HOW OUR PERFORMANCE ESTIMATES ARE DETERMINED

 

The pro-forma account shown in the spreadsheet and graph below consists of actual performance (actual daily returns) from two accounts: “Client 1” and “Galway”. On