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Jrinne
Re: How was 2021?

Hi Azouz,

Great returns with AN AMAZING standard deviation and Sharpe ratio to match!!!! And done without many ETFs and no ETFs that one would normally associate with risk control (in isolation). You use a lot of strategies that could be coordinated in some way I assume.

I can't help but think that you might be making an effort to control risk (or the standard deviation, the drawdowns, Sharpe ratio or Sortino ratio). I leave it to you to define risk or any metrics you might like to use for quantitating risk.

Any thoughts you have on this topic and wish to share would greatly appreciated. For example, if you do make an effort to control risk is any of this plugged into outside programs like Python's pyportfoliopt? I know you could easily program this on your own and it would not have to be in Python (if you found it useful). Maybe you pairs trade or have a long/short strategy considering how low the standard deviation is.

I also understand the IB has some programs that weight individual stocks in their backtester for volatility control. I am guessing that you probably do not use that but whatever you are using seems to be working.

Thank you.

Jim

Great theory, "and yet it moves."
-Quote attributed to Galileo Galilei (1564-1642) gets my personal award for the best real-world use of an indirect proof or reductio ad absurdum.
`

Jan 14, 2022 9:14:09 AM       
Edit 11 times, last edit by Jrinne at Jan 14, 2022 9:50:34 AM
azouz110
Re: How was 2021?

Hi Jim,

The fact that IB here calculates stats using monthly data points explains the low standard deviation.
I am currently not using any effort to control risk. Except having 10%-20% cash at any time.

I use multiple strategies for two main reasons:
- To have more positions and thus lower capital invested per stock (to minimize market impact)
- To have better diversification (I select strategies so that each one has lower than around 60% correlation with all others - every single one)

Jan 14, 2022 10:02:56 AM       
Jrinne
Re: How was 2021?

- To have better diversification (I select strategies so that each one has lower than around 60% correlation with all others - every single one)

Azouz,

Thank you. Very helpful. Especially, the above quoted portion.

Best,

Jim

Great theory, "and yet it moves."
-Quote attributed to Galileo Galilei (1564-1642) gets my personal award for the best real-world use of an indirect proof or reductio ad absurdum.
`

Jan 14, 2022 10:18:23 AM       
danparquette
Re: How was 2021?

Everything that has been stated by others above regarding the advantages individual investors have is absolutely true. It was mentioned above that individuals cannot beat the 'pros'. Of course individuals as a group cannot consistently beat the very best of the pros. But what Yuval does, and I do, is to trade the small, illiquid stocks that the pros cannot trade. The people trading those stocks are mostly untrained individuals that dont have access to tools like P123. If you had to choose between fighting Tyson in his prime or some random dude on the street, which would you choose? I fully believe that somebody like Yuval that has spent the time to educate himself and learn how to use the tools available on the site, will consistently beat the stock indexes by a wide margin.

I started using P123 in 2004. At that time I knew very little about the markets. I spent a lot of time in the 2000s reading books and experimenting on the site to see what factors and rules actually worked. I still do research projects from time to time, but mostly I just use systems built on my prior research. My point is, I am not the same caliber of investor as Yuval or as many others on this site.

I have 9 accounts that hold p123 stocks and they all have other things mixed in, so the stats are not helpful. The better way to show my P123 returns is a screenshot of my P123 systems. Since 2004, I have manually entered every trade, so the returns are accurate. I currently have 8 portfolios running. They are sorted by 1Y return in the image. 3 of them are new this year, so they dont have 1Y stats yet. 2 of those are sector specific (banks and energy). For the 5 that have 1Y stats, the average was 53%. But 1YR doest mean much. Look at the Total Return vs the Bench Return - that is what is important.

As for survivorship bias, I can address that also. For as long as I can remember, whenever I decide to stop investing in a system, I switch it to 'auto' rebalance and move it to my 'live at one time' folder and let it run forever so I can see how it does. Most of them have commissions and slippage set. I dont think I ever deleted anything from that folder, but I cant say for sure. Another part of my process is to create a 'baseline' copy of every system I invest in. It is a copy of my live system but it runs on auto rebalance. I use that to see how my choice to override the system have worked out. The 'live at one time' folder also has those old baselines - that is why there are 80 systems in that folder - it is actually probably 50 or so unique systems.

Of those 80, there are 13 with negative returns this year. 7 of those are gold/silver stock systems (there are only 2 other sector specific systems). There are 5 with 0% 1Y returns - those are meaningless since they were turned off and didnt auto rebalance. If you take out those 12 systems, then the average 1Yr returns for my retired systems was 44.4%. Leave the gold systems in and the average is 37.9%.

I would rate myself as a horrible investor. At any given time, I am more likely to think the market will be going down rather than up. I could never do the 'buy and hold' strategy where I hold stocks after my retirement accounts are down 40%. I would sell and miss the rebound. So my strategy has been to hold P123 stocks with some sector ETFs mixed in and heavily hedge. Those hedges have been expensive, but they protect me from myself and have allowed me to beat the market since 2004 and never loose any sleep at night. I would not have been able to do this without P123.

Attachment Current systems.JPG (57153 bytes) (Download count: 58)


Attachment Junkyard1.JPG (179286 bytes) (Download count: 59)


Attachment junkyard2.JPG (163300 bytes) (Download count: 59)


Attachment junkyard3.JPG (75962 bytes) (Download count: 59)


Dan

Jan 14, 2022 10:37:11 AM       
Jrinne
Re: How was 2021?

