Equity Curve in 2011 vs 2010
Posted by Kris Pivo on Saturday, May 28, 2011 Under: Monthly Performance
We are running our 2011 strategy for the last 5 months and it is worth while to take a moment and review its effectiveness. Our ultimate measure of success is represented by the equity curve, which shows win-loss, trade-by-trade [see chart below]. The objective is to have a smooth equity curve, starting at the bottom left corner and ending in the top right corner with the least deviation from a straight line. I.e. we don't like major step changes [up or down] as it indicates major market shifts and/or that we are assuming excessive risk. However, we live in a real world and we are exposed to many random events [e.g. who would predict a nuclear disaster in Japan!?] where some deviations are inevitable.
So, the chart represents Cable [GBP/USD] over the last 12 months [Jun-2010 to May-2011], with our equity curve just below the price chart [the fat green diagonal line], and Multiple Moving Averages histogram at the bottom [which we ignore in this discussion].
Please note the small step down in equity curve, slightly to the right from the middle of the chart. At the end of Dec-2010 we closed our open (unprofitable) position to square the books in preparation for 2011. As much as we don't like it, it clearly demarcates the performance of our 2010 strategy [on the left side] vs. our current 2011 strategy [on the right].
Our 2010 strategy was more aggressive, with steeper equity curve, but lets not forget that we had a very volatile market (government bailouts, volcanic eruptions) and in addition we were assuming too much risk. As a result we had some surprises along the way, but under the circumstances we did well.
In 2011, our new strategy is delivering a flatter, but near-straight line equity curve! This is exactly what we wanted to achieve. It is performing well under tough market conditions, but we mustn't let our guards down! So, watch this space, we are having a great trading year! Our annualized performance is currently at 70% (based on Jan to May 2011), so our less risky strategy, with flatter equity curve might actually outperform our last year's more aggressive strategy.
Given that Cable is one of the most difficult markets to master, we are very pleased with ourselves.
So, the chart represents Cable [GBP/USD] over the last 12 months [Jun-2010 to May-2011], with our equity curve just below the price chart [the fat green diagonal line], and Multiple Moving Averages histogram at the bottom [which we ignore in this discussion].
Please note the small step down in equity curve, slightly to the right from the middle of the chart. At the end of Dec-2010 we closed our open (unprofitable) position to square the books in preparation for 2011. As much as we don't like it, it clearly demarcates the performance of our 2010 strategy [on the left side] vs. our current 2011 strategy [on the right].
Our 2010 strategy was more aggressive, with steeper equity curve, but lets not forget that we had a very volatile market (government bailouts, volcanic eruptions) and in addition we were assuming too much risk. As a result we had some surprises along the way, but under the circumstances we did well.
In 2011, our new strategy is delivering a flatter, but near-straight line equity curve! This is exactly what we wanted to achieve. It is performing well under tough market conditions, but we mustn't let our guards down! So, watch this space, we are having a great trading year! Our annualized performance is currently at 70% (based on Jan to May 2011), so our less risky strategy, with flatter equity curve might actually outperform our last year's more aggressive strategy.
Given that Cable is one of the most difficult markets to master, we are very pleased with ourselves.
In : Monthly Performance
null
