In 2001 MRCI published an article titled "Evaluating Seasonal Strategies" (located
here) in which we discussed
processes by which a trader could evaluate seasonal strategies. One methodology
discussed was to incorporate volatility-based stops on a strategy-by-strategy
basis.
Utilizing one particular strategy as an example, a December British Pound, we
discussed a methodology for evaluating the individual years "Worst Equity Amount
" to determine on a by-strategy basis how much movement had to be allowed in
order to maximize potential profitability for a strategy.
We have been asked periodically to update that particular article; but, while
evaluating it, we elected to go one better. For a full discussion of the
methodology, refer to the article listed above. But starting in October 2014, a
stop analysis graph is available for each strategy published on MRCI's web-site.
When viewing the detail of any Futures or Spread strategy, the title of the
final column "Worst Equity Amount" is now a hyperlink to a graphical
representation of the analysis.
Soybean Meal(CBOT)-December |
Buy on approximately 10/06 - Exit on approximately 10/25 |
Contract Size: 100 tons |
Cont Year |
Buy Date |
Buy Price |
Exit Date |
Exit Price |
Profit |
Profit Amount |
Best Equity Date |
Best Equity Amount |
Worst Equity Date |
Worst Equity Amount |
2013 |
10/07/13 |
420.70 |
10/25/13 |
423.50 |
2.80 |
280.00 |
10/24/13 |
530.00 |
10/15/13 |
-1830.00 |
2012 |
10/08/12 |
472.60 |
10/25/12 |
481.40 |
8.80 |
880.00 |
10/24/12 |
930.00 |
10/16/12 |
-1980.00 |
2011 |
10/06/11 |
304.10 |
10/25/11 |
322.20 |
18.10 |
1810.00 |
10/14/11 |
2350.00 |
|
|
2010 |
10/06/10 |
295.80 |
10/25/10 |
334.60 |
38.80 |
3880.00 |
10/20/10 |
4200.00 |
|
|
2009 |
10/06/09 |
277.50 |
10/23/09 |
303.30 |
25.80 |
2580.00 |
10/12/09 |
2980.00 |
|
|
2008 |
10/06/08 |
249.90 |
10/24/08 |
268.30 |
18.40 |
1840.00 |
10/09/08 |
2610.00 |
10/15/08 |
-540.00 |
2007 |
10/08/07 |
260.50 |
10/25/07 |
279.50 |
19.00 |
1900.00 |
10/15/07 |
2070.00 |
|
|
2006 |
10/06/06 |
167.80 |
10/25/06 |
185.20 |
17.40 |
1740.00 |
10/24/06 |
1780.00 |
10/10/06 |
-100.00 |
2005 |
10/06/05 |
167.30 |
10/25/05 |
170.90 |
3.60 |
360.00 |
10/13/05 |
1030.00 |
10/10/05 |
-70.00 |
2004 |
10/06/04 |
156.70 |
10/25/04 |
158.40 |
1.70 |
170.00 |
10/11/04 |
660.00 |
10/14/04 |
-420.00 |
2003 |
10/06/03 |
201.10 |
10/24/03 |
240.30 |
39.20 |
3920.00 |
10/24/03 |
3920.00 |
|
|
2002 |
10/07/02 |
171.00 |
10/25/02 |
169.90 |
-1.10 |
-110.00 |
10/21/02 |
140.00 |
10/09/02 |
-620.00 |
2001 |
10/08/01 |
166.70 |
10/25/01 |
161.30 |
-5.40 |
-540.00 |
|
|
10/22/01 |
-1050.00 |
2000 |
10/06/00 |
167.90 |
10/25/00 |
170.00 |
2.10 |
210.00 |
10/19/00 |
370.00 |
10/13/00 |
-520.00 |
1999 |
10/06/99 |
149.80 |
10/25/99 |
150.40 |
0.60 |
60.00 |
10/13/99 |
710.00 |
10/22/99 |
-240.00 |
Percentage Correct |
87 |
|
|
|
Average Profit on Winning Trades |
15.10 |
1510.00 |
|
Winners |
13 |
Average Loss on Trades |
-3.25 |
-325.00 |
|
Losers |
2 |
Average Net Profit Per Trade |
12.65 |
1265.33 |
|
Total trades |
15 |
SEASONAL TENDENCIES ARE A COMPOSITE OF SOME OF THE MORE CONSISTENT COMMODITY
FUTURES SEASONALS THAT HAVE OCCURRED OVER THE PAST 15 YEARS. THERE ARE USUALLY
UNDERLYING FUNDAMENTAL CIRCUMSTANCES THAT OCCUR ANNUALLY THAT TEND TO CAUSE THE
FUTURES MARKETS TO REACT IN A SIMILAR DIRECTIONAL MANNER DURING A CERTAIN
CALENDAR PERIOD OF THE YEAR. EVEN IF A SEASONAL TENDENCY OCCURS IN THE FUTURE,
IT MAY NOT RESULT IN A PROFITABLE TRANSACTION AS FEES, AND THE TIMING OF THE
ENTRY AND LIQUIDATION MAY IMPACT ON THE RESULTS. NO REPRESENTATION IS BEING MADE
THAT ANY ACCOUNT HAS IN THE PAST OR WILL IN THE FUTURE ACHIEVE PROFITS UTILIZING
THESE STRATEGIES. NO REPRESENTATION IS BEING MADE THAT PRICE PATTERNS WILL RECUR
IN THE FUTURE. HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS,
SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY
ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.
IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE
RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING
PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT
THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION,
HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL
TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL
TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR ADHERE TO A PARTICULAR
TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO
ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS
RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC
TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF
HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL
TRADING RESULTS. RESULTS NOT ADJUSTED FOR COMMISSION AND SLIPPAGE.
|
When that hyperlink is selected, a new window will open depicting hypothetical
stop-loss returns. Per the article previously discussed, the total hypothetical
results are evaluated using stops in $50 increments from $0 to the first amount
above the largest drawdown experienced by the strategy. In this particular case,
reading down the "Worst Equity Amount" column you see that this Soybean Meal
strategy saw its largest drawdown in 2012 at $1980 which makes the last stop
evaluated $2000. A green bar represents the optimal historical stop amount for
that particular strategy. The red bar(s) highlight where the MRCI common 130%-of-net-equity
stop would reside.
|