Dear Investor,
We are very pleased to touch base with you all as we enter what promises to be a very prosperous 2011 trade year. Our apologies for the delayed update as we had much of our team out travelling during the holidays, and we are still not back to 100% full staff although we should be by the end of this week. On that note, we sincerely hope you've all enjoyed a very relaxing and pleasant Holiday Season and had some time to spend with your family and friends and loved ones.
We have wrapped up the year on a positive note, and although December was one of the most brutal months we have seen in a long time for many traders we know personally, we were able to get out relatively unscathed. Our Chrome system was the only one who took a hit out of our 3 systems, and as a result we have removed one strategy from it, and merged the dual Chrome strategy into a single account again (there is no Chrome A and B anymore, just one single Chrome account as mentioned on our previous newsletter). McLaren came out pretty much at break even. Precision banked just under 10% in the first 10 days approximately so we decided to call it a month, and not risk trading over the holiday season.
We realize many of you are anxious for trading to start back up full swing, however our team has been diligently analyzing the general market behavior during the past 10 days, as well as evaluating liquidity conditions and depth of market as we approach mid-January. So far, market liquidity has not yet returned to conventional levels and price action also remains relatively thin at this time. Therefore, we will proceed with caution as we ease back into the markets slowly but surely for the remainder of the month.
As always, we encourage both our current and prospective clients to read through our update in its entirety so that everyone is up-to-date on our latest developments. As always we report the good, bad, and the ugly, we don’t hold back on anything, and we pride ourselves in explaining things as openly and honestly and clearly as we can to our clients.
Our returns for the month of December are as follows…
------------------------------------------
DECEMBER 2010 PERFORMANCE (Primary Broker)
Precision FX: +8.83%
Chrome FX: -8.04% (Note: chrome A and B have been merged back into one)
Mclaren FX: +0.20%
December Average: +0.33%
------------------------------------------
Secondary Broker
Precision FX: +10.46%
- Performance was much closer at our secondary broker in December, more details on this below.
- Performance was much closer at our secondary broker in December, more details on this below.
* Account Discrepancies – Once again, please remember that if your returns for a given month do not match our posted returns take note that our numbers are from the 1st of each calendar month, to the last trading day of the calendar month. If you have invested in the middle of the month, your numbers may not match ours and could vary significantly. In addition to this, if we have open trades at month-end, we calculate our return on the current balance that day at midnight server time, NOT the floating equity. So open trades which have not realized their PnLs yet will be carried into the next month.
* Please keep in mind that we are now trading some of our systems at two different brokers. We will always have discrepancies between different brokers (much more on this below). For certain systems we have also noticed small discrepancies between larger investor’s accounts (100K+) and very smaller investor’s accounts (<5K). This often has to do with the broker’s min position sizes and how smaller trades are distributed with the allocation software in our MAM/PAMM.
2010 PERFORMANCE (Primary Broker) PER SYSTEM
Here are the gross returns extracted out of our total performance since inception to show only the 2010 trading year.
| System | Months Traded | Annual Compounded Return | Monthly Average |
| Precision FX | 12 | 220.95% | 10.69% |
| Chrome FX | 12 | 55.95% | 4.32% |
| McLaren FX | 12 | 117.97% | 7.03% |
| Guardian FX | 7 | 108.82% | 11.51% |
| Average: | | | 8.39% |
Overall we cannot complain. We did not set any records this year, but we are quite pleased with our numbers given the turmoil and overall state of the markets in 2010, and the issues we have personally went through with our systems and our brokers. Then factor in all the many punches we had to roll with in terms of the changes we have had to make this year and we are quite happy with the results. Some of these systems have come on and off throughout the year, and most have been through many tweaks and changes during 2010. We still managed to in most cases at least double client accounts or more this year (tripled for PFX), which in our view is an achievement that we are very proud to have accomplished. We have learned a lot during 2010, and although we have a few changes in store for early 2011, we feel very well equipped to be able to expand our managed capital into the New Year. Once again, we must stress that longevity is our most important asset in which we place with very high merit. We prefer the steady long-term approach instead of living the short life in the fast lane approach, and we are happy to share this with our clients who have the same ambition.
