That is fantastic and you did most of it during a very volatile crash/recovery(?). Wishing you continued success!
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I hope you all are doing well. There will be some changes to Patience is a Virtue coming to adjust for the recent announcement - linked below. In the long run I think this will not be a big deal, but will require me to find some replacement funds for ZIV, TVIX, and UGLD. I have several possible methods to address this change, and will update subscribers and others as I select a way to handle this. https://www.prnewswire.com/news-releases/credit-suisse-ag-announces-its-intent-to-delist-and-suspend-further-issuances-of-its-velocityshares-etns-301080971.html
Thank you kind subscriber who sent me the link!
Iâve been using UVXY SVXY NUGT.
Feel free to copy.
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Dear subscribers,
Due to the fact that TVIX, ULGD, and ZIV will no longer be traded on exchanges in the near future, I have made some changes to the ETF selection. I certainly could have waited to do this, but decided to take the conservative approach and get out of these before there was any erratic price action or drift from the true values.
For the time being they will be replaced by UVXY, GLD, and SPY. These new ETFs are not exact equals. However, I have tested all of them already in backtesting well before I published my strategy and know they will do just fine. I may look for a different alternative to GLD and SPY, but for now I am going with what I know.
They were not my first choice obviously, but the silver lining is that overall there is less leverage use with them. For now I have not changed the percent allocations, but have just done a plain swap. For example, even though GLD is 1/3 the leverage of UGLD I have exchanged UGLD for an equal dollar value of GLD - roughly. I will be doing further backtesting over the next month or so to dial in exactly how the allocations should change in the long term for everything. Once I do this I will publish updated backtest results in the forum.
I started to replace UGLD with UGL. However, I forgot that many people including myself who follow with IRA accounts at Interactive Brokers will have trouble following. UGL is not permitted at Interactive Brokers inside IRA accounts. Similarly, I have considered using SVXY in place of ZIV, but SVXY has restrictions at IB for use in IRAâs.
For now I will just be keeping calm and carrying on.
Interactive Assets
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Yeah itâs good you didnât do this. Two completely different animals.
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They certainly are. I have run simulations with both. I am able to do better with SVXY in simulation vs ZIV, but donât use it because of its structure. If they were to bring back a XIV type option at the original -1 factor I would use that in place of ZIV. The indicators would certainly change etc., but in simulations I would do best if I had access to a recreation of XIV. Yes I know it sounds crazy. That is why it would only ever be a part of the portfolio just like ZIV was only a part of it.
Broadcast to Subscribers on 6/27/2020
Dear Subscribers,
I am very grateful for you and hope all is well! I want to cover two things. The first is that I will not be able to monitor my system on July 1st or 2nd. As you should know by now, my system runs on its own and all should be just fine without me. However, I have trained my wonderful wife as a secondary safety net. If anything gets outside of predetermined limits I have set, she will close out those positions.
I am leaving my money tied to the system while I am out of commission. However, you will have to decide if you feel comfortable doing the same or not. I simply wanted to make sure you were informed. Between now and when I am back in the drivers seat, I will be restricting new subscribers. That way no new people can join without getting this warning.
The second item I want to cover is much more exciting. I have recently made some huge progress on backtests for one aspect of the strategy that would build upon one of part current aspect of the strategy. However, to properly implement this aspect into the system I would need to purchase long put options.
I am not making any final decisions at this time, but it looks promising that in the near future I will be adding some long options trades to the strategy. If you donât have permissions to trade long put options you wonât be able to copy those trades. Therefore, you may want to reach out to your broker to see if that is a permission that you can or should get.
Some of you may not want to trade options for a variety of reasons, and I respect that. However, if I do implement the options it is because they are the best tool I can find, and I will be tying my assets to the strategy I believe to be the best. If you have any problems with the strategy trading long put options please let me know. If enough people donât want options added and are willing to pay for a version of the strategy without options (the current version), I can likely publish two strategies to accommodate.
