I've scaled up April's returns for the entire month.
The beta is 3.95 and alpha -23.8% per month. Ouch! This means that if the model returned zero for the month - something that hasn't happened - I would lose 23.8% of my account. It also means I am using 4 times leverage. I'd expect to have a negative alpha, which means that I'm not implementing the model correctly. But I'd like it to be much smaller! The R-Squared is 0.77.
Some months obviously are better than others. This is shown by the positive and negative residuals above and below the regression line. September 2006 was the worst month given how well the model did that month. Though October-December 2006 also all lost money the model was not doing as well in those months.
There are many trading blogs out there and a lot of the traders struggle to make money even if in the long-run they are making money. Making money trading is possible but obviously it is not at all an easy thing to achieve. It makes it clear that the ads telling you how easy it is to make money with the trading method they want to sell you are at best not telling the whole story and at worst scams.
2 comments:
moom,
There is no such thing as stupid trading just undisciplined trading. It's hard. I'm with you for March AND April. I've pretty much have lost %50 of what I've earned in 2007. I'm up, but I'm down in my account. It is so hard to take a loss when you think you are or were right about the direction of the stock you pick. I wish I had an economist brain to think more fundamentally so then all the technically data I use would either agree or disagree. I think having both sides of the knowledge makes the picking process easier and more profitable. Hope things work out for you this month. I need BA to go past $95 by APR 07 expiration date! later -fn
I almost exclusively trade NQ/QQQQ. Even when the macro news comes out I don't really take an opinion based on fundamentals. I just try to go with where the market is going. What I do pay attention to is if there is a divergence between the reaction in the stock market and the bond market or foreign exchange market. If the moves in the different markets don't make sense I know the stock market is likely to move back into alignment with the others. I mostly invest in stocks for the long run, though I trade closed end funds a bit based on the discount to NAV.
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