FXQ - Real Trading Performance

FXQ is my first and longest traded quantitative trading strategy. It is a portfolio trading strategy which has virtually unlimited AUM capacity (if traded more than once a day). Before the implementation of the Dodd-Frank Act, I traded FXQ in a multi million hedge fund account, but I currently trade it for a proprietary trading account only. The objective of FXQ is to seek absolute returns with low volatility and low correlation to the traditional equity and fixed income investments. FXQ performance was virtually flat in 2011-2012, and I was considering superseding it by FXI. However, in November 2012 I redesigned FXQ and beginning January 3, 2013, it will continue trading using a new algorithm. Please see FXQ Back Testing Results to see hypothetical results of the new version (v.11/2012) of the strategy.

 FXQ has around 60% correlation relative to FXI, but these two strategies combined perform better than the individual strategies separately. Combined performance results are available upon request.

I. TRADING APPROACH

FXQ is a quantitative trading program based on time series analysis, digital signal processing (DSP) and position size management. Through these methods, it trades currencies of developed countries (EUR, GBP, CHF, CAD, JPY, AUD, NZD, SEK, DKK, NOK and SGD) in the spot markets and does not trade futures or options on futures on any organized exchange. This program analyses exchange rates between the currencies comprising the basket. The strategy identifies relatively strong and weak currencies and gives specific trading signals for each currency, which are then implemented against the remaining currencies. The resulting positions are then implemented in the market. It uses statistical methodology and not classical fundamental or technical analysis. There are no classical indicators which attempt to predict market direction (no one can predict market direction!), no pattern recognition techniques and no trading rules based on trader's experience. The trading system is always in the market, but portfolio components are adjusted daily. Leverage is applied in line with client's preferred risk tolerance level. Risk control is achieved through a variety of means which in most market conditions should minimize drawdowns. The first is portfolio construction and diversification; second is controlling leverage through position sizing adjusted according to account size, volatility and risk-reward analysis; and third is stops based on money management rules.

To see extrapolation into the past of the currently traded FXQ strategy (v.11/2012), see the hypothetical performance report from back testing on the FXQ Back Testing page. Actual trading results from November 2008 to December 2012 were achieved trading older versions of FXQ.

II. PERFORMANCE SUMMARY

ACTUAL TRADING RESULTS (Based on Proprietary Trading)

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. THE RISK OF LOSS IN TRADING FOREX CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION AND INVESTMENT OBJECTIVES.

1. Monthly Rates of Return (ROR) Graphs (Before and After Performance Fees)

The charts below show monthly rates of return (ROR) and the growth of $1,000 (the Value Added Monthly Index - VAMI), before and after 20% performance/incentive fee deduction. Compounding by monthly profit reinvesting is used.

A newer version of the strategy (v.12/2012, the red line in the graph below) replaced the former version in January 2013

2. Monthly Rates of Return Table (Before and After Performance Fees)

    

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

YTD

VAMI

2008

 See back testing results of the currently traded strategy (v.12/2012) 8.91% (4.62%)  (5.33%)*

3.88% 3.10%*

1,038.8 1,031.0*

2009

 8.00% 3.42% 2.44% (0.14%)* 2.75% (1.18%) 2.49% 1.69%* 1.11% (0.18%) (1.88%) (1.88%)* 1.01% 0.98% 1.01% 0.61%* 21.48% 17.03%* 1,261.9 1,206.6*

