That is a very informative chart CoreyR.
What was the max drawdown for the XIV buy & holders?
I just joined Roberts VIXTrader Pro after following for almost a year.
I lost a lot of $ on other VIX strategies because I flinched when I was down 20, 30%.
I wasn’t sleeping well @ night & constantly checking my IB phone app, hoping for the bleeding to stop on the bad days.
All the time thinking "could this be it? The cliff we all expected to see eventually? The turning point?
I have learned a lot in the last year of being on C2. Mostly about myself & my threshold for pain.
Pro seems to fit my needs. I like the way Robert is not afraid to change directions in a heartbeat.
I am sleeping better at night now & am hoping he can continue to keep up the unbelievable returns.
Interesting that some of his total return % was made on VXX & not just XIV.
When XIV finally does start taking a turn for the worse, the buy & holders will be wishing they were in one of Roberts strategies making $ on the way down.
That is a very informative chart CoreyR.
In the past few weeks I have faced a sad phenomenon… Some of my new subscribers have lost money instead of making money because they unsubscribed after a small DD… Some of them even sent me an apology for not being able to withstand the pain of the small loss … I personally felt their fear and pain but I couldn’t help them
This is the worst thing that any subscriber can do to himself.
I write these things for them and for every investor who decides to subscribe for any trading strategy in the future.
The solution to this sad phenomenon is actually very simple and almost any investor can adopt it and ultimately give a real chance for himself to earn a lot in the capital market…
In fact, most investors in the market, studies talk about 80% -85%, lose money in the market even when the market rises and even when they use profitable trading strategies!
This known phenomenon consists of the following stages in C2:
- The investor joins C2
- The investor invests time and efforts in searching and following a strategy that is suitable for him, especially in relation to risk/reward…
- The investor chooses a strategy that suits him and connects his investment account to it…
- Unfortunately, the strategy is losing money but still in its usual risk range…
- The investor decides after a short time to cut off the strategy from his trading account to stop his pain and many times when his loss is maximal
- The investor sees that the strategy that has lost money is coming back in a short time to itself, and even start to generates profit…
- The investor is angry with himself because he has sworn not once in the past not to repeat this mistake again and again …
- After a while, usually a few months, and after the pain has disappeared, the process starts from scratch …
So what’s going on here? Where is the investor’s mistake? Which action did the investor improperly perform or did not perform at all?
I, as a developer, invest enormous efforts to reduce the risk level, mainly by managing the risk of the strategies, and in fact, in an attempt to minimize the pain of the investors who use them. Of course, there is no possibility without experiencing losses from time to time. In fact, if my strategies will not show losses at all then instead of earning 100% or more per year, they would earn hundreds of percent each year …
DD and losses are part of the strategy exactly as the profits but the investor knows how to deal with profits, but knows less how to deal with DD…
So what’s going on here?
What happens here, in my opinion, is that the investor does not prepare a personal plan for managing his risks, mainly in accordance with his personality and needs.
What is meant by? If an investor sees for example a strategy that has a DD of 15% and is convinced that it fits his personality and is psychologically capable of such an impairment, then he must realize that he is likely to be wrong and he will not succeed if this DD happens as soon as he joins. These are the facts of life. 15 years ago it happened to me too so I know what I am speaking about…
So what solutions are?
Option 1: Joining the strategy for the first time with only a fraction (say a third or a half) of the amount designated for the investment, and only when the strategy showing profits, add additional amounts gradually.
In this way the investor has some control over the risk, his risk is lower and the sleep point is further away.
Option 2: Split the funds designated for investment between a number of strategies with low correlation between them…
In conclusion, I think that only risk management, both on the part of the developer and the investor, will bear fruit in the form of calm clients who will give the strategy the time it needs to produce a good return for them…
Option 3: Lose money enough times for long enough that you eventually learn how to take losses.
For me it was Option 3 and just gaining experience. Option 1 and 2 can help but you’ll still eventually mess up if you don’t know how to take a loss. Anyone can manage profits but handling losses is critical and I think it just takes time and experience to get that skill.
Option 3 is for investors without a strategy/plan/experience… I spoke about investors who decided to follow strategy which already has RM and MM and of course includes SL…
SL point is probably the most challenging issue in developing RM and MM…
Thank you for your post. I Agree!!!
Did this really happen? The VixTrader and VixTrader Pro strategies hardly had any drawdown. I increased my scaling after the recent small losses. If the investors want guaranteed returns they needs to be in low return investments like bonds instead of trading equities. Or they can just put a small portion of their funds in trading.
The most important thing to the regular investors is not to lose money… This is why the VIX Trader Professional is basically dedicated to the professional and experienced investors and VIXTrader is for the regular investor…
The interesting point here is that the investors know in advance that the highest DD in the last 20 months of the strategy was around 7% and still they unable to see 4% DD in real life…
This is a VERY important issue… It shows that even a successful strategy is not enough to make money
I agree with you completely. All these guys underperforming buy and hold
And patting themselves on the back while they charge large sums.
Finally we agree together about something
I think you should subscribe to VIXTrader…You are conservative in your style and this could fit you perfectly…
Robert, I subscribed to your system but had to cancel when it became apparent it could not be traded manually. And that’s one of my sine qua non’s!! Otherwise, I would subscribe to VIXTrader in a heart beat.
Robert, your model seems very robust to me. Congratulations. Risk management is very professional and the returns you get are very good. These models are necessary in C2. Best. Gonzalo.
I really have a great news for you!
In the coming Friday I will start 2 new strategies which can be traded manually… Great performance and low DD as I like…
I will write here in Friday the full details…
Don’t stretch yourself too thin Robert
I agree nearly all of us are under performing a buy and hold other than those who are using leverage or naked positions to outperform. Being a developer of one of these, I am biased. However, I do believe some of these managed strategies that are under performing will outperform in the future.
All these stuff will fail when the market is down. Mark my word.
No doubt most will take big hits. However, if you only invest part of your money and take some of the profits and place them into other things, I think volatility trading is a great component to a whole portfolio. That is what I am trying to do with DIVERSE, which only does volatility trading as about 15% of the total portfolio value.
Then why don’t I buy XIV directly?
Well by my testing holding XIV may give you roughly 15% a year with massive 75% plus drawdowns. I do believe active management can improve the return and reduce the drawdown. My backtested algo like many others indicate that it is possible. However, some of that is built off of extrapolated data to simulate 2008 etc.
In other words they are not perfect. So, that is why I would never put all of my portfolio into VIX strategies - even my own. So, I do believe that it is possible to get better than that 15% a year, but there will still be big drops in the VIX strategies overtime.
In the off chance that I or other developers are wrong no one should ever put all their money into any strategy much less a vix strategy. That is why I do DIVERSE with 15% actively managed volatility, 15% actively managed stock picking, 40% long term bond index fund, 15% intermediate term bond index fund, 7.5% gold index fund, and 7.5% commodities index fund.
I do think just doing a long term hold with a 1 year rebalance of 15% XIV, 15% Stock market Index fund, 40% Long term bonds, 15% intermediate term bonds, 7.5% gold, and 7.5% commodities would outperform the S&P 500 and be super easy and cheap to implement.
That feeling is not correct!