2Q09 qoq : +14.7%
2009 ytd : +21.5%
2Q09 was mostly about the round trip in the "green shoots" trade. Given that I was late to buy into "green shoots" and still involved now (charts not turned yet) even as markets are questioning its validity, it is a given that my results for 2Q09 are mediocre at best. Returns figures above are based on risk capital in futures margin account only, which is where I really "go for it". Based on current risk capital level and assuming negligible returns on my passive portfolio (passive=75% TNW; SGD interest rates=near zero; risk capital=25% TNW), I need to make around 4%-5% per month in T4L to cover living expenses and other costs. Thus, I am currently quite some way behind budget. Need to be nearer to +30% ytd to be on track.
2 big trading mistakes during the quarter, both made in Jun09 =
- Ran the short ED futures position for too long and incurred an unnecessary big loss. Its intended presence as a hedge against short USD/fx positions did not work. And I lacked discipline in taking corrective action when the latter became apparent. My previous interest rate trading "experience" was more of a hindrance than help in my new T4L environment in that it gave me a false confidence in my ability to read the market.
- Failed to invoke my rule #11 and press the eject button on 12Jun09 when P&L exploded suddenly and unexpectedly. As someone once commented here, I guess I held myself hostage to the comments I made earlier that very same day about following JL and sitting tight (incredible coincidence and timing). Going forward, I must not feel embarassed to take a completely opposite course of action to what I have stated here if circumstances change.
- I was able to separate my thinking from my trading. To this day, I still do not fully believe in the recovery story. But it is pleasing that I was able to NOT let that personal view affect my trading which is purely chart based.
- Riding the long GBP/USD position from 1.49 to current (1.6430) in a disciplined manner (no greedy pyramiding, no pre-mature exit); this is basically the trade that saved my quarter. Also proof that JL works. SIT on trends.
[Aside : I guess in T4L, one's prime objective for each year should be to cover all costs thus NOT having to dip into savings to fund living expenses. Only when that is achieved can one start thinking about building wealth. In other words, don't start off being too ambitious.]
15 comments:
Still looks pretty impressive to me. Have you worked as a broker or a trader in the financial sector before?
9 years big Swiss + 9 years big Dutch bank trading interest rates prior to T4L.
2Q09 qoq : +14.7%
2009 ytd : +21.5%
Your results and thinking is the same as mine, you`ve got 21% ytd and you say you are struggling while others even some gurus and some pshyholog gurus say that 20%/year is enough and a trader should not expect more. I would say that with the current capabilities of margin a trader should think of getting another job if he is not able to make more than 20%/year.
My risk capital is only 25% of Net Worth. The other 75% is in low risk instruments. I need to divide the 21.5% by 4 = 5.3% to get overall return on NW. This 5.3% is the figure that should be compared to the 20% yoy that the experts recommend.
I do not feel brave enough to allocate more of my NW as risk capital. I need the risk free bit to fall back on in event of a trading disaster.
I was refering to that 25%, on that the return is 21% for you now. Those gurus are not talking about net worth the discuton is general and its about returns over exposed capital not over net worth. But then again those gurus teah and talk and some of us are traders.
I've noticed that the value of $1 invested is over 7 times since you started T4L. Apart from the monthly 4~5% you say you need to cover for expenses, do you keep your profits in this T4L futures account or do you transfer them to your passive account? I am wondering if your trading size has grown exponentially since you began T4L. BTW, I really enjoy reading your blog. For someone thinking about pursuing T4L, it truly is inspirational. Thanks!
My risk appetite increase has not kept pace with equity growth. At the end of the last 2 years, I have withdrawn funds from margin account to fund expenses as well as increase savings. So, definitely not exponential growth in trading size.
I have found that in T4L, it takes time to get used to bigger and bigger swings in daily P&L. Thus, growth in risk appetite is more of a linear function. To trade well, one has to be mentally unaffected by the P&L volatility. I find that difficult beyond a certain amount and expansion of that comfort zone has to be done gradually.
For me, the biggest difference between T4L and interbank trading is that I am playing with my own REAL money and it hurts when I have to suffer the consequences of stupid actions. In interbank, it was all just numbers to me, like keeping score in a computer game or playing with monopoly money.
18 years of bank trading experience, impressive! Prop trading, flow trading or market marker?
Why do you left the banks? If you are trading well, I am sure banks will reward you.
Simple. T4L is my dream.
TS, 20% + quarterly return is actually a great result. And combined with long term (relative) consistency - many money managers would give an arm and a leg for such a result.
Look forward to reading your posts.
Pandu
TS,
Sometimes, all we can do is tread water and keep our heads up. That is, make just enough to cover expenses (or to minimise losses/preserve capital); we have to take the 'lean' times just as much as when we capitalize on the out-sized gains of the 'fat' times -- the 'joseph' cycle is real in any timeframe.
In any case, a >20% (or ~4%, based on TNW) over 2 quarters for 'lean' times are still very credible results. Kudos to you.
A bit surprised at your relatively big loss in Eurodollar; I remembered/thought this trade as one held for quite a short period only.
I understand your rationale for trading such a wide range of markets (diversification, taking each trade on its own trend/technical merits etc) and I'm sure in previous good years the top returns may had been from other instruments (which justifies the diversification of course); but will you ever consider dropping a market based on previous large and continued losses in it ?
(ie. apart from adding/removing market instruments based on the primary criteria of liquidity+favourable trend price action)
Good trading and thanks as always for your sharing.
Don
Don - I think all of us at one time or other get into situations where we feel that we are just "suay" with certain markets eg like my Gold trades and repeated unsuccessful attempts to trade it this year. However, I think it's really all in the mind and down to discipline. So I would not abandon any market just because of a bad run of results in it .. if you believe that trading off charts work.
Don - I have however, decided to stop trading natural gas because of the difficulty I have in charting it. The contract rolls monthly, exhibits large discontinuity in prices across contract months, and I just cant find a way to construct a nice big picture view of it.
TS,
Understood and points taken, esp about Discipline. Actually, would not have expected anything else/otherwise from you/your methodology.
:)
Again, your posts+sharing will be very useful, if/when I do move away from being a 'screen jockey' (from your longer-term perspective!) and towards trading long term timeframes exclusively.
After all, opportunistic diversification is the whole point of LT trend-following...
Enjoy this long weekend.
Thanks,
Don
Thanks Don. U have a good weekend too.
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