Our Trading Performance In 2015

Market Context

I think it’s important to have context before looking at performance metrics of a strategy so let’s begin by walking through the market environment and price action of the S&P 500 for the year.

2015 has been a challenging year for swing trading.

Take a look at this chart from @RyanDetrick

2015 has contained two of the longest streaks without back-to-back up days in the S&P 500. This type of no-follow-through environment is challenging for swing trading and particularly so for trading breakouts (which is all we do).

January through July we were in a 10 point trading range in the SPY between 200 and 212 with lots of chop and narrowing leadership. The clean uptrend that existed for the prior 4 years in this bull market was no longer so clean.

In August we saw a sharp break of that range and a pullback of 10% in less than two weeks. That flush ultimately put in the lows of the year as we managed to chop and grind our way higher from that August 24 pivot back into the range from earlier in the year.

When looking at 2015 on a yearly time-frame, it appears as though we just put in a digestion year within the context of a long term uptrend.

Into The Numbers

Below is the year to date performance of The Trade Risk which members were able to participate in every step of the way. In January the final 2015 numbers will be updated.

One final note before getting to the numbers, my goal is to maximize risk adjusted returns. For me, that also means limiting draw-down and maintaining a consistent equity curve. Therefore the risk thresholds I choose to use are conservative.

Let’s first start with some core statistics:

As you can see the majority of our trades were on a short-term swing time horizon lasting on average 2 to 5 days. These trades accounted for approximately 84% of our total trading this year and they did produce net profitable results. However, our longer term trades, those with a holding period over 2 weeks, were a bit more challenged, as we essentially broke even on the year net on 37 trades.

I believe the factor most impacting the sluggish performance for our long-term swings was the market environment. There just wasn’t enough consistent direction to carry those breakouts higher.

Next let’s look at the equity curve. This is a report run directly from my broker which includes every single transaction on the year net of commissions.

Year to date gains: 8.60%

The one area I want to point out is January through April of this year. Notice the volatility during this time period versus the rest of the year.

During the beginning of the year I was doing a poor job normalizing risk across positions and equal weighting them based on volatility, % of account size, etc. In April I launched our Position Sizing Calculator which precisely sizes all of our trades to make sure no one trade has an out sized impact on our overall account and allows us to sleep easy at night due to our systematic formulas for calculating safe exposure.

The calculator is fully customizable based on personal risk tolerance and it’s my favorite resource I offer to members. I’m sure there are other factors that played a role after April which caused the equity curve to smooth out but the calculator had a big impact.

Last but not least, the maximum drawdown from peak equity to a low before making a new high came in at 4.56%.

As I mentioned above, it’s all about return on risk, and for me I run a fairly conservative portfolio risking anywhere from 0.30% on our short term swings, up to about 0.50% on the longer trades.

For more aggressive traders taking our same signals but risking closer to 0.6% on the average trade then you could have expected to return approximately 16% on the year with an 8% max draw-down. It all comes down to how much fuel you want to throw in the fire.

Another point that’s worth discussing is the sideways movement from September into the end of the year. It’s tough psychologically moving sideways for nearly 3 months, but similar to a stock that consolidates through time rather than by price, I like to think of our equity curve as getting ready to breakout higher for the next directional run.

Which brings me to my offer.

For those of you who want to get involved in our next equity curve breakout, then now is the time. The new year is right around the corner and there’s no better time to start learning a new strategy that has proven profit in a difficult environment.

Heading into 2016 I will be raising prices on our membership so these are the final days to lock in the current discounted rates. For more information on the membership, with info detailing exactly how we trade, the resources and support you’ll receive, and a host of other FAQs, head on over to our premium page and don’t hesitate to contact me if you have additional questions.

2015 challenged us in a good way as it made us further refine our strategy, test our discipline, and make us more prepared moving forward. We beat the market not only with a higher return, but with a smaller draw-down, and lower volatility. And that’s something I’m proud to have helped members achieve.