As you know I donât do naked shorting because of how risky it is. I already take on enough risk for my taste. However, my most recent backtests have indicated that I may see some serious improvements to the overall long-term success of the strategy by implementing a short replacement strategy on several ETFs. As I like to remind you, even with this potential improvement I still expect the long term average return to be far below the current 100% annualized. So donât say I didnât warn you!
Blessings,
Interactive Assets
Dear subscribers,
Thank you again for your support. I now publish two strategies: Patience is a Virtue & Opt for Patience. Both strategies are remarkably similar in application and methodology, but I believe that in the long term Opt for Patience will be the better strategy because it will occasionally use long option positions. Other than that, the strategies are very similar. I will keep both strategies running so you can pick whether you want to follow the stock only strategy (Patience is a Virtue) or the stock/option strategy (Opt for Patience). I will keep most of my own assets following Patience is a Virtue for now, but plan to slowly shift over to trade like Opt for Patience assuming I donât run into any large road blocks.
I am starting small with Opt for Patience because backtesting options is a much more difficult task compared to ETFs and stocks. So even though the results seem more promising than Patience is a Virtue I am not as confident. Therefore, my plan is to go slow and verify that my real options trades in Opt for Patience track with my simulations and expectations. I wish you all the best!
Interactive Assets
Dear Subscribers,
As always thank you for you trust and support. I have no idea what the market will do tomorrow. Just like I had no idea I would do so well today. I am no fortune teller. I simply use my backtests and studies to estimate what is likely. Similar to how an insurance provider has no idea which particular drivers will wreck their automobile, I donât know what any day holds. However, if I keep my leverage in check, diversify across various backtested indicators, and diversify across primarily appreciating assets I have a reasonable chance of doing well.
Perhaps the biggest obstacle to succeeding with my strategies is remaining consistent because it likely feels like I am doing nothing or am asleep at the wheel during slow or down periods. The end of last week was a bit rough in the terms of drawdowns, and I felt it particularly with some large personal expenses in my life. If you are anything like me even a small drawdown can begin to make you question the validity of any investment strategy. Yet so often it is proven to me that consistency is necessary. It is shown over and over again in backtests and real trading. When I am tempted to not be consistent, my biggest aid is digging further into my backtesting and checking for errors or improvements. That often gives me a confidence boost making it much easier to stick with the program. Unfortunately that is just not an option for you since I canât give away my secrets.
Since my backtests are proprietary, you have to find different ways to make copying my trades mentally bearable for you. My suggestions are to:
- Not follow with too high a percent of your net worth.
- Look at the history of my performance and my backtests.
- Look at my strategy description. Does the philosophy seem believable.
- If you donât think you can remain subscribed after a 35% drawdown then consider changing something. (I may work on publishing a strategy that reduces drawdowns, but the returns will not be as great.)
- If the strategy produced no net profits for a year can you remain consistent?
I donât want to scare subscribers away, and I donât want to give subscribers a false sense of security. You have to decide for yourself what makes sense. As for me I will keep calm and carry on.
Interactive Assets
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Hello,
Iâm new around here but I just wanted to ask you how youâve changed the strategy over time. Iâm mostly curious about the pre-epidemic time frame moreso then post; the sideways movements.
Is the strategy unchanged since then? Or have you been tweaking it since then.
The main concepts and components of the strategy have not changed at all since I started publishing. The sideways movements you are referring to are normal. I fully expect to have periods of sideways or negative returns. Looking at the backtests results earlier in this thread you can see they certainly happen.
The minor changes have only been adjustment due to certain instruments being taken away. For example, ZIV and UGLD both went away and were replaced by adjusting allocations to GLD and multiple major leveraged stock ETFs like TQQQ, UPRO, TNA, and MIDU. FYI I may eventually replace GLD with options on GLD in the Opt for Patience strategy when I finish further backtests.
