isa's long term trading journal

[isatrader]

Relative Performance vs S&P 500

Attached is the chart of the relative performance of my account vs the S&P 500. As you can see I started during October 2008 seriously and was hit hard straight away. My preference for trading precious metals and commodities gave me a strong recovery early on. But I then made the mistake of trading leveraged natural gas which caused some big losses while the rest of my portfolio was doing well. I’ve made lots of mistakes in the last few years, but I think I’ve learned a lot more from them than my wins to be honest. My trading has stabilized in the last year, with much less wild swings and would have been much better had it not been for the high fees of trading in an ISA. My aim to remedy this is trade less frequently in my ISA and try to catch longer term moves and leave the active trading to my spreadbetting account.

Performance since Oct 08
My ISA account is 7.04%
S&P 500 is -2.42%

=> I am 9.46% above the S&P 500 currently.

Chart is below

 

[isatrader]

Sharpe Ratio

As requested by Arabian Nights. I’ve attempted to do a sharpe ratio. Not sure if it’s right or not. So let me know if I’ve messed it up please.

The ratio says it’s: 0.247

If I’ve done it right. Can you tell me if that’s good or bad please as will be interesting to know. Thanks

 

[arabianights]

The chart V S&P should worry you. Although over the entire time period you've beaten the S&P, you've basically stagnated since Jan 2009 while the overall market has been in a huge bull run. But you could argue that you've taken less risk so that's not necessarily an issue, so:

The chart versus the S&P also shows a problem with sharpe ratio in that, like everything else, it's bloody hard to use over such changeable market conditions; I'd run another analysis since Jan 09 and see what you come up with.

Also, a secondary point: You need to look at cumulative returns - is the S&P there cumulative?

 

[isatrader]

The chart V S&P should worry you. Although over the entire time period you've beaten the S&P, you've basically stagnated since Jan 2009 while the overall market has been in a huge bull run. But you could argue that you've taken less risk so that's not necessarily an issue, so:

The chart versus the S&P also shows a problem with sharpe ratio in that, like everything else, it's bloody hard to use over such changeable market conditions; I'd run another analysis since Jan 09 and see what you come up with.

Also, a secondary point: You need to look at cumulative returns - is the S&P there cumulative?

I think I set it up as cumulative. I do agree that it’s a worry that it’s catching up with me. But until last month my portfolio had a large leveraged natural gas position in it, which I had made various rookie mistakes with such as averaging down, using a bad trading vehicle in LNGA, and not cutting my losses early. The other major problem I had was that I was using commodity ETFs which were all priced in dollars and so even though the majority of my trades have been right this year the exchange rate has held them back. I’m trying to remedy this by balancing my portfolio better with a mix of ETFs priced in dollars and stocks in pounds. The recent performance seems to show that it’s more in line with the S&P now and not opposite it anymore. But there's still a lot of work to do and a lot to learn still. But I look at the equity curve in a positive way as my draw downs have been minor all year and are not swinging around wildly anymore. I think now I’ve got risk a bit more contained that I can start to work on making more profit.

Any more suggestions you might have are welcome and I really appreciate you taking the time to do the comments you have already. Thanks

 

[isatrader]

Sharpe Ratio - 09 & 10

I managed to get the cumulative figures for each set up, but can’t seem to get them to work on the same chart in excel. So I’ve tried another metric of dividing my portfolio by the S&P 500 as it shows relative performance as a single line, so is much clearer.

Also for the Sharpe ratio I’ve done since Jan 09 as you suggested arabian, and also split the 2 years up.

Both years combined: 0.35225197

Sharpe Ratio 2009: 0.524202882
Sharpe Ratio 2010: 0.002520957

 

[isatrader]

Sharpe Ratio - 09 & 10

I thought it would be good as a comparison to do the same for the S&P 500. So attached is the chart

Both years combined: 0.727363586

Sharpe Ratio 2009: 0.905364912
Sharpe Ratio 2010: 0.481463556

So my figures were much lower than this. Does this mean my risk reward is much lower?

 

[isatrader]

Market Breadth Charts

Attached is the the following Market Breadth Charts from stockcharts.com free charts section:

$CPC (CBOE Options Total Put/Call Ratio)
$NYAD (NYSE Advance Decline Issues (EOC)) – I’ve put the S&P 500 behind to compare.
$BPNYA (NYSE Bullish Percent Index)
$NYHL (NYSE New Highs-New Lows (EOD))
$NYA200R (NYSE Percent of stocks above the 200 day moving average)
$NYA:$USD (NYSE/US Dollar)
$NYA:$SPX (NYSE/S&P 500)

I think these are really interesting and give me some concerns about the current move higher. Advance Decline is still strong, but last weeks move was a little bit weaker than the market. The Total Put/Call Ratio is getting near to an extreme, but is not there yet though. The Percent of stocks above the 200 day moving average is at 76.21%, so still has room to go higher before the end of the bull run as well. The main concern is that the $NYA is lagging the $SPX. During the previous bull run the $NYA lead the $SPX. The NYSE Bullish Percent Index is still strong however.

Overall it still looks bullish to me, but with some warning signs starting to appear.

 

[isatrader]

Nickel – Entry

Ticker: NICK
Entry Date: 7/12/10
Amount: 55 Shares
Entry Price: £17.7091 ($27.95 @ fx rate 1.5790)
Commission: £12.50
Total: £986.50

Entry Grade: 62.5%
(Calculation: High-Entry price/High-Low) Entry Grade above 50% is my target

Nickel has been a good performer for me throughout the last few years. My current open position is up around 10%, and I’m currently reading Reminiscences of a Stock Operator, in which the value of pyramiding a winning position is emphasized so well. So I thought I’d take the advice today and buy more Nickel instead of buying copper. Copper broke out to a new high today and I considered buying that, but Nickel usually leverages coppers gains, so I thought it better to add to my open position of that instead.

