Diary of a Littlefish: February 2017

The purpose of these blog posts is to update you guys on a monthly basis on my progress with a strategy taught to me personally by Littlefish FX Founder Sam Barry. For confidentiality reasons I am unable to disclose any specifics of the strategy, but all I can say is it’s classed as a breakout system.

The month of February seemed to be hungover from the nightmare of January’s results. In the first two weeks I had about 15 losses in a row, which had an impact on the bottom line at the end of the month. However after those initial few weeks I started to see a slight upturn and my trades were starting to become profitable and started clawing back at the hole the beginning of the month had dug. Although it wasn’t enough and I had a third month in a row of net negative pips.

Apart from trading the strategy by following the plan, I looked into the impact of early week movements across the currencies to see how it affected the future moves throughout the rest of the week. Because I note down every morning* the price from the previous day’s moves, I can calculate these moves as a percentage. I used these as the base of my analysis to see if there was any notable impact from the start to the end of the week.

*Collecting the currency move is such a part of my routine now I barely notice I’m doing it anymore.

I can’t reveal too much as it will be easy to understand how this strategy works. But it turns out that if there is a higher than average move during a Monday, price has a high probability of continuing in that direction throughout the week. I looked into various combinations like if it doesn’t move higher than its average one way, but then moves past the average the other way, what does this look like at the end of the week etc. and various other combinations.

I am currently sitting on this analysis for now, working out how I can take advantage of how this can provide a greater edge for the strategy. I don’t want to apply it in such a way that it completely changes the nature of the strategy, it’s a breakout strategy, so is fairly straight forward, and adding extra layers to improve its edge is going to be tricky without changing the way of how I trade the system.

Although I haven’t applied any of this to my strategy yet, it has been a valuable insight into the way the markets move throughout the week.

FEBRUARY RESULTS

Another poor month, but it finished strong and think it’s on the up! (Despite it being the worst performing month yet!) Surprisingly I’m not worried, or wanting to jump ship with the system, Sam has provided some reassurance that the system has had a few hard months. I’m not emotionally attached to the losses either, I have a low risk level within my tolerance, however I believe that I would and could trade this strategy the same way if I had a 50k, 100k, or 500k account!

This month’s results ran from the 6th Feb to the 3rd March as strategy has to run over a course of a week.

So as previously mentioned, this has been the worst performing month yet, returning -1,145 pips! The win / loss percentage is pretty dire as well across all currency pairs. This month, my wins weren’t enough on average to overhaul the losing trades and as a consequence my average pips per trade when looking at all pairs was -25 pips.

The number of trades place on each pair is evenly spread out again; no pair has been triggered significantly more than any others. However with this being the fourth month, I am now seeing some consistency, I am averaging around 50 trades a month, with little variance so far So I can take this as a sign that I’m sticking to the plan.

Interesting to note I’ve taken over 250 trades since starting this strategy. Looking at a yearly view, there will be roughly 750 live trades that I can look back on and analysis. Although a long way off, it will be good to see its performance across a year.

Fictitious 50k Account

Month of February

Similarly to January, if I was using a high risk (2%) per trade, it would have resulted in a drawdown of 19% for the month. However on the other end of the scale, a risk level of 0.25% would have produced only a negative 2.2%, which would be much more comfortable for most traders.

Running Total

Risking 2% per trade doesn’t seem like too much but the results show that it would cause such a big draw down in the account, almost 30%! But it is important to note that I am taking on average 50 trades per month, so I don’t need to be risking this much per trade.

Note: These % figures include holding costs and spreads etc.

Thanks for reading through another addition of Diary of a Littlefish. Again I’ve left you guys with some interesting stuff below.

ADDITIONAL BITS AND PIECES

This Month’s Book – Flash Boys – Michael Lewis

This Month’s Podcast – ChatWithTraders: EP 109: The man who beat the dealer, and later, beat the market – Edward Thorp (https://chatwithtraders.com/ep-109-edward-thorp/ )

Two Blokes Trading Podcast – Naked Trading (http://twoblokestrading.com/041-naked-trading/ )

This Month’s Quote – “Mistakes are the stepping-stones needed for achievement.” – John Wooden

Other Interesting Stuff:

How a $26 Billion Hedge Fund Lures the Beautiful Minds – https://www.bloomberg.com/news/articles/2017-03-06/citadel-joins-two-sigma-chasing-quants-in-campus-recruiting-push

Leveling Wall Street’s Playing Field – Quantopian inspires talented people everywhere to write investment algorithms.

https://www.quantopian.com/home

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Trade The Plan; Rinse & Repeat

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