got some supportive words from the US Fed on Tuesday, and a surprise rate cut from the ECB on Thursday which helped stocks to recover. Late in the week, I noticed some constructive price action in Akamai (AKAM), so I bought 2 of the Nov 30 calls at about 0.95. We got some follow-through and the contract closed the week at 1.05. Will try to sell these next week in the 2.0 to 2.5 range.

Forex Robots had a bang-up week, with nice gains is most accounts. The star of the week was Atipaq Full Portfolio which picked up about 7% for the week and is now up 40.18% on the year.

Atinalla FE had a solid week, up about 4.5%. This system had 3 winning trades in a 2 day period which is unusual to say the least. This system traded well in the face of the steep selling in EUR this week, taking 3 consecutive winners on the short side.

Megadroid Live picked up about 1.5% on the week. Since the Margin level went to 1:50, Megadroid no longer doubles its size after a loss. This makes it a safer system to trade overall.

Most of the other accounts were a disappointment. FX-Regression took a pasting with all this directional action and lost about 6% on the week.

All of the Coatl portfolios lost, since they were setup for further upside in the Euro, which didn't turn out as expected.

On the development side, my new FXDD Account is open and funded. More to come on that.

Enjoy your weekend.