Thursday, November 01, 2007

October Trading Report

This month was again a poor one for trading and a good one for investing. It's somewhat arbitrary what I count as an investment and what I count as a trade. Obviously day trades aren't investments and stuff I hold for more than a year are probably investments rather than trades. In between is fairly murky - I don't count all trades that result in short term capital gains or losses in my trading numbers in these reports. I exclude all Australian trades to start with... Then, for example I sold half my IBKR this month. I held for less than a year obviously. So was that a trade? Or an investment I decided to reduce. Anyway, it isn't included in the numbers either. Nor is my much more successful investment in RICK, which has doubled my original investment at this point. Anything that I might hold for the long term isn't counted in the trading results.

US based trading lost $681 or 3.9% of trading capital. The model gained 2.9% and the market gained 7.1%. Most of the month the model struggled to make any headway and when the model is struggling I usually lose money (negative alpha with respect to the model). Also I didn't trade for the first week and a half of the month. But that was when the model was struggling more... I did better than September but still lost money and had a negative residual relative to the model - in other words I underperformed relative to the model even taking into account my usual negative alpha. From July to now I have had negative residuals even though I made money in August it was still less than typical given the model's performance in that month.

Major losses came from earnings related trades in GOOG (-$706) and AMZN (-$252). Without those non-model based trades I would have had a positive month. I feel that I am turning the corner - my behavior is getting better and I am interpreting my models better now that I am running both SPX and NDX models on a daily basis. I made 2.1% in my Interactive Brokers account after losing 8% in September, 4.4% in August, and 11.5% in July. Progress was very erratic though:

The total value of my Ameritrade and Interactive Brokers accounts were at $57,747 against the goal of $63k (total investment in these accounts since 1997) a gain of $2874 for the month. My goal for trading income for the year is $18,000. At the end of October I am at $12,776. It'll be hard to reach the goal in the final two months of the year, but you never know.

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