 

[isatrader]

ANTO – Entry

Ticker: ANTO
Entry Date: 7/12/10
Amount: 64 Shares
Entry Price: £15.22845
Commission: £12.50
Stamp Duty: £4.87
Total: £991.99

Stop Loss: £13.62
Target: £18.28

Entry Grade: 35%
(Calculation: High-Entry price/High-Low) Entry Grade above 50% is my target

Antofagasta has had an impressive run and today broke out to a new high. My entry in this is a breakout play.

 

[tafita]

Hi Isatrader

It's good to see a longer term technical trader on these boards who uses similar techniques to my own. (I do not use so many indicators on my charts though). Keep up the good work

I breakout trade placing limit orders with my broker and pyramiding positions using technical entries to do so. I reduce risk by using a 1% risk per trade rule which allows me to pyramid without excessive risk on each trade. I also calculate monthly and annualised returns against the FTSE 100 as I am a trader of UK shares and also use sharpe ratio to keep myself in check.

Lots of luck

Tafita

 

[isatrader]

Hi Isatrader

It's good to see a longer term technical trader on these boards who uses similar techniques to my own. (I do not use so many indicators on my charts though). Keep up the good work

I breakout trade placing limit orders with my broker and pyramiding positions using technical entries to do so. I reduce risk by using a 1% risk per trade rule which allows me to pyramid without excessive risk on each trade. I also calculate monthly and annualised returns against the FTSE 100 as I am a trader of UK shares and also use sharpe ratio to keep myself in check.

Lots of luck

Tafita

Thanks for the reply. On the subject of indicators, I tend to only really use 2 to 3. Which is rRelative (Price dived by the 200 Day simple moving average), MACD and Force Index (the difference between today's close and yesterday's close multiplied by today's volume). Other indicators such as RSI and Elder Impulse are more for confirmation/warning signals to me, but I never trade off a single indicator. I always have a price reason for entering a trade and just use the indicators to help with timing.

 

[isatrader]

Hi Isatrader

I also calculate monthly and annualised returns against the FTSE 100 as I am a trader of UK shares and also use sharpe ratio to keep myself in check.

Hi Tafita, I’d be interested to know how you calculate your sharpe ratio? I had my first go at it the other day as you will see in my previous post, so not sure if it’s right or not. So would be interested to know how you calculate yours?

Cheers

 

[isatrader]

Randgold Resources Exit & Re-entry

Randgold Resources (RRS)

Exit Date: 9/12/10
Original Entry: £64.49125 on 11/10/10 – Total Cost £1560.29
Amount: 24 Shares
Exit Price: £56.6625
Commission: £12.50
Total: £1,347.40

P/L: -£212.89
Percentage Gain: -13.64%
Trade Grade: E

Entry Date: 9/12/10
Amount: 26 Shares
Entry Price: £56.7375
Commission: £12.50
Total: £1487.68

Entry Grade: 43%
(Above 50% is good. Calculation: High-Entry price/High-Low)

Reason for trade
I decided to take my loss on this trade and then re-enter at the lower price and a few extra shares as Randgold is at it’s 252 day moving average. So the one year average of trading days. Throughout the last few years Randgold has bounced strongly off of these levels, but even if it doesn’t this time, I’m a long term bull on gold, so the one year average is an excellent place to buy and hold. With the aim of accumulating more shares if the bull run continues next year. I’ve included the seasonal HUI chart from ZealLLC.com as this shows that December tends to have a pullback in gold stocks, so I think a good opportunity to accumulate shares.

 

[isatrader]

Weekend Update

My portfolio pulled back 1.51% this week to close at +5.13% for my account. The pullback was mainly due to the fees of taking the loss on Randgold Resources (RRS) and opening two new trades in Nickel (NICK) and Antofagasta (ANTO) which also includes the spread cost. So not too much to worry about.

S&P 500
The market managed a weekly close above the 61.8% Fibonacci level from the 2007 high for the first time. Looks to me like the start of the 3rd or 5th wave in this bull move since the summer depending on which pivot point you use for your starting point. Bearish warnings though on the daily chart as volume had a pop and drop during the week, so possibility it’s a false move higher. I prefer weekly data though and weekly the volume was good and broke above the previous weekly closing high so bullish on that front I think for me.

My Ratings
Short Term – Neutral/Bullish
Intermediate Term – Bullish
Long Term – Bullish
Disclaimer – this is all just my opinion for my personal trading account. I’m still learning, so do your own research.

US Economic Data – the week ahead

Tuesday
Producer Price Index*
Retail Sales*

Wednesday
Consumer Price Index*
Treasury International Capital
Industrial Production*
Housing Market Index
EIA Petroleum Status Report

Thursday
Housing Starts*
Jobless Claims
Philadelphia Fed Survey*

*most important

Looks like quite a lot of data this week from the states, so will need to watch carefully for anything out of the ordinary.
Have a good week

 

[isatrader]

Win Loss Ratio

I did a bit more analysis on my portfolio this week and have calculated a few more bits of data to help me improve my trading. One that I found particularly interesting was my win loss ratio. I read about this in one of the recommended sections on this site and thought it would be useful to know.

Number of closed winners: 32 (58.18%)
Number of closed losers: 23 (41.82%)
Total closed trades: 55

Average win: £125.01
Average loss: -£152.31

Win Loss Ratio: 0.82

I think this is quite telling in that I can see clearly now that I’ve been cutting my winners too soon as the ratio is only 0.82, which isn’t good. My aim now is to improve this to above 1 over the next year and continue to have a higher number of winners over losers.