Historical Draw Downs to the system and comparisons to this
trade
Here's the 4 max draw downs to the system:
-10.04%
-8.7%
-7.8%
-7.7% (current Trade)
Right now the current trade is the 4th highest draw down.
Not that it makes it feel any better or hurt less, but this
current trade is still only the highest drawdown.
Every one of the draw downs have been winning trades in the end,
that doesn't mean this one will be. I'm just pointing out
stats. I will look at it more in the weekend and may do a
newsletter specifically for the SPY system
Posted by traderdavek on 9th of Aug 2011 at 10:00 am
What has worked for me is to hedge a position (long SPY with 3x
inverse SPXU) when I see the trade going against me. I'll
remove the hedge if and when the trade comes back.
Unfortunately, I did not do this soon enough in the current
min-crash.
Doing something similar with the same instrument but day trading
on 5 minute charts which is the only way one could get positioned
once the freefall started. It is the only thing that has allowed me
to hold on to my position and compensate somewhat for the drawdown.
This has been a real learning experience on getting a grip on
emotions. It has been stressful, I've had to trade furiously around
the position. You have to be pretty disciplined with taking profits
on a hedge as you don't want the trade to go against you and turn
into more losses, but then you have to hedge again as major support
areas get taken out. The only complaint I have is that I am
supposed to be on a holiday!
Vida, yes I've been doing the same -- hedge trading around the
position and it's been intense although worth doing. It's weird
having the long position just sitting there staring at me with it's
red numbers and I "can't" do anything with it but I have to keep
trailing out on the shorts to not give back too much since I don't
know when we're going to bottom, then I have to get the shorts on
again if we head down again -- nothing like the noose to focus the
mind! BTW thx to tumbler for helping me think about options -- I'm
doing the Multi and went with calls instead of cash after the first
signal -- has helped some in terms of $$$ loss numbers.
Your comment "nothing like the noose to focus the mind" is spot
on! I've also had to trade much larger positions than I normally
do. I've actually done well but of course still red due to the spy
system position. But in a way, thanks to the system I've been much
more decisive and nimble.
All my other long positions were stopped out in a timely manner
and normally I'd be watching things with popcorn. I am also doing
the multi and we may still get out of this OK, but it's been a real
lesson on mental fortitude. When the system gives an exit it will
be a relief. I am afraid of a small bounce and then further fall to
new lows before a larger rally...
Too bad we missed the down does not the system make a shift when
necessary to capture,any gains, will we at least break even on the
multi after such a drop in the market Breck
it seems impossible that the system is going to be able to make
money it's single entry approach trade at this point...and waiting
for a bounce could be deadly as the bounce could come from much
lower levels..
from the single entry buy. I think people who are
following this system have to give it 15-20 trades to see how it's
going to do. We've had close to this much of a drawdown before, and
the trade worked out. It may not this time. I think after 15-20
trades you will have to compare this system with the market
and see how it does.
I think the folks here who are expressing the most emotion are
probably over-leveraged in this trade. I don't think you can judge
a system by five trades or so.
I agree about not being able to judge a system by so few trades.
However, I think that the system's performance so far is
beginning to make it clear to people that backtested results aren't
the same as historical results. They may turn out to be, but
the only way to know that is to see how the system behaves in real
time.
Yeah, said that a while ago, nothing like live trading. I
really like to see live trading for a significant length of time
before putting significant capital into it. ESPECIALLY mean
reversion systems! JMHO FWIW
If you look at the ATR 20 for the max low point down draws of
the past. You will find that the current trade is worst than
those of the past. A good formula to keep things in perspective
is: low point down draw/ATR 20
Interesting post, fishbait. Your
comment is backed up by comparing the VIX:
Specifically, date of previous
largest drawdown (10.04%) was 03/06/09.
VIX O/H/L/C data on that date were
a whopping 50/52/48/49 (using round numbers)
Yesterday’s low was the point of
maximum drawdown for the current trade, which I calculate as
10.26%
VIX O/H/L/C data yesterday were
28/39/28/32 (using round numbers)
So, current trade represents a
slightly greater drawdown but on much reduced volatility – in other
words, the trade is even more stretched to the downside (in both
senses of the word) than perhaps we first thought.
