$33,750 in 12 Months — Real Signals, Real Possibilities

Quant Trader just celebrated its first birthday.

Yes, that’s right, live signals began 12 months ago.

Looking back, I’d say Quant Trader’s start date was just right. Not because a roaring bull market was beginning. But because the worst conditions since 2011 were upon us.

You see, anyone can make money in a bull market. Trading seems almost effortless. People begin to believe trading is an easy way to make money.

But it’s never that simple.

The easy pickings of a bull markets never last. Successful traders also need to navigate the tough times. This is when you see who really knows their stuff.

The last 12 months have put Quant Trader to the test. The period from May has been particularly rough, with six down months out of nine.

Today is the final part of Quant Trader’s performance review. I’m going to bring together the long and short trades to show you the whole. It’s a fascinating outcome.

But first things first, I’m going to update the performance charts for long and short trades. I also want to show you Quant Trader’s version of a league table.

Tallying the numbers

Okay, let’s have a look at the graph for longs.

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This shows the performance of every long position since Quant Trader went live. It assumes placing $1,000 on each signal. And it doesn’t take account of costs or dividends.

You’ll notice that the chart hit a new high this week. The All Ordinaries by comparison is still in the red for the year.

It goes to show you can still find opportunities in a difficult market. Quant Trader’s strategy is to identify stocks that are rising. It’s then a case of running winners and cutting losers.

Here are the numbers behind the chart…

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Next I’ll put some faces to the data. The next list is Quant Trader’s top 30 long trades. To be clear, these are all signals that have been live for some time. Please don’t take this as a recommendation to buy these stocks today. Quant Trader subscribers receive new signals regularly, which is where the next 12 months’ performance will come from.

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This table is really interesting.

Have a look at the percentage profit. Start at the bottom and move upwards.

Notice how the numbers increase smoothly as you go up the list. This is the sort of distribution I look for in a system. It tells me the strategy doesn’t rely on one lucky trade.

The average gain for the group is 99%. Blackmores is by far the strongest performer. If we exclude it completely, the average gain is still a high 80%.

This type of result is typical of a trend following strategy. The bulk of the profits come from the top trades. This enables the system to perform well with a win rate of around 50%.

Ideally your portfolio will have a few stocks from this list. Quant Trader’s strategy is to have many small trades, not a few big ones. This increases the odds of having a selection of the best stocks.

But not every trade does well. There’ll always be trades that fail. This is how the worst 30 long trades shape up…

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You can see the same orderly movement in the percentages. SRX is the group’s outlier. Extreme cases like this should be few and far between.

There’s another thing that stands out. The losses in this group are mostly smaller than the profits from the best performers. This is consistent with back testing.

Remember, the Quant Trader strategy is about running profits and cutting losses.

The group’s average loss is 27%.

Let’s move onto short trades.

This is what the performance graph looks like…

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The chart shows the result of every short signal since 17 November 2014. It assumes placing $1,000 in each trade. No allowance is made for costs.

Now here are the stats…

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Quant Trader’s short portfolio is only slightly ahead for the year. And that’s not unusual. A short portfolio typically makes most of its money in big bear markets.

I view shorting as insurance. Its job is to buffer the long portfolio in a large downturn. The rest of the time I’m happy for it to breakeven. Most of Quant Trader’s profits are from long trades.

Next I’ll show you the league table for shorts. I’m going to reduce it to the top 20. This is because there are less short trades overall.

Okay, here’s the best 20 shorts…

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You’ll notice a similar steady rise in profits. But the average profit comes in at just 50%. The top long trades are much more profitable. That’s because a stock can’t fall more than 100%.

Now let me show you the worst 20 trades.

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Quant Trader uses a wider stop loss for short trades. The reason is to maximise time spent in stocks that have been weak. These stocks often fall the most in a market downturn.

Remember, the aim of shorting is portfolio insurance. But there’s a cost to this strategy — losses for shorts are typically greater than long trades. The average loss on the worst 20 shorts is 42%.

If you trade short, make sure you have a selection of trades. An even spread of risk across many trades is a key part of the strategy.

Bring it all together

It’s now time for the final piece of data. I’m going to bring it all together with a single graph. You’ll see the result of following EVERY Quant Trader signal over the last year.

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This is a really pleasing chart. Quant Trader has made a profit during a bear market. By contrast, the All Ordinaries is down close to 4%. The system has had a good year.

The graph shows the performance of every trading signal since Quant Trader went live. It assumes placing $1,000 on each trade. And it doesn’t take account of costs or dividends.

A robust strategy is a repeatable formula. It should work over and over again. Back-testing showed these sorts of results that were possible. We’re now seeing this come through in live trading.

I know many members have done well this year. It’s rewarding to hear their stories. Quant Trader has made a real difference to these people.

But I’m also aware some members haven’t done as well. I’m always disappointed when I read someone hasn’t had a good experience.

Trading is an uncertain pursuit. A good system can swing the odds in your favour. But there will still be times when trades don’t go your way. As you saw, about half of Quant Trader’s signals fail.

I talk a lot about spreading risk. This is the best way I know to ensure a few bad trades don’t ruin your year. It’s about as close as you’ll get to a safety net for your capital.

There’s another reason for having many small trades. You see, it increases the chances of getting a few of the best performers. These stocks can make a big difference to your results.

The final point I’ll make is about time. Quant Trader is a medium term system that aims to profit from large share price moves. These usually take many months, if not years.

Don’t worry when your portfolio is slow to move. This is a normal part of trading. There will inevitably be periods where prices go sideways or fall.

The key is to stick to your strategy — you need to give your plan time to work. Patience and persistence can take you a long way.

Until next week,


Editor’s note: Is your portfolio performing like the All Ordinaries? Don’t worry if it is — Quant Trader can help you turn it around. Remember, the results you saw before are from real signals. New signals could easily be hitting your inbox from Monday.

Take the next step…see what Quant Trader can do for you.

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Jason is a professional quantitative analyst. Before he graduated in 1991 he joined Bankers Trust — a Wall Street investment bank — to be a trader. After Bankers Trust was taken over in 1999, Jason, already financially independent, co-founded a stock market advisory and funds management business called Fat Prophets. At 37 he sold his part of that business and retired. These days, he’s a private trader and system developer. In 2014 he launched the wildly successful trading service: Quant Trader.

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