So my strategy has been to hold P123 stocks with some sector ETFs mixed in and heavily hedge. .


Dan,

Thank you for sharing. I do this also. My main theme (I hope) has been that this is especially important for people who are new to P123 because it can be difficult to know for sure that a strategy works to begin with--let alone how volatile it will be out-of-sample.

I can tell that you are not using leverage.

One of the questions I have had is are the slippage estimates for micro-caps with poor liquidity accurate for the Designer Models?

I am not sure what type of liquidity you use. But stocks with $10,000 ADT have been discussed on the forum. Do you think the slippage is accurate for the Designer Models when the liquidity is that low? How much can one invest in such a strategy without significant market impact?

As far as I am concerned, an understanding of the true slippage of stocks with liquidity that low would be the main advantage of P123 showing us a traded portfolio.

Also would you consider running a small sample of your better preforming ports as sims (with the same rules as your port) and make comparisons (whatever you feel might be pertinent). I would be fine if you said you ran x samples and found little difference or an average of y% in the returns. I trust what you say and would appreciate any information on the subject.

I am not kidding when I say my holdings differ significantly. You have helped me with this question before. This would help to address questions about slippage also.

Thank you for sharing. And thank you again for helping me in the past with one of my main concerns: why are the holdings in my sim so different from the port? And does it really matter?

Jim

Great theory, "and yet it moves."
-Quote attributed to Galileo Galilei (1564-1642) gets my personal award for the best real-world use of an indirect proof or reductio ad absurdum.
`

Jan 14, 2022 11:12:46 AM       
Edit 12 times, last edit by Jrinne at Jan 14, 2022 11:54:50 AM
danparquette
Re: How was 2021?

Hi Jim,
I have never started a designer model, but I did follow a few at one time and I had no issues with liquidity on those particular small cap models. The page below mentions the liquidity requirements and they seem to be adequate for most individuals.
https://www.portfolio123.com/app/r2g/myr2g?view=models&st=8
"Liquidity requirements: Stocks in your model ranked in the bottom 20% in terms of liquidity must average more than $150,000 in daily turnover."

Most of my older ports used the rule AvgDailyTot(20) < 200000
In the last year or so I have reduced the liquidity requirements using rules like: AvgDailyTot(20) > 100000 OR LoopAvg("Spread(CTR)",20)/price*100 < 1.5 //avg spread < 1.5%
I have not had much difficulty trading these when buying $5-25k in each stock.

I'll run sims for some of the 'baseline' ports I have and let you know the results. I'll send you an email since I dont want to hijack this thread. There is no point in doing it for my live ports because I dont buy every stock they recommend. I expect that sims I run now will be very different then the results of those portfolios that are on auto rebalance. Some will be better and some will be worse because:
-They generally hold between 5 and 15 stocks. With so few holdings, any minor difference vs the sim can result in major differences in the results.
-The rules or ranking systems could have been tweaked at any time while I was trading them. So the older history would not have used the current settings.
-P123 had many changes over the years including changing data vendors.

Dan

Jan 14, 2022 2:24:14 PM       
ustonapc
Re: How was 2021?

There has been some diversion from the subject.

Pls show us something that is "independently tracked" which shows people making 75% or (100%+ that was mentioned) from buying small caps/micro caps in 2021. (like what Azouz has done.)

There are micro-cap and small cap mutual funds and ETFs as well as hedge funds that play in that space. I don't think it is reasonable to expect members here just to believe what was stated before we can see some kind of proof.

Regards
James

Jan 14, 2022 2:43:51 PM       
Edit 2 times, last edit by ustonapc at Jan 14, 2022 2:49:29 PM
yuvaltaylor
Re: How was 2021?

I should add that designer models all use the variable slippage setting, which is extremely harsh on microcaps. If the daily dollar volume is less than $50,000, the slippage is a whopping 5% per transaction, and if it's between $50,000 and $100,000, it's 1.5%.

Yuval Taylor
Product Manager, Portfolio123
invest(igations)
Any opinions or recommendations in this message are not opinions or recommendations of Portfolio123 Securities LLC.

Jan 14, 2022 2:49:18 PM       
yuvaltaylor
Re: How was 2021?

There has been some diversion from the subject.

Pls show us something that is "independently tracked" which shows people making 75% or (100%+ that was mentioned) from buying small caps/micro caps in 2021. (like what Azouz has done.)

There are micro-cap and small cap mutual funds and ETFs as well as hedge funds that play in that space. I don't think it is reasonable to expect members here just to believe what was stated before we can see some kind of proof.

Regards
James


How's this for "proof"? It's a screenshot from Fidelity with the account numbers blacked out. All the figures are as of 12/31/21 and are annualized. The "Total" line is the pertinent one. Also I use some margin in the cash account. My margin debt right now is 14.5% of my total funds.

Attachment Screenshot 2022-01-14 at 14-59-22 Fidelity Investments.png (40429 bytes) (Download count: 46)


Yuval Taylor
Product Manager, Portfolio123
invest(igations)
Any opinions or recommendations in this message are not opinions or recommendations of Portfolio123 Securities LLC.

Jan 14, 2022 3:07:32 PM       
Jrinne
Re: How was 2021?

Yuval, Dan and Azouz too,

Thank you for the very significant amount of additional, good data.

Best,

Jim

Great theory, "and yet it moves."
-Quote attributed to Galileo Galilei (1564-1642) gets my personal award for the best real-world use of an indirect proof or reductio ad absurdum.
`

Jan 14, 2022 3:15:02 PM       
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