Below are given
back testing results of the currently traded FXQ strategy(ver. 11/2012),
generated by the software. These results should be considered as
extrapolation into the past of the real trading FXQ, which started live trading
on January 3, 2013. It replaced the previous version of the strategy, which has
been trading since November 1, 2008. Performance fees (20% of
new net profit above high water mark) are not deducted from back testing results.
To see actual trading results, please go to the FXQ
/ Real Performance page.
FXQ features:
- The variability of returns is relatively low and the
Sharpe, Sortino, Calmar and Omega Ratios are excellent - among the highest in
the currency trading industry. The strategy is extremely robust i.e. insensitive
to parameter changes (it is not a curve fitted, or over optimized system), which usually promises excellent
performance in forward trading, after the back testing period.
- There is no
upper limit on the account size. By trading more frequently (for example,
1/3 of account traded every 8 hours) the strategy can trade accounts of virtually
any size without performance degradation (it would be even improved, due to
time-factor diversification)
- The strategy is not affected by price
slippage (it trades in small increments, by market orders, only once a day). Hence, the actual trading results are very close to hypothetical
results. See "Transaction costs" above.
Average number of R/T transactions
(100k FX lots) per $1Million NAV per year
980
Average annual transaction
costs - bid/ask spreads (deduct from annual ROR)
2.45% of NAV
per annum
Average transaction bid/ask spread, as a fraction
of the transaction value
0.00025
* -
Total long/short position value is roughly 2 × strategy leverage. It is used
for portfolio turnover and costs calculations. Leverage (long only position
value) is used as a measure
of exposure.
3. Performance Graphs and Histograms
3.1 Monthly Graphs
Note the semi-logarithmic co-ordinates in the
VAMI chart
1. There is very regular,
bell-shaped, thin tailed distribution of 5-day rolling rates of return .
Robust systems, which are not curve-fitted usually have this type
of distribution.
2. The 5-day rolling rate
of return (ROR) mean is positive and equals 0.299%. There is a
50% probability that the 5-day rate of return will be greater than
0.299% and 50% probability the return will be less than 0.299%.
3. 5-Day RORs are more
clustered in the positive territory in the histogram above. There is a
31.4% probability that a 5-day ROR will be negative and a 68.6%
probability the 5-day ROR will be positive.
4. The 5-day
Value-at-Risk (VaR)
for the 95% confidence level is 0.94%. This means that the risk of loss
in a 5-day period is 0.94%, with a 95% probability. The probability of
loss of more than 0.94% in a 5 day period is 5%. Similarly, the 5-day
VaR for the 99% confidence level is 2.30%. Excessive negative RORs do
and will happen, although with decreasing probability. To see these
calculations open the 5 Day ROR Percentile tab in
this Excel workbook.
1.) how many days the system was in drawdown
of given magnitude (the red colored
line). The back testing period is 3638 days;
2.) what time (as a percentage of the total
back testing time) the system spent below a given drawdown level
(the blue colored line). For
example, the system spent only 5% of time (182 out of 3638 days) in
drawdown worse than 2.43%, and only 1% (36 out of 3638 days) in drawdown
worse than 4.11%. These figures also give some idea on the recovery
time. Calculations can be found in this
Excel
worksheet (1.1 MB), under the Drawdown Histogram tab.
The most important facts to remember from
the Drawdown Histogram are that:
1.) large drawdowns are relatively rare
(the larger the drawdown - the less the probability, although it does
exist - see the 11.21% drawdown far left in the histogram above);
2.) the system quickly recovers from
extremely large drawdowns. There is no answer, however, how deep
the drawdown can go; statistics only show it should not last for too
long. This chart also shows how important it is to be patient and not
to quit trading during drawdown (which is the worst possible moment
to do so).
The above
tables and charts document FXQ historical hypothetical performance
based on back testing results. To see actual trading results, go to the
FXQ Real
Performance page (after January 3 , 2013).
Please note
that performance results reported are before performance fees, which
decrease returns. Interest on open positions is not taken into account in
hypothetical results.
Hypothetical
Performance Disclaimer:
HYPOTHETICAL OR
SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN
ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING.
ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE
UNDER-OR-OVERCOMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH
AS LACK OF LIQUIDITY. SIMULATED TRADING PLATFORMS IN GENERAL ARE ALSO SUBJECT TO
THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION
IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES
SIMILAR TO THOSE SHOWN.
Risk Disclaimer
THE RISK OF
LOSS IN TRADING COMMODITIES CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY
CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL
CONDITION AND INVESTMENT OBJECTIVES. PAST PERFORMANCE IS NOT NECESSARILY
INDICATIVE OF FUTURE RESULTS. THE PERFORMANCE QUOTED REPRESENTS PAST PERFORMANCE
AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. TRADING IN FOREIGN EXCHANGE IS
SPECULATIVE AND MAY INVOLVE THE LOSS OF PRINCIPAL; THEREFORE, FUNDS PLACED UNDER
MANAGEMENT SHOULD BE RISK CAPITAL FUNDS THAT IF LOST WILL NOT SIGNIFICANTLY
AFFECT ONE'S PERSONAL WELL BEING. THIS IS NOT A SOLICITATION TO INVEST AND YOU
SHOULD CAREFULLY CONSIDER YOUR FINANCIAL SITUATION PRIOR TO MAKING ANY
INVESTMENT OR ENTERING INTO ANY TRANSACTION.
