Hi, is there some way to compare actual monthly portfolio returns, not just mark-to-market daily values? For example if I want to research "closed-trade-to-closed- trade" results? That would reflect reality better than daily marks IMO, thanks>>
Hi, Mark:
We don’t currently have that feature, though I think it is possible to build. On my first analysis, though, I wonder if it might be one of those features that only make things more complicated and daunting without adding a lot of value. I’d like to try to understand the request more. Why would a “show only closed trades” performance display have more (or even any) value than showing positions marked-to-market? Without marking-to-market, it’s easy to game the results, keep losing positions in inventory, and never close them. A non-MTM display really does not reflect the reality of any brokerage account following a system.
I’m not trying to be negative for no cause; I just sincerely don’t understand what the value of such a feature would be. Am I missing something?
Matthew
Hi Matthew, thanks for the swift reply.
Here’s the reply I was going to give:
" I think the value would be for comparison purposes. If a system opens a trade May 1 at $100, in June it trades down to $80, then he closes it in July at $120, the system monthly results would show June performance down 20%"
I thought about it some more, and the MTM method IS accurate,. but it doesn’t somehow reflect the actual “dollars-in-my-account” results. I might look at a signal’s trade history and see all green, but Monthly results might have lots of red months. Since a decline isn’t “real” unless and until it’s realized (sold), is there some way to close this perception gap? You could rely on Compound Annualized return, but that has its own accounting issues.
Am I getting this right?
Hi Mark,
“Closed trade to closed trade” reporting has also its own problems.
For example let’s say a system starts with $10.000 and at the end of the month the balance is $12.000. From a “closed trade to closed trade” perspective, the system made 20% that month, which is quite remarkable.
Sure, but what if I told you that this system had to go through a $8000 drawdown first, would you still be interested?
One thing is for sure, C2 vendors who specialize in dangerous martingale and “average down” systems would love your idea, for obvious reasons.
Mark:
You write two curious things.
You write: "[Marked-to-Market accounting] method IS accurate, but it doesn’t somehow reflect the actual ‘dollars-in-my-account’ results."
And you also write: "Since a decline isn’t ‘real’ unless and until it’s realized (sold), is there some way to close this perception gap?"
I really must disagree with both these statements. The entire purpose of marked-to-market (MTM) accounting, and the reason why every regulatory and accounting standards body insists that it be used, is that it does reflect the reality of what is happening in a brokerage account. In other words, your broker certainly does use MTM valuation when valuing your account, day-by-day, even minute-by-minute. And your broker very certainly will issue a margin call to you, if your account value, as determined by MTM, drops below the required threshold, even if the losing trade causing all your bleeding isn’t officially "closed."
I think you allude to one issue in your post, which is that the demarcations of the calendar are entirely arbitrary. That is very true. So, for example, it is possible to have a system that shows steady “gains” in the monthly-results table, because each arbitrary calendar month starts higher than the previous calendar month – but which is actually a wild rollercoaster within the months.
But that’s what the detailed equity charts are for – to show you the change in MTM account value day-by-day (even, sometimes, minute-by-minute, if you zoom into the chart far enough).
It’s always good to “know what I don’t know”. In other words, I don’t mind being wrong! I guess I need to readjust my perceptions somehow. I was comparing it to a house that I recently sold, but houses don’t get MTM. Thanks for the education Matthew.