Our complete Performance Table has also been updated with the following statistics of interest:
| MONTH | PRECISION | CHROME | GUARDIAN | MCLAREN | AVERAGE | |
| Dec-08 | 32.30% | 72.73% | | | 52.52% | |
| Jan-09 | 18.70% | -4.19% | | | 7.26% | |
| Feb-09 | 27.50% | 160.30% | | | 93.90% | |
| Mar-09 | 29.50% | 21.97% | | | 25.74% | |
| Apr-09 | -34.40% | 61.33% | | | 13.47% | |
| May-09 | 53.30% | 33.35% | 3.52% | 9.43% | 24.90% | |
| Jun-09 | 23.60% | 25.77% | 4.69% | 30.46% | 21.13% | |
| Jul-09 | 10.10% | 20.69% | 4.13% | 28.02% | 15.74% | |
| Aug-09 | 26.92% | 10.77% | 4.86% | 26.94% | 17.37% | |
| Sep-09 | -0.32% | 5.44% | 5.79% | 7.83% | 4.69% | |
| Oct-09 | -4.26% | 20.36% | 6.55% | 11.94% | 8.65% | |
| Nov-09 | 10.76% | -20.98% | 30.98% | 29.39% | 12.54% | |
| Dec-09 | 9.37% | 15.94% | 10.39% | 7.78% | 10.87% | |
| Jan-10 | 33.63% | 27.91% | 16.02% | 4.30% | 20.46% | |
| Feb-10 | 15.31% | 14.93% | 22.63% | 2.33% | 13.80% | |
| Mar-10 | 15.43% | -5.08% | 3.23% | 6.75% | 5.08% | |
| Apr-10 | -8.11% | -9.43% | -0.05% | 2.99% | -3.65% | |
| May-10 | 0.70% | -7.66% | 27.30% | 21.07% | 10.35% | |
| Jun-10 | 20.86% | 10.56% | 4.83% | 9.68% | 11.48% | |
| Jul-10 | 10.80% | 14.57% | 6.60% | 0.15% | 8.03% | |
| Aug-10 | 5.46% | 2.34% | | 7.35% | 5.05% | |
| Sep-10 | 14.91% | 6.13% | | 1.37% | 7.47% | |
| Oct-10 | 10.36% | 0.02% | | 28.55% | 12.98% | |
| Nov-10 | 0.05% | 5.60% | | -0.35% | 1.77% | |
| Dec-10 | 8.83% | -8.04% | | 0.20% | 0.33% | |
| TOTAL COMP'D RETURN: | 1565.46% | 3337.37% | 302.76% | 751.23% | | |
| MONTHLY AVERAGE: | 13.24% | 19.00% | 10.10% | 11.81% | 13.54% | |
MONTH-END TRADING RECAP
1. Precision FX – PFX has been our longest running, most tweaked, and the most consistent product of ours. It was also our best performer in 2010 banking a 220% return, while keeping its largest intra-monthly peak to peak drawdown under 9%. This system trades almost entirely different than it did two years ago. Back then, the system was 100% scalping based and only traded the EUR/CHF and EURGBP pairs. Now, this accounts for only a very small part of the system’s core strategy. Since inception, we have been working on two things with this system - 1. diversifying the strategy as much as possible to profit in multiple market conditions and 2. working on reducing it’s drawdowns. To date this system has evolved into a very unique product in which we are quite proud of. The system is best described as a continual work in progress. As markets change and evolve the system is designed to adapt by turning on or off various sub-strategies or bringing in new ones and removing old ones altogether. We attribute this continual adjusting and multi-strategy approach to it’s overall success.
During December we were able to bank some quick profits, and after a few losses near the middle of the month, we decided to shut down for the remainder of the month throughout the holidays to play things safe. Our demo testing proved that we made the right decision as we would have incurred more losses than usual over the xmas period if we decided to stay in the markets. January has been a bit of a rocky start, in particular at our secondary broker, but we are very certain that the system will continue to grow and perform as usual and bank another lofty return in 2011. We have less than 10 client’s who have been with us in this particular system since it’s managed account inception back in December 2008 and who have witnessed the huge transformation that this strategy has undergone. Those few clients have also experienced a whopping compounded return of 1565.46% over the past 25 months! While we do not trade this system as aggressively as we used to in late 2008 and early 2009, this clearly demonstrates the true power of compound interest for those who are willing and able to commit funds for a lengthy period of time. We have no doubt that this system will perform well in 2011. We know that this year will not be without its challenges but we are more than ready to take on that challenge. We would like to genuinely thank all of our PFX investors for their support and trust in this system, as well as the programmers and traders and partners of ours who have helped build it into what it is today.