The potential good news on the
horizon is our old and timeless friend Mr Mean Reversion. If price
snaps back to this mythical mean with even more ferocity than the
aforementioned trade of Feb-Mar 09, we could be looking at a winner
of greater than the c. 20% profit that that trade ultimately
achieved.
But in two of the cases, after selling the long position, it
shorted the next day and made huge gains (7% and 8%) in the heart
of the fall '08 crash. If we get anything like that, I
suspect we soon see a pretty big short squeeze, furious rally and
as somebody else mentioned here, the system goes short and takes us
on a big ride downtown.
Tough to guess what might bailout the financial sector though.
Actually not tough to guess. My guess: Geithner and
Bernanke. But how?
Posted by marketguy on 5th of Aug 2011 at 10:15 pm
"I'll buy that for a dollar" (old move line :-)
honestly though, the way things are going is we'll cover at a
big loss and then we'll rocket up, the system will short and "then"
uncle Ben will wake up from his hibernation and crush us
again....mentioned it many times on this blog....Murphy's
Law....Murphy's Law....
It's a system. You play all of it or none it. I
remember last fall I got "shaken out" and sold, only to see the
market up substantially a month later. Not saying that here,
but the odds are in favor over the long term from every
spreadsheet I saw. We are all here with you...win or
lose.
Your spreadsheet shows worst ever drawdown -10.0% ended up a
19.7% winner. 2nd worst 8.7% drawdown ended up 7.1% winner. 3rd
worst was 7.8% drawdown but final profit was cut off from your
screen capture. What was it?
It was 15.44% and just an FYI you could have also looked at the
date of 10/14/08 and went to the spreadsheet in the SPY Section and
just looked for the trade that closed on that day.
Posted by jaycrockett on 5th of Aug 2011 at 11:04 am
Excellent! Even if this trade is the exception and does
result in a loss, I have no doubt that by sticking to your system,
it will be made up as further trades occur. The system makes
it so much easier to buy into weakness which is never as easy as it
sounds.
Historical Draw Downs to the system
Posted by matt on 5th of Aug 2011 at 09:39 am
Historical Draw Downs to the system and comparisons to this trade
Here's the 4 max draw downs to the system:
-10.04%
-8.7%
-7.8%
-7.7% (current Trade)
Right now the current trade is the 4th highest draw down. Not that it makes it feel any better or hurt less, but this current trade is still only the highest drawdown.
Every one of the draw downs have been winning trades in the end, that doesn't mean this one will be. I'm just pointing out stats. I will look at it more in the weekend and may do a newsletter specifically for the SPY system
there is no remedy for over leverage
Posted by turps on 9th of Aug 2011 at 10:31 pm
Come on everyone, the facts are:
This is an un-tried system,
It is a mechanical system
if you are blown up now you over levered.
read the disclaimer and TAKE NOTICE OF IT.
yes I am backwards in this trade
No I do not expect it to be profitable in the end of this trade.
Yes I expect to be profitable in the long run.
The long run is what matters.
A thought on SPY Swing System Stops
Posted by traderdavek on 9th of Aug 2011 at 10:00 am
What has worked for me is to hedge a position (long SPY with 3x inverse SPXU) when I see the trade going against me. I'll remove the hedge if and when the trade comes back. Unfortunately, I did not do this soon enough in the current min-crash.
Doing something similar with the
Posted by Vida on 9th of Aug 2011 at 12:25 pm
Doing something similar with the same instrument but day trading on 5 minute charts which is the only way one could get positioned once the freefall started. It is the only thing that has allowed me to hold on to my position and compensate somewhat for the drawdown. This has been a real learning experience on getting a grip on emotions. It has been stressful, I've had to trade furiously around the position. You have to be pretty disciplined with taking profits on a hedge as you don't want the trade to go against you and turn into more losses, but then you have to hedge again as major support areas get taken out. The only complaint I have is that I am supposed to be on a holiday!
