System Trading Blog

Make Your Money Work Harder

What happened to our real-time experiment?

with one comment

On June 1, 2010 we started a real-time experiment to illustrate how the system trading works and the profit potential of this type of investing.

We followed through for about 7 weeks before we diverted the resources to an income-producing work at hand. During those 7 weeks the results were mixed.

Overall, pure currency systems (Alpari PAMM, Tradency, Zulutrade) performed better than stock (Covestor) or commodity systems (Collective2). Since then, Covestor has redesigned its web site and the service offer looks more compelling than ever. The performance of Covestor models (i.e. strategies or trading systems) have recovered noticeably from last June. As at the time of writing, top-performing Covestor models are back on track with up to 55% returns during the last 3-month period (apparently, in line with the general market upward move).

Tradency has redesigned web site and now have the product offer directly from their web site rather than kept it obscured somewhere in brokers´ web sites. Collective2 and Zulutrade have kept their service offer basically unchanged, save for some non-essential features (such as additional languages and too-simple-to-be-useful analytic tools).

The basic premise of system trading is that, theoretically, a good trading system should perform well irrespectively of general market direction. In practice, most trading systems depend on certain market conditions, their performance is limited in time and it is critical to recognize and scale out systems whose ¨production stage¨ is over.

One of the conclusions to draw from the experiment is clear: constant monitoring and adjustment of the system portfolio is a must. Hardly any of the trading systems, originally included in the portfolio, pass the test 5-6 months later.

Namely,

On Collective2, out of 11 systems, 9 are down, 2 are up. The average decline is about 10%.

On Zulutrade, out of 15 systems, 4 systems are not identifiable, 6 are down and 5 are up. Average up is about 8% (not counting the unidentifiable four).

On Tradency, out of 6 systems, 2 are not identifiable, 3 are down and 1 is marginally up.

So, out of 32 systems, only 8 or 25% are good half-a-year later. The other 24 systems would have been removed from the system mix in the due course of the ongoing selection process.

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One Response

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  1. i like it

    jim

    January 5, 2011 at 8:16 pm


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