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    How long is the strategy going to be profitable?

    27 Jul 2017,

    I´ve got a question recently: “Mr Zdenek, I have got no experience with automated trading yet. Howeve, I guess automated strategy is going to be profitable only for a few weeks”.

     

    Actually it was not a question, it was the statement. And it´s clear, that the man has no knowledge, nor experience with automated trading. So let´s go and examine automated trading today. The most important question is: is it really true, that automated trading strategies are going to be profitable only for a few weeks? We want to be fair and transparent. That´s why I´ll show you now my results since the beginning of this year and also results of the same portfolio from the year 2016.

    My portfolio´s this year outcomes looks as follows:

     

    A little explanation for those who does not recognize what´s on the picture. (This is not only a backtest 🙂 )

     

    It is the MyFxBook report. MyFxBook is the online service to verify the authenticity of the results from trading accounts. It´s connected directly to the trading account, it is constantly monitoring each trade. MyFxBook is able to distinguish real vs demo trading account. It identifies the amount of  traded cash, the broker and the leverage. At the top of the picture you can see the proof that it´s real account  at the broker Purple Trading. My net profit is 22,69% with maximal drawdown 4,59%. The starting capital was 8 850 $ (200 000 CZK) when the strategy has started to trade.

     

    In total, there are 9 strategies in this portfolio and the results follows:

    Strategy 1: +2,99%

    Strategy 2: +0,67%

    Strategy 3: +7,06%

    Strategy 4: +4,12%

    Strategy 5: +0,51%

    Strategy 6: +2,02%

    Strategy 7: +0,39%

    Strategy 8: +2,18%

    Strategy 9: +2,74%

     

    As you can see, all of the strategies are still (after 7 months of trading) in profit. On this account they earn 7 months already, which is more than a couple of weeks.

     

    Maybe the profit seems quite small for you, but the risk is set at the very low level. The average risk on trade is 0.35% and average profit is 0.55%. My goal is not to risk a lot, but to go for reasonable profits with a reasonable risk to make the trading mentally comfortable for me. After all 8 850 $ is not a little money. Thus it´s good to to have the risks under control, in order to do the trading not as a game, but as a serious business. However, if you want bigger profits, you can set higher risks and have profits 3x or even 4x bigger. This decision is up to each of you. 🙂

    Maybe you say that half a year is not too much. OK then, let me show you the resutls of the same portfolio from the year 2016:

    The second half of the year was less friendly for our strategies, but we made a profit above 50% with maximum drawdown just 20%. So the result was finally a pretty good.

    One point is important: In trading, it is common to have a period when a new profit is not achieved. This phase may last several months, it might occur 6 months in chop or even losses. As I mentioned before, it´s normal part of the trading business and it doesn’t mean failure.  Trading is not a job where we expect a payout of 15th every month 🙂

     

    I always say to traders (on every level of knowledge): Please, keep your expectations realistic. Do not try to find the way to make 10% each month with no risk. Do you really think it could be possible? Rather stay realistic. Try to find the way to make realistic profits and become real profitable trader at all, not just a dreamer.

     

    Learn how to build a good quality strategies. There is no other way to achieve long-term success in automated trading :).

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