If you have a question that is not specific to you, please post it here, as the answer may help others as well!
I’ve received a handful of questions already via private message, which I have been happy to answer and will continue to answer, but I’ve had recurring variations of two questions:
#1: Is your (self-reported) ROI based on trade balance or starting portfolio balance?
The ROI and Drawdown values I report are based on the starting portfolio balance, not the trade balance. As the cash margin requirement to trade one S&P E-Mini contract is around $13K currently (at IB at least), both ROI and Max DD would be MUCH higher if reporting on a trade balance of $13K. This trading is intended for a $50K balance, so all values are reported assuming a $50K starting portfolio balance.
While not exact to the dollar as the strategy is tuned every weekend, here is a one year backtest of the current iteration I’m running:
#2: Drawdown questions: how much, how often, are you in one currently…
The max historical drawdown was right about 26%, which would be about $13K on a $50K starting portfolio balance. I’ve actually been trading much more than $50K on this strategy, so my drawdown was quite a bit more than $13K when it happened :).
We are currently not in a drawdown. I had that 26% drawdown in early November, and while it started recovering through the rest of the month, it did not fully recover that 26% until mid-December. Since then, the worst drawdown was about -14% in early January, which we have more than recovered from, and are up just over 10% for the month currently.
Futures contracts are highly leveraged instruments. This strategy has double-digit drawdowns almost monthly, usually an open position that it holds until recovering (it does use stop losses as well). YOU NEED TO BE OK WITH PERIODIC DOUBLE DIGIT DRAWDOWNS, or this is not the right strategy for you. It’s easy to say, but hard to live through, I know, since I’m trading this right along with anyone else.
The chart below should help to understand the frequency and depth of drawdown (at least historically). While this chart and backtesting reflect an astronomical 200% gain in the worst year for the market since 2008, it also reflects regular drawdowns of 10% or more, and several drawdowns >20%:
