Saturday, February 20, 2010

Performance Review RUT Iron Condor

Day-by-day Review of Live trades:
FEB RUT Iron Condor Day-by-day review Content:
JAN RUT Iron Condor Day-by-day review
RUT Iron Condor - Day by day review
JUL RUT 30-Day Iron Condor (day-by-day review)
JUN RUT 30-Day Iron Condor (day-by-day review)
JUN09 RUT 50-Day Condor (Day-by-Day Review)
MAY RUT 50-Day Condor (Day by day Review)

So, let me start with a log of all trades (Live and backtested) for this strategy, I’ve tested the RUT Iron Condor for 2 years before I dug into it, the log bellow illustrates the results. One thing I’ve noticed is how much difference there is between 2 years and 1 year, because I decided to focus all my positions on at least 1 year horizon, I used the 2 years of data just for information, all my analysis is done based on the last 1 year of performance.

This is fine, but let’s also look at a simulated equity curve chart based on this data:

You’ll notice in the above picture that in the short term time-frame the position is going through a slump, however, even more telling is the fact that the trade’s vital signs are not so good, the win-ratio is relatively low for an income strategy, and this could mean trouble. With these two numbers, I used Henry Carstens’s forecaster to test the edge, go to and check it out for yourself, just plug in the variables and run a few scenarios to make sure your position is still a winner.

After running the simulation many times I’ve noticed the edge is positive, but the equity curves were not the most exciting ones, a lot of draw-downs or side-ways cycles. With this information in mind I decided to leave this strategy in the back burner, and re-allocate my capital to other strategies that have a better profile and are likely to keep me in the green for longer periods of time. I also have a limited bandwidth of how many strategies I can trade, and in this case, the more I can focus on fewer strategies the better off I get.


Chad said...

Hi Gustavo!

Thanks for this .. a great learning tool. How do you calculate win/loss ratio? What does .94 win/loss mean or represent?

Thanks mate,

Gustavo's Trades said...

Hi Chat, that is essentially how much you win (on average) divided by how much you lose (on average). It represents the ammount of dollars you usually risk vs. how much you expect to make on every trade.

This is actually one key measures for any trading system. Coupled with your % wins, you can figure out if you have a positive edge or not.


Gustavo's Trades said...

.94 in the example above means you earn $.94 cents for every $1.00 you risk. about 1:1 risk to reward.

Chad said...

Thanks! :-)