2. Chrome FX – Our Chrome system felt the effects of the holiday season the most, in particular on Chrome B which suffered a larger loss on our AUD/NZD fractional grid trading system. Ever since NZ downgraded their national debt by more than 20%, this pair has been continually trading out of its normal range, and causing the grid strategy some problems for the first time in over 1 year. Due to a loss on this pair alone, we ended the month with a -8% return. Since this episode we have removed the AUD/NZD grid strategy altogether from Chrome, until this pair resumes a more regular trade pattern which suits this strategy best. Because of this we also ended up merging the Chrome strategy back into a single MAM again. This simplifies things for all of us, and we are very comfortable with the less complex strategy on the single MAM now. There will be some minor adjustments made since the merger of A and B, most happening this upcoming Friday, and we believe that this system will be looking very attractive and poised for a good strong run in the New Year as well.
During the course of 2010 Chrome struggled with some of the more major changes being implemented out of all the systems. We tried to implement a hedging system during the spring of 2010 which was unsuccessful at our brokerage due the fact that we could not achieve partial closes which were needed for the system to work properly. By the time we tried to work around this we had incurred 3 loosing months in a row, and had to bail on the hedging program. We brought the system completely back into a scalping type of program with the addition of the fractional grid system and it achieved 6 winning months in a row, before encountering December’s loss. This last change by merging the accounts should bring some great stability to the system. We have some final adjustments to be implemented this weekend which should finalise its strategy for the time being. Overall this system won 8 out of the 12 months in 2010, and banked a 55% compounded gain for the year. While this was one of our lower performers, we must factor in the issues in which it was faced with throughout 2010. Investors who have been invested in this system since the get-go have encountered about double the gains than that of PFX. The developers behind this system never cease to amaze us with their ingenuity, and their ability to work through problems as they arise. We are finally finishing a final adjustment for this system which we believe to be a very nice and needed tweak. While it was certainly a tougher year and a year of “change” for the Chrome system, after all it has been through we feel this system is in great shape now for 2011 and should also be included in all our investor’s portfolios.
3. McLaren FX – McLaren FX has been a trooper for us in 2010, and has some promising new developments in store for 2011. The system struggled a bit in December but managed to preserve its capital. This system is so non-correlated to our other systems, that we can almost count on it profiting when the others are not, which makes for a really nice diversification. December’s performance was almost opposite to that of PFX. In the early part of the month it had incurred some drawdown. After consulting with the lead developer on this, he advised we let it trade through the holidays, and because of this it was able to dig itself out of the early month drawdown finishing the month just over break even. We are excited about some new additions being added to McLaren in the early part of the year including a short-term sub-strategy. We think that this will complement the main strategy quite nicely. The system right now is about as “simplistic” as it gets, and that is what makes it effective so we are cautious not to complicate it to much. This system is an excellent long-term system for clients as it often goes through cycles of capital maintenance but with huge “bursts” or “growth spurts”. This system is also looking quite healthy for 2011.
