System Trading Blog

Make Your Money Work Harder

Covestor’s Most Popular Down 21% in May

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The most popular model manager on Covestor is down almost 21% month to date.

However, the model is up annualized 162% since inception on 10th April, 2010. 20+ percent drawdown is historic maximum drawdown for the system.

Drawdown of this magnitude, after months of good performance, is nothing extraordinary in the system trading world. Happens all the time.

What do you do, if you have a system like this in your portfolio? Quite simple – you pull it from your portofio. You may re-evaluate it later and probably put it back in the porftfolio, but at the moment it’s no-brainer – ditch the system from your portfolio just because it moves out of its historic performance parameters.

Have you lost money? Not at all, if you traded the system correctly. What does it mean to “play it correctly”? You watched the system for about three months in early Y2009, then gauged it’s risk/return profile and put it in your porftfolio. You still made about 100% annualised return on your money while the system was in your portfolio from July – August 2009 till May 2010.


Written by A.S.

May 23, 2010 at 11:17 pm

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