I assume it's the GBPCAD(Jalapeno?) set file that is in drawdown atm? I bought that commercial set file just a few days ago and it has gone almost to fifth level in it's basket(around 15 pips to fifth level).
I did several backtests with Tickstory downloaded data to see how it would perform but how have you seen it cope with these drawdowns and how do you think this particular case will develop(I still assume you have this set file in drawdown)?
yes Jalapeno is in a 15% drawdown right now, if it hits 50% it will realize it's loss, however that never happend in the backtest. It used it highest level of 7 7 times during the backtest and the max relative drawdown is 28%.
Hence everything is normal and it is tading as backtestest should the drawdown exceed 28 or 30% than it would enter unknown territory unless that happend it is trading like normal.
The setfile will not open a higher level than 7, after that it will just wait. It is normal that it hit level 5 or 6 rather quickly if a trend occurs.
We will see how the situation resolves in the hours/days ahead. All of the four CAD based pairs in our portfolio are now in a drawdown resulting in an all time high drawdown figure of 15%. Still not too much to worry about as our monthly growth % is roughly 25%.
Yes we reduced our exposure to apparantely correlated pairs for both CAD and AUD. This reduces the number of EAs from 14 down to 10. And we are close to introduce a new EURNOK grid EA to complement the portfolio and increase diversification.
Our upcoming newsletter contains some more information.
Yes we got 3 stop loss hits due to an overexposure to CAD related pairs. We learned our lesson and reduced the amount of 'correlated' pairs across the board. We are totally fine with stop loss hits, however 3 packed together was something that I considered 'unlikely' a month ago. We are all students of the markets and I am doing my homework to make sure that something like this doesn't happen again.
I follow many grid and martingale systems. I have to admit that despite your equity curve now not looking ideal, apparently your portfolio suffered the least damage from the CAD and AUD trends and I can see that it is now even back in black. If you look at many of the strategies on say signaltrader.com you will be shocked. A couple of trade leaders have had to deposit funds to maintain their margin, unfairly at the expense of their followers, and are still getting hammered. One particular 91 week long running strategy has an unrealised PnL of -140% of the original deposited amount at the minute. Following this rout of martingale and grid strategies does your portfolio still consist of just Blessing 3 set files?
It is paramount to have a stop loss in place and if price hit that level you must have the discipline to cut your losses short to preserve your capital. Many traders with deep pockets think that they can somehow get out of the trade without the loss.
The huge problem is that a drawdown is already a loss, the fact that it is still only on paper and not real doesn't change the fact that's a loss.
Our mistake was to assume that the behaviour of commodity related pairs like the CAD pairs is determined mainly by the other currency in the pair. However the strong trend in CAD itself cause 3 of our 4 CAD pairs to hit the stop loss. the last CAD related pair is AUDCAD a commodity cross which did not hit the stop loss as teh trend in CAD also affected AUD hence buffering the trend.
We learned from our mistake and reduced our exposure to correlated pairs across the board. With all of our incredibly profitable exotic pairs like EURZAR, USDZAR, AUDSGD, EURNOK and the like we are now having a portfolio with much lower risk even though we removed 5 EAs. The portfolio has now 9 EAs and we will add a modified GBPCAD soon.
Yes right now our Pepperstone live portfolio still consists only of 9 b3 setfiles which we developed ourself.
We opened an IC Markets account last week which will run the same portfolio but here we can add a special scalper and our CFD model trading the US markets (Nazdaq, Russel2000). We prefer to trade the Naz but if we sense a strong speculative sentiment shown by the outperformance of small cap stocks than we will switch over to the russel2000. We might also include little VIX trades. But the VIX is highly volatile as it is a volatility related instrument itself so we will only trade a small part of the portfolio. It is all about risk/reward.
We will move away from grid and the CFD model as well as our own EA which we develop right now don't need retail brokers as they can be run with an good ECN US broker (0.1 min lot size and 100 leverage w/o hedging).
But this transition away from grids won't happen overnight.
Great, if I follow you I'll be back to indices which I used to enjoy trading a lot. I used to trade them via ETFs and options. Was tempted to try trading them via futures contracts but never got down to it. It will be CFDs now.
Yes but you have focused & correlated to many pairs to 1 currency as the CAD. You would of not have suffered such a draw down if you only had a CAD pair. So you focused on the currency I hate the most :)
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