This account should have come far enough. Time to resume a less aggressive trading style…

This month’s record shows a relatively low trading frequency. Most of the trades were based on some form of trailing stops. As such, the average loss is smaller than the average win. Such exit strategies can go a long way towards enhancing the overall profitability, because we can stay with the occasional strong trends for rather long, and exit quickly when the market is choppy.

For the month of Jan’10, the return on this account was about 17%.  This time, I experimented having no explicit take-profit levels specified; positions were closed based on certain technical conditions signalling a possible reversal or a potential exhaustion of the trend. Such an exit rule serves the same function as trailing stops, so that we minimize losses when the market moves sideways, and allow profits to run when the trend is strong.

Apologies for having overlooked the updating of the trading records. Have been busy fine-tuning this strategy. The return in November ‘09 was lower than in previous months - at about 20%. As noted from the statement, the win rate in the trading outcomes was actually rather low. In fact, the proportion of winning trades was less than 50%. The reason why it was still profitable was that the exit strategy was designed to cut losses short and take advantage of the occasional occurrences of strong trends. Psychologically, a trading stategy like this is very hard to follow, as you would be taking losses very often.

In my numerous back-testing experiments, I’ve realised that changing the entry setups doesn’t change the trading performance much. It is very often the exit strategy that will significantly change the trading performance. As such, my focus has been on improving the exit plans.

I am still in the midst of fine-tuning the exit strategies in this trading method to enhance its long-term profitability and reduce its vulnerability to sideway market conditions (although it’s never possible to totally predict and avoid ranging conditions). While doing the fine-tuning, this strategy was not traded in December. This account has resumed trading in Jan’2010. Hopefully, this year will produce good and consistent returns without increasing risk exposures too much.

For the month of Oct’09, the return on this aggressive trading account was about 32%.  Many of the trades were based on trailing stops, designed to cut losses short during adverse movements, and to ride trends when they happen.

For the month of Sep’09, my return on this aggressive trading account was about 35%. To date, the USD10k account has been compounded for 6 consecutive months since Apr 09.

In this month, I tested the effectiveness of using a trailing stop to maximise how much I can benefit from the riding of strong trends when they happen. Over time, I will fine-tune the trend-following techniques I am using to maximise the gains in strong trends, and to minimise the losses when false alarms happen. Indeed, this is what the age-old axiom of trading is all about: “Let your profits ride; cut your losses short”. It has become a cliche in the trading community. I believe one of the reasons it has become such a cliche is that so few traders really practise it!

My return in Aug 09 was about 31%, after doing 7 trades for the month (with 1 losing trade). To date, the USD10k account has been compounded for 5 consecutive months since Apr 09.

July was a relatively inactive month for me, as far as trading is concerned. In this trading account which I started in April, I managed to do 4 trades in July, all of which were profitable. The return for the month of July was 20%. It’s not bad, although it pales in comparison with the returns in April, May and June.