2010

 (0.16%) (2.05%) (1.05%) (1.05%)* (0.35%) 0.73% (0.97%) (0.97%)* 1.37% 0.23% (0.99%) (0.99%)* 1.22% (0.02%) (0.62%) (0.62%)* (2.68%) (2.68%)* 1,228.1 1,174.3*
2011 0.64% 0.67% (0.31%) (0.31%)* 0.70% 0.35% 0.92% 0.87%* (0.86%) (5.53%) 1.98% 1.98%* 1.05% (0.09%) 0.53% 0.53%* (0.15%) (0.20%)* 1,226.3 1,172.0*
2012 (1.04%) (0.15%) 0.21% 0.21%* 0.10% (0.03%) 0.41% 0.41%* (0.22%) (0.16%) (0.58%) (0.58%)* 0.11% 0.11%* (0.45%) (0.18%) (0.18%)* (1.98%) (1.98%)* 1,202.0  1,148.8*
2013 0.06% 1.56% (0.17%) (0.17%)* 0.87% (0.58%) 0.63% 0.63%* 0.83% 1.20% (0.05%) (0.05%)* 1.28% (0.60%) (0.76%) (0.76%)* 4.31% 4.31%* 1,253.8 1,198.2
2014 1.72% 1.65%* 0.96% 0.77%* 0.18% 0.14%* 0.43% 0.35%* 0.18%  0.15%* (1.00%) (1.00%)* (0.06%) (0.06%)* (0.34%) (0.34%)* (0.51%) (0.51%)* 1.74% 1.74%* 0.51% 0.44%* (1.22%) (1.22%)* 2.67% 2.18%* 1,287.3 1,224.3*
2015 1.21% 1.19%* 1.46% 1.17%* 1.33% 1.06%* 0.69% 0.55%* (0.85%) (0.85%)* (1.19%) (1.19%)* 2.31% 2.26%* 0.48% 0.39%* 1.71% 1.37%* (1.76%) (1.76%)* 0.79% 0.79%* (0.24%) (0.24%)* 6.01% 4.76%* 1,364.6 1,282.7*
2016 0.97% 0.97%* 2.31% 1.90%* 1.42% 1.13%* (0.02%) (0.02%)* 0.53% 0.43%* 0.74% 0.59%* 0.44% 0.35%* (0.04%) (0.04%)* 0.10% 0.09%* (1.48%) (1.48%)* 0.22% 0.22%* 0.27% 0.27%* 5.53% 4.45%* 1,440.0 1,339.7*
2017 1.04% 1.04%* 0.24% 0.20%* (0.59%) (0.59%)* (1.17%) (1.17%)* 0.99% 0.99%* (0.06%) (0.06%)* (1.14%) (1.14%)* (1.02%) (1.02%)* 0.74% 0.74%* 0.19% 0.19%* 0.60% 0.60%* 1.15% 1.15%* 0.92% 0.87%* 1,453.2 1,351.3*
2018 0.19% 0.19%* 0.36% 0.33%* (0.14%) (0.14%)* (0.92%) (0.92%)* 0.23% 0.23%* 0.65% 0.65%* 0.94% 0.79%*           2.25% 2.01%* 1,472.4 1,366.6*

* - Net of 20% performance fee. Before January 2014, performance fees were calculated quarterly. Beginning January 2014, performance fees are calculated monthly

           - the former version of the strategy (which was replaced by ver.12/2012 in January 2013)

The above table shows actual trading results, before and after performance fees. ROR figures have been calculated according to CFTC Regulation 4.25(a)(7)(i)(F), by dividing the monthly net performance (gain or loss) by the previous month net asset value, or the notional trading size.

III. Performance Analytics (Based on Actual Trading Results, Net of 20% Performance Fee)

Strategy Statistics

Reporting period

 Nov/08 - Jul/18 (117 months)

Total return since strategy inception

 36.66%
Return last 12 months 2.79%

Compound average annual rate of return (ROR)

 3.26%

VAMI Index - hyp. growth of $1,000 since inception

 1,366.6

# Profitable months / average positive ROR

 68 / 1.08%

# Unprofitable months / average negative ROR

 49 / (0.82%)
Kurtosis & skewness of monthly RORs 12.54 / 1.56

% Profitable months

 58.1%
Ratio avg. positive / avg. negative monthly ROR (Gain to loss ratio) 1.31
Maximum / minimum monthly ROR 8.91% / (5.53%)
Monthly profit factor (Profit to loss ratio); Ratio sum positive returns ÷ sum negative returns 1.81

Risk Measures
Annualized standard deviation of monthly RORs 5.58%
Annualized downside deviation (below the RF rate of return of 1% per annum) 3.17%

Sharpe ratio, annualized (RF rate of return 1.0%)

 0.40
Sortino ratio, annualized (below the RF rate of 1% per annum) 0.71

Calmar ratio, since inceptiopn of trading

 0.51
Efficiency index 0.58
Strategy Alpha relative to the S&P 500 Index, annualized 4.46%
Strategy Beta & Correlation coefficient, relative to the S&P 500 Index (0.09) / (0.22)
R-squared (coefficient of determination), rel. to the S&P 500 Index 0.05
Jensen's alpha relative to the S&P 500 Index, annualized 3.24%
Information ratio, relative to the S&P 500 Index (0.54)

Worst drawdown depth / duration (on end-of-month basis)

 (6.33%) / 27 months

Please contact me for Value at Risk (VaR) and Drawdown Analysis, based on strategy back testing.

Risk Disclaimer

THE RISK OF LOSS IN TRADING FOREIGN EXCHANGE (FOREX) 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.