Monthly Strategy Update

I plan on doing updates at the end of each month on how the strategy is performing and some thoughts about what is working and ways to improve it.

After a week of action the market finds itself essentially flat. I had a rough start initially but my strategy has done decently so far but obviously one week of testing is nothing sufficient to base a conclusion. Sell disciplines have essentially been the difference so far which will likely be true moving forward as well.

Market wise I am fairly surprised we have held up so far even though friday volume was very light. Economic data is getting progressively worse and the market has stayed bullish, reversing a fairly large drop on Thursday. Overall I think investors are in a "buy the dip" mode but I am predicting a more prolonged pullback over the next month or so as we get panic that positive ecnomic progress is slowing down. I of course could be wrong and I will watch the market to tell me the next move and attempt to position accordingly with the strategy.

Total Strategy Return Since Inception: 2.17%

Follow-Up to 2009

So overall 2009 was a decent year. I am disappointed in how it ended though. I ended up 117% overall however considering where I was that is not very good. The Amazon trade was a big loss that should not have happened and it was hard to recover the rest of the year. The good news though is that I learned a valuable and expensive lesson and will trade smarter because of it. There are some key take aways from 2009 I think:

In general, I think I managed risk fairly well considering I was essentially trying to short the market since July and still managed to make gains until AMZN. I over traded for the market environment we had but obviously in the moment it is harder to be objective and hindsight is 20/20. That said, I did fully support and participate in the rally from March-May and then started to become skeptical but a major pull back did not materialize.

For 2010, I'd like to see myself with more consistent performance with smaller draw downs and less trading. That is obviously part of the plan with my new strategy so we will see how it goes. I have to put full faith in my trading system to truly test its worth so I will need even more patience and discipline. I often wonder if making it completely mechanical would be ideal but at the same time I think I have become disciplined enough over the past 3 years to intervene at my discretion.

Key Metrics to track for 2010:
Theoretical vs. Actual Expectancy
Drawdown analysis
Standard Deviation of portfolio vs. Index
Absolute and Relative performance
Attribution Analysis
Average Capital at Risk

I am looking forward to this challenge and hopefully a good year, but even more so I will look to learn from things that don't work. Ultimately I want to have a sustainable long term strategy that can return consistent profits in different market environments. Stay tuned.

Strategy Launch

I have developed a potential strategy I feel could be fairly profitable that I will be officially launching tomorrow. I would like to track the strategy performance over a year and hopefully develop a successful track record. This is a more conservative and passive approach than my typical trading so it will be interesting to see the results. It has the potential for great success in terms of theoretical expectancy but of course the reality could be different which is the whole point for testing it.

I won't go into specifics at this time for obvious reasons but the main focus will be on risk management and the exploitation of market behavior. The strategy is fairly simple yet not necessarily obvious which I think could be a good recipe for success.

I will track its performance on here each month and update with some commentary and thoughts about what tweaks could be beneficial. I will look into ways to audit the performance so it can ultimately be verified if it is successful.

Total Strategy Return Since Inception: 0.0%