Discretionary trading

[grems8544]

What is efficient for a buy and hold index portfolio, is not necessary true for an actively traded portfolio.

Kenneth,

I agree with you on this point.

The concept of bounding is implicit in my posting; my lookback was of ~100d or so. If the results here become the boundary of expectations in the present market climate, and if further risk management (entry at 1/3 RR, stops based on pivots, etc.) gives us the suggestion that we will be bounded by the "worse-case" results presented (e.g., risk management improves performance and/or reduces risk), then I think we can have a reasonable expectation of outperforming the boundary going forward.

My conclusions on allocation were simply to suggest that there is an allocation which represents, in the present market climate, a configuration that reduces volatility of an entire portfolio that is comprised of two trading instruments. I think we can agree that if holding 100% IWM, we have a reasonable expectation that the volatility will be lower than holding 100% GDX. If the last 100d of actual returns and volatility represents the next few days/weeks (forward looking) of expected returns and expected volatility, then I think my conclusions are not too far from the mark, independent of whether you are holding IWM, GDX, or a mixture of both.

Kind regards,

pgd

[Pascal]

Thank you Pascal. Great documentation, as always.

With an IWM historical MDD of -10.5%, is it safe to conclude that using the leveraged triple ETF would result in a MDD in excess of -31.5%?

Regards,

pgd

If you use leverage blindly, this will be the case, but knowing that there is an astounding 0.49 correlation factor between the MDD and the 20DATR, what you need to do is to avoid tripple leveraged when the ATR is above a certain level (my hunch is above 3%) and avoid double ETF when the ATR is for example above 5%. This way, you really reduce the MDD, but you keep your potential for big gains. I would need more research to find out the real combination though.


Pascal

[Rembert]

Thank you for the analysis Pascal. Seems like Pareto's law applies to the robot signals as well in that 80% of the profits come from 20% of the signals. One of great things about the VIT robot is that it's able to tell up front which signals are likely to fall into that 20% category. This is something most systems can only do in hindsight.