Tuesday, May 01, 2007
Trading Result for April
April turned out to be a good month in the end. I made $3278 from trading in my three US accounts. That's about a 10.9% rate of return (per month not per year!) on capital deployed. The NDX rose 5.4% and the model gained 6.4%. Based on my trading since June 2006 I would be predicted to make about 4% when the model returned this amount and so I had a nice positive residual driven by Google and Apple trading. My accounts have gained $12,200 from trading in the same period. So I estimate conservatively that I can make $15k or so per year from trading. Together with passive income from dividends and distributions I'm close to earning enough income (not counting long-term price appreciation) outside of retirement accounts to meet my expenses. There are no guarantees that the recent good trading results will continue as none of the test statistics are very statistically significant yet.
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5 comments:
CONGRATS! Excellent job considering that you overcomed a bad trade to get here! I am have the confidence that I can trade consistently better than the passive index fund. I would love to see you succeed in this difficult quest!
sorry. i meant "do not have the confidence".
I had negative alpha and lsot money trading in the early years. But if I had gone down the route of index funds (there weren't any available to me really at the time anyway and it wasn't a concept I had even heard about almost) I wouldn't have learned about evaluating stocks and managers and developed methods of trading profitably. I am still learning to implement my models properly. Of course if someone sees that their performance doesn't improve after a few years (and they should only actively trade a little of their account) then they should give up, because it doesn't look like they're going to develop an edge.
i've been busy recently. thanks for your nice reply. i think the problem i have is that it is really hard to differentiate luck from superior skills. i was encouraged by my luck in stock picking early on. however, i found that i was not developing any edge in 2005. a bet on macroeconomical measure is still hard to time, like Buffet's bet on dollar's devaluation in early 2000's.
you seem to be developing an edge though, certainly much better comparing to mine. my major is not in finance or economics. therefore, it's more likely that i will develop positive alpha from starting a business. i like your post on investing versus entrepreneurship, and that's where i think i can develop an edge.
In trading and investing we can test for skill vs. luck by having a big enough sample of data and testing for statistical significance. But I think you have the bottom line - it's important to know what you are good at and what suits you. I hate being a manager, I'm also not interested or skilled in building/rehabbing work. I do like modeling and thinking about investments in abstract ways. Still I really think it is not so hard to find the skilled managers and invest with them.
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