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A little update in late June 2023. I am at the end of my formal Mentor period with Nick and Craig. What I have learnt is a story for another post, but suffice to say at this stage, “you can teach anybody to design, code, test, and trade” a robust strategy. So for what you guys have taught me and exposed me to, I think my family and I will be forever grateful!
For me, the past 4 months has been non-stop learning, researching, analyzing, building, coding and thinking. All good things must come to an end as I return to my full-time job next week. So, over the last couple of weeks, I have worked on transitioning my mind from full-on systems development, to a place of implementation and execution. Slowly slowly, and softly softly. Setting up new brokerage accounts, planning movement of equity to allow implementation of my strategies etc. Dipping my toe in.
To that end, I can happily say that this morning I executed my first full circle mean reversion trade by closing out my first position! Does that feel good to someone who was rather reticent to go down the higher frequency trade route? You bet. For my position to close with a 8.8% win in just 3 days is just amazing. Was it just signal luck? Probably. Beginners luck? Sure. But, it certainly feels good. Especially the part that the signal came from a strategy that I developed (with help of course).
What did I learn by executing this first signal? There was a slight teething problem around the ranking, which I believe I sorted out, but it taught me another lesson about why in backtesting my strategy works. Did I get a complete fill? Yes, just $0.01 above the low of the entry day. Did my exit influence the opening today? Yes, slightly. My exit suppressed the opening auction price by ~1%, but it was a successful exit in the open. Could I have held the position to exit later in the day? Yes, but that would break my rules and I had no certainty that the price was going to keep rallying.
So with the completion of that trade, and the prospect of another 1000 like it, I feel like I have turned a corner. Will all my mean reversion trades be so profitable? Definitely not. But, my backtesting suggests a win rate of ~68%, so I should be confident to keep taking the signals. Today I have three entry signals in play, and another trade in play, and in the black for now. So, a positive start all round.
I will do another post of where I got to with my strategy development during the mentorship. Suffice to say, I wildly exceeded my objectives in what I achieved.
A little project that has gnawed away at the back of my mind was to develop a monthly rotation strategy for the broader XAO minus the XTO section of the ASX. There are often some strong movers in there (up and down), so maybe it was worth my while.
Compared with my Monthly Rotation for the XTO, I quickly realised this section of the market is a little more challenging. The increased volatility appears to manifest in longer MaxWait times, and deeper MaxDD. I guess when the market decides “risk off”, this section gets hammered quicker than the XTO. To trade this part of the market, it looks like I would need to be comfortable with extended periods of drawdown, that turns around with a stampede. Hmmmm.
One potential solution may be to rotate twice a month, rather than once per month? Can anyone point me to AFL code that rotates every 10 days, rather than end of month, or end of week? Or any other tips for this style of strategy would be greatly appreciated.
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