Vida, yes I've been doing
Posted by bkout3 on 9th of Aug 2011 at 12:39 pm
Vida, yes I've been doing the same -- hedge trading around the position and it's been intense although worth doing. It's weird having the long position just sitting there staring at me with it's red numbers and I "can't" do anything with it but I have to keep trailing out on the shorts to not give back too much since I don't know when we're going to bottom, then I have to get the shorts on again if we head down again -- nothing like the noose to focus the mind! BTW thx to tumbler for helping me think about options -- I'm doing the Multi and went with calls instead of cash after the first signal -- has helped some in terms of $$$ loss numbers.
Your comment "nothing like the
Posted by Vida on 9th of Aug 2011 at 01:07 pm
Your comment "nothing like the noose to focus the mind" is spot on! I've also had to trade much larger positions than I normally do. I've actually done well but of course still red due to the spy system position. But in a way, thanks to the system I've been much more decisive and nimble.
All my other long positions were stopped out in a timely manner and normally I'd be watching things with popcorn. I am also doing the multi and we may still get out of this OK, but it's been a real lesson on mental fortitude. When the system gives an exit it will be a relief. I am afraid of a small bounce and then further fall to new lows before a larger rally...
Why did the system not go short
Posted by breck123 on 9th of Aug 2011 at 02:55 am
Too bad we missed the down does not the system make a shift when necessary to capture,any gains, will we at least break even on the multi after such a drop in the market Breck
Will system have any chance of breaking even
Posted by breck123 on 9th of Aug 2011 at 02:32 am
With the big drop on the multi is there hope of even a break even with a bounce Breck
if this trade wasn't on, when would the next signal be?
Posted by dtheo on 9th of Aug 2011 at 12:19 am
Matt,
If this trade wasn't taken, would the system go long into this crash? at what price level(s)?
thanks,
DT
it seems impossible that the
Posted by chlo888 on 8th of Aug 2011 at 12:29 pm
it seems impossible that the system is going to be able to make money it's single entry approach trade at this point...and waiting for a bounce could be deadly as the bounce could come from much lower levels..
What's your point?
Posted by burkmere on 8th of Aug 2011 at 12:32 pm
I think their point is....
Posted by marketguy on 8th of Aug 2011 at 01:13 pm
Yes...it's down 11.2%
Posted by burkmere on 8th of Aug 2011 at 01:36 pm
from the single entry buy. I think people who are following this system have to give it 15-20 trades to see how it's going to do. We've had close to this much of a drawdown before, and the trade worked out. It may not this time. I think after 15-20 trades you will have to compare this system with the market and see how it does.
I think the folks here who are expressing the most emotion are probably over-leveraged in this trade. I don't think you can judge a system by five trades or so.
I agree about not being
Posted by algyros on 8th of Aug 2011 at 01:46 pm
I agree about not being able to judge a system by so few trades. However, I think that the system's performance so far is beginning to make it clear to people that backtested results aren't the same as historical results. They may turn out to be, but the only way to know that is to see how the system behaves in real time.
Yeah, said that a while
Posted by john9o9 on 9th of Aug 2011 at 09:20 am
Yeah, said that a while ago, nothing like live trading. I really like to see live trading for a significant length of time before putting significant capital into it. ESPECIALLY mean reversion systems! JMHO FWIW
agree
Posted by tsurplus on 9th of Aug 2011 at 09:41 am
yeah, hope/pray for a good bounce to turn this big loss into small one.
then reduce my allocation for it until it "behaves" over time...
My sense is that mean
Posted by john9o9 on 9th of Aug 2011 at 12:21 pm
My sense is that mean reversion system are harder to develop without curve fitting. Just the nature of the beast.
Yep...
Posted by burkmere on 8th of Aug 2011 at 01:48 pm
low point down draw
Posted by fishbait on 6th of Aug 2011 at 11:53 am
If you look at the ATR 20 for the max low point down draws of the past. You will find that the current trade is worst than those of the past. A good formula to keep things in perspective is: low point down draw/ATR 20
Therefore :2/29/09 = 10%/3.05= 3.27 7/28/11=10%/2.27= 4.40
low point draw down
Posted by philosoraptor on 6th of Aug 2011 at 01:10 pm
Interesting post, fishbait. Your comment is backed up by comparing the VIX:
Specifically, date of previous largest drawdown (10.04%) was 03/06/09.
VIX O/H/L/C data on that date were a whopping 50/52/48/49 (using round numbers)
Yesterday’s low was the point of maximum drawdown for the current trade, which I calculate as 10.26%
VIX O/H/L/C data yesterday were 28/39/28/32 (using round numbers)
So, current trade represents a slightly greater drawdown but on much reduced volatility – in other words, the trade is even more stretched to the downside (in both senses of the word) than perhaps we first thought.
The potential good news on the horizon is our old and timeless friend Mr Mean Reversion. If price snaps back to this mythical mean with even more ferocity than the aforementioned trade of Feb-Mar 09, we could be looking at a winner of greater than the c. 20% profit that that trade ultimately achieved.
Fingers crossed...
Not only were those trades winners....
Posted by kalinm on 5th of Aug 2011 at 07:18 pm
But in two of the cases, after selling the long position, it shorted the next day and made huge gains (7% and 8%) in the heart of the fall '08 crash. If we get anything like that, I suspect we soon see a pretty big short squeeze, furious rally and as somebody else mentioned here, the system goes short and takes us on a big ride downtown.
Tough to guess what might bailout the financial sector though. Actually not tough to guess. My guess: Geithner and Bernanke. But how?
"I'll buy that for a
Posted by marketguy on 5th of Aug 2011 at 10:15 pm
"I'll buy that for a dollar" (old move line :-)
honestly though, the way things are going is we'll cover at a big loss and then we'll rocket up, the system will short and "then" uncle Ben will wake up from his hibernation and crush us again....mentioned it many times on this blog....Murphy's Law....Murphy's Law....
What does it matter?
Posted by Robert50 on 5th of Aug 2011 at 03:22 pm
It's a system. You play all of it or none it. I remember last fall I got "shaken out" and sold, only to see the market up substantially a month later. Not saying that here, but the odds are in favor over the long term from every spreadsheet I saw. We are all here with you...win or lose.
Matt, Your spreadsheet shows worst ever
Posted by dougmil on 5th of Aug 2011 at 12:50 pm
Matt,
Your spreadsheet shows worst ever drawdown -10.0% ended up a 19.7% winner. 2nd worst 8.7% drawdown ended up 7.1% winner. 3rd worst was 7.8% drawdown but final profit was cut off from your screen capture. What was it?
Thnnks,
Doug Milliken
Doug, if you look to
Posted by philosoraptor on 5th of Aug 2011 at 12:56 pm
Doug, if you look to the left of the spreadsheet you can see the Dollar amount profit of $15,400, so it must be a 15.4% win - I think?
It was 15.44% and just
Posted by tom on 5th of Aug 2011 at 01:00 pm
It was 15.44% and just an FYI you could have also looked at the date of 10/14/08 and went to the spreadsheet in the SPY Section and just looked for the trade that closed on that day.
Downgrade on debt with a
Posted by john9o9 on 5th of Aug 2011 at 10:36 pm
Downgrade on debt with a full position on the SPY system..........
Historical Draw Downs
Posted by jaycrockett on 5th of Aug 2011 at 11:04 am
Excellent! Even if this trade is the exception and does result in a loss, I have no doubt that by sticking to your system, it will be made up as further trades occur. The system makes it so much easier to buy into weakness which is never as easy as it sounds.
Matt- These stats are for the
Posted by chlo888 on 5th of Aug 2011 at 10:56 am
Matt-
These stats are for the single entry system correct?
Yes for single entry, easier
Posted by matt on 5th of Aug 2011 at 12:37 pm
Yes for single entry, easier to show that way.