I have no doubt that at some point there will be a 12 month period or longer where I lose to S&P 500. Backtest show it and I have already had roughly 7 month periods of under-performance. Take a look below at this period of under-performance prior to the pandemic. It isnât pretty but the same mechanics were working then as when I out-performed the market before and after that period.
I would love to say that I have come up with a strategy that can beat the market in every 60 day period by 1% even after a after fees are withdrawn, but that is hard to do. I am working on one but have so far failed in back-testing a successful strategy. Judging by the number of continually certified C2Star strategies I am not alone in the struggle.
What I have managed to develop is a strategy that I trust and have enough confidence in to continue being patient even in time periods like the one pictured above. Under-performance has and will continue to happen at times. I hope that helps.
I am working on starting my own RIA (Registered Investment Advisor) while still running my C2 systems. My compliance consultants have told me that it is best to keep my C2 presence and my RIA presence completely separate and that no client should be a subscriber and not subscriber a client. Essentially, they are worried about the performance advertising problems etc. So until I find anything different I am keeping things completely separate.
In an ideal world for me I would like to have one set of block orders that goes through for all my clients and c2 subscribers. That would be the most fair. However, I the best methods I have to do this are not great. I am open to any solutions. My current thoughts are this.
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Scale strategies down to my account size so I can start doing broker transmit that will pick up my block trades for my clients. I like this method except for the fact that I have to scale both of my current strategies down because all of my personal accounts are at about $100,000 or less making them to small to control my current C2 strategies at their current equity values. From what I understand scaling down is a difficult process. I do like that I would save $100 a month by not needing to autotrade my own strategies. I donât like that my fee would then be a higher percent of the equity etc. Overall this may be my best choice. I also donât like that it would make it so that I need to keep my account size in sync with my C2 strategies which can become annoying when spending money or depositing more in my real accounts etc.
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I could link each client accounts to the appropriate strategies and have everything run off of the same signals. However, I know of no good way to do that without setting up a C2 account for every single client account and paying $50 a month each. Plus if C2 has some glitch etc then that would affect my clients where I have more legal responsibility.
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I could remove all TOS and simply try to get my orders for C2 and my RIA to execute as close together as possible.
Right now I am leaning towards option 1 or 3. If I do that I likely will implement it in early September.
Wouldnât option 1 mean that the clients are always getting their executions done first? So the clients would be front running the C2 subscribers?
@MaxTor assuming there is even a short delay between IB and C2, I believe you are right. However, they are all at least getting orders placed within the same second or so. Also as a RIA, I am operating as a fiduciary so, I believe it is more important to put those clients first. That being said, I trade pretty infrequently and fairly liquid items, so I donât think any of the above methods will result in a significant difference for any party. However, I want to avoid any appearance of trying to front run etc. Another negative I thought of for option 1 is that I think even if I have stop orders sitting in my IBKR account they donât show up to subscribers if I am using broker transmit. They only show up as market sells once IBKR triggers. That is my understanding.
Dear Subscribers of Opt for Patience,
Thank you for your continued support. Currently, I have 2.5 of my 3 IBKR accounts following Patience is a Virtue and the remaining half following Opt for Patience. However, only 1 of the 3 accounts is currently captured in my Trades Own System badges leading to the small scaling percentages on my badges. Soon, I will have one brokerage account per strategy set up to AutoTrade with the full balance of the brokerage account.
Due to this change the scaling percents shown on my TOS badges will go up from their current 15% on Opt for Patience and 33% on Patience is a Virtue. At this time there is nothing you need to do at this time, but I donât want you to fret over the temporary loss of Trades Own System certification of Opt for Patience.
Interactive Assets
Overall I am very happy with this chart. TQQQ has just overtaken me again in total returns. However, my drawdown is certainly much better than TQQQ alone. I personally would never feel comfortable just holding TQQQ.
I highly encourage users to always compare the strategies they are considering vs simply buying and holding the assets they trade. It is very common for strategies on C2 to have fortuitous beginnings making them look smart. However, the reality may be that they have just gotten lucky and started at a time where the asset did pretty well.
Dear Subscribers,
I hope all is well. Fortunately, Patience is a Virtue and my other strategies have had some very nice returns so far. I am obviously very excited about how well they have done. However, we must always remain mentally prepared for drawdowns. My backtests suggest that at some point I am likely to have a drawdown of at least 35%. Furthermore, 133% annualized return wonât last forever. I imagine the long term results will be much more similar to my backtested average as shown in the forum thread Patience is a Virtue. The backtest also have years that get results well over 100% but not most years.
So be prepared. Things will not always be as good as they are now. Similarly when things do get bad that doesnât mean they will stay bad forever. I firmly believe in my strategy and the methods I am using. I am essentially betting my entire financial future on it. However, I am always making sure that I am financially okay with at least a 35% drawdown or more. You should do the same.
When my strategies inevitably hit a slow or bad period I expect many subscribers will stop and jump out at some of the worst times. I donât blame you but I do caution you not to do that. I also fully expect to get blasted with many angry private messages whenever that drawdown occurs. That is fine. However, if you are not yourself prepared to have a 35% drawdown or more while following any of my strategies please heed my warnings! I will have little sympathy for you if you do not listen now.
That being said I donât know if the next month will be a good month or a bad month. I am just playing my odds based on my simulations. Therefore, I will continue to carry on having an emergency fund, solid personal finances, and investing very aggressively with what I donât need for a long time. Please consider your own situation and the affect a 35% drawdown or more in my strategies would have on your life.
Interactive Assets
I apologize for sending two broadcasts. However, I should also remind you that today or in the near future when Interactive Brokers moves my account to be under an advisor. I will at the minimum lose the capability to AutoTrade for a period of time. Therefore, you will likely get a message saying I have lost my TOS status. This is why. I am still trading these same methods with my own money but C2 wonât be able to see it.
Certainly a rough day in the markets for my accounts, but well within my models and expectations. For some of you a 10% swing in my system when the market has only dropped about 3% may not be willing to stick with it. That is ok! My system isnât for everyone.
For me I find comfort in looking back. The same signals that helped me generate a 125% return YTD even with the roughly 10% drop today. That is the nature of my strategy and it requires a great deal of patience, trust, and risk tolerance.
That being said I am not doing nothing today. Days like today only increase my motivation to find more and better ways to invest, but unfortunately I have no news on any great new method that will circumvent days like today.
Fortunately I recently quit my job and one of my main focuses will be working on a way to start adding some effective intraday trading. As of now I have not succeeded in simulating anything on a intraday trading time frame that will have long term success. I am in the process of testing all sorts of ideas. Some that are my own some that just come from sifting through all the junk on the internet. I also want to say that I am open to exploring any ideas you may have. However, before I would every trade with anything you suggest I would then take it an run numerous simulations on it myself to test the merit.
My best advice for today is stick to the plan or find a plan that better suits you. Donât just change the plan.
Yes the strategy has done very well even considering the recent drawdown. At the same time have you considered combining more positions that have a lower correlation to each other in order to reduce the drawdown?
Believe you me I have considered it and have been working on it. Fortunately, I resigned from my day job about a month ago and worked my last day last Friday. So I do have more time to work on these things now and am more open to creating a system that trades throughout the day not just at the end of the day. I have some promising theories and initial tests in the works but do not have anything ready for sharing yet or investing large sums of my own net worth.
While I am looking at adding other assets my main focus is adding additional smaller time frame versions of existing signals. Right now that is the most promising theory and work in progress I seem to have. Like all things I am a big fan of robust backtesting and small scale trials before implementing here.
The best option immediately available to reduce drawdowns is to reduce scaling percentages. However, in my opinion that would be something better to do when the strategy is screaming up rather than in moments like this.
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