INFORMATION AND NEW DEVELOPMENTS
1. Broker: Discrepancies and Other Issues – We must again bring this up as we get a lot of inquiries about this. We are trading some of our accounts at two brokerages now. When auto trading, especially with any type of higher frequency trading, you will hardly ever (very rarely) have the same results. Sometimes one may be better than the other, and other times it will be reversed. For example with PFX - November was much more profitable at our original broker (Sparen FX), while December was more profitable at our secondary broker (Inovatrade) by a slight amount. This again definitely raises some concerns and begs some major questions from clients such as which broker produces the best returns? Where should I put my funds? This is a hard question to answer. As we mentioned in our previous email - no two brokers will produce identical returns when doing automated trading. Especially for higher frequency trading systems such as scalping which can place upwards of 50 trades per day and is dependant on fast price action and tick data. Once again, while both brokers have some similarities and both are light years ahead of the majority of bucket shops out there, there are still some significant differences. Mainly in the “data” which each broker gets to feed their charts. Sparen uses a 3rd party (eSignal) and Inova uses their own “in house” ECN. While both have their pros and cons, the difference often has a large impact on how our systems read various forms of chart data and execute their trades. If one broker misses even just a handful of trades it could have a large impact on the overall performance for the month (especially if the missed trades hit full stop losses). We have witnessed this in the first week of trading PFX at our second broker, where we hit one of it’s largest SLs in some time, which wasn’t hit at our primary broker. This does not necessarily make one better than the other, as it could have went both ways. But this makes for an uneven month right off the bat. December was much closer than the previous months, and we feel that after many tweaks and upgrades that these brokers for the most part are in sync (as much as possible). Just remember that no matter how close they are, results will always vary. We have seen the same system at the same broker but on different accounts produce different results. We are starting a test this week into looking at a trade copier solution. This holds some promise to really standardize things, however these are not without their limitations and issues to solve either. We will give it a thorough test drive though to see if it can be of assistance in standardizing performance between multiple brokers.
Both of our brokers are a little bogged down getting caught up from the holiday season, same as we have been ourselves. Those with any pending requests or withdrawals and deposits in to them, please hang tight if things are a little slower than usual. This week things should be pretty much back to business as normal. But we do know that both our brokers were working with reduced staff up until last week. We are always continuing to look at new brokers, particularly those with unique and innovative technology solutions and we are currently in the works with doing some initial due diligence on a possible new brokerage firm to trade through. It is always good to have options and be diversified on the broker front as well as the trading front.
2. Synergi FX and New Trading Systems – We have been debating really hard whether we should release a new Synergi managed account or not and have been posting our results for some time for clients to follow along in our testing phase. While the strategies in this system certainly do hold some great potential, we have decided that we are going to roll out a completely different system altogether this year which belongs to a long time friend of ours. While Synergi is good, it also is aggressive and subject to larger drawdowns compared to the other system we are working with. Our focus this year is “stress free trading” and we feel the new system will be a much better fit, and a very good compliment to our lineup of forex systems right now. We are quite excited about being able to have access to this, but we will not get into to much detail on this subject now until it is closer to being ready to be released for trading.
SUMMARY AND GOALS FOR 2011
Our goal for 2011 is simply coined as “stress free trading”. This may sound like an oxymoron, but by this we mean controlled drawdowns, little changes, and few adjustments, and just letting our systems trade untouched and do their thing for as long as possible. This will not be as easy as we describe, but that is certainly the goal we are working towards. It will be a bumpy road and there will be both tough periods as well as great periods that’s for sure, and we have completely come to terms with this as the nature of the beast. But at the end of 2011 we want to look back and say we worked hard, improved drastically, learned a whole lot, and made some good money for ourselves and our clients based on realistic expectations and putting our heads down and battling the markets.
That being said we are hoping to at least double client accounts within each of our individual systems, and perhaps even triple them or more if we are lucky. This is of course a very lofty goal we realize, but one that we feel is achievable, especially with the help of compound interested. Did you know that if you made 6% net per month for 12 months you will officially double your account? That is when you factor in compounding. If you could sustain 9.6% per month for 12 months, you would officially triple your money! These are of course lofty targets, but they go to show the possibilities especially for those who invest for the long term and let their funds compound. We have accomplished this before, so we know it’s at least possible to do it again and again.
As always we will do our best to communicate with our investor base whether in the form of monthly updates, or on a “per needed” basis as we go through the month on any issues which may present themselves. Please visit our website and blog for frequent updates and newsletters (note: we are always adding new content to our website) and do not hesitate to contact us at any time should you have any inquires or concerns you would like to discuss with us.
Thank you to all our current investors for your trust once again in trading with us and crossing into a new year of possibilities with us! Onwards and upwards in the new year and new decade!
Cheers!
Cayo Flow Team
No comments:
Post a Comment