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Comment

Market behavior was a bit different 5 years ago.

Answer

For the arbitrage approach I’m trading, it doesn’t matter.
It is not a specific implementation scenario that is traded, but the fundamental and statistical properties of the market as a whole.
These are based on the principles of a market auction and the need for large participants to hedge their positions.
The approach has been tested on historical data since the 1950s, and nothing has changed globally in it.
And in general, it cannot change because the processes that take place in the market are governed by physical laws that are unchanged.
To anticipate your next question, “Why doesn’t everyone do this?”, the answer is simple:

Continue reading “Q&A 3 market behavior”

Total Returns 2018-2023

Total returns: November 2018 through September 2023

This is a combined statistic of my two brokerage accounts. I used to trade with Exante. Now I’m with IB.

Below are the trading statements in pdf format.

Total returns: November 2018 through September 2023 vs Benchmark SP500

Total returns: Strategy +171.9% vs Benchmark +66.9% (2.55x)

CAGR: Strategy +22.7% vs Benchmark +11.0% (2.05x)

CAGR inflation adjusted: Strategy +17.8% vs Benchmark +6.8% (2.6x)

Max. Drawdown: Strategy 24.2% vs Benchmark 35.3% (1.45x)

MAR ratio: Strategy 0.94 vs Benchmark 0.31 (3.05x)

MAR ratio inflation-adjusted: Strategy 0.74 vs Benchmark 0.19 (3.9x)

The Strategy outperforms the benchmark in terms of risk/return (MAR ratio) by 3 times or almost 4 times inflation-adjusted.

For the first 2 years I had very high transaction costs, overnight rates and borrow rates with my previous brokerage account: total impact was -7.5% per year vs -3% per year now. Had I used IB immediately, the return would have been about 4% per year higher in 2019 and 2020. Do not repeat my mistakes.

Continue reading “My trading statistics for the past 5 years”

Comment

You should just buy tqqq

Answer

When the last drawdown of the Nasdaq100 was -37%, the drawdown of TQQQ was -80%.
Let’s remember the drawdown of the Nasdaq100 in 2000–2002: it was -81%.
What will happen to TQQQ? You’ll lose 99.9% of your funds. Even after more than 20 years, you won’t be able to get out of the drawdown and even beat inflation.
It’s impossible to beat the market over long periods of time with high leverage in indices.
Below is a synthetic TQQQ chart based on QQQ data since 1999 and a link to the simulation. You can check it yourself and see that all the numbers are correct:
If you compare the 3x simulation with the real TQQQ, you’ll see that TQQQ is worse. And in reality, everything will be even worse than in the picture. Unfortunately, it is not possible to beat the market in such a simple way.

You’ve surely read my post with 2022 trading results.

There I mentioned the most important achievement of the year: the development and practical application of a small-cap strategy. In this article, I’d like to tell you more about what it is, how it was developed, what historical results have been achieved, including the 2008 crisis; and how you can get access to the model.

Here is a chart and excerpt from the article in case you missed it:

Small Cap Strategy vs Russel Micro

Important: always subtract the return of the index from the return of the securities portfolio to filter the average market direction and determine your potential return. When the index shows its average return after some time (+6.3% GAGR for Russell since 2008), the strategy should generate approximately 0.291+0.063 = 0.331 or +33.1% CAGR in the long run.

Broker’s report: here.

How the model was developed

I’ve been interested in securities for a very long time, and over the years I’ve learnt several key ideas from various sources:

Continue reading “No need for ETF indexes anymore”

Hello everyone!

I decided to summarize the results of another trading year and share some good news with you (if there’s any good news at all from 2022, given the circumstances).

Total returns log chart 2018-2022

+127.3% total return, CAGR +21.8% vs 4.9% benchmark, log scale

 

 

 

 

 

 

 

 

 

Despite the -14.3% return in 2022, I think this performance is still acceptable considering that the benchmark (SPY +TLT) showed a -21.7% decline and we have an excess return of +7.4%. Especially considering that the securities and bonds market has experienced the worst decline in the last 50 years.

Continue reading “2022 RESULTS”

In this series of Q&A posts, I’ll post some of the comments and questions under my ads or articles, as well as the answers to them.

This one is from the end of December 2021.

Comment

Still underperformed the market this year. The market made over 100% in the last year and half, while you are up 130% in the last 3 years. Nothing to brag about.

Answer

1. The profit of S&P500 “in the last year and half” since July is not > 100% but +54%. It’s obvious to me that you took the profitability of the market from the bottom of its decline in March 2020.

You can’t do that, because the risks have already been realized, which we had no way of knowing in advance. In data science, this is called Look-Ahead Bias and is a very gross error.

Take the period literally a few months earlier and you’ll see the profit drop from 119% to 46% and the drawdown increase from -11.1% to -35.5%.

2. My profit for 3.15 years is not 130% but 158% https://reallyeasytrade.com/trading-statistics-for-3-years/

3. My trading is market neutral, meaning a steady flow of profits from year to year. Whereas the S&P500 may not make any money for 10+ years and has a very low historical profit of 7% annually above inflation with monstrous drawdowns of 50%+.

4. You can’t compare returns for different time periods, the profit for 3.15 years should be compared with the profit for the same 3.15 years. 158% vs 77% SPY.

5. You can’t just compare absolute returns relative to each other; you need to compare profit (CAGR) / risk (MaxDD):

Continue reading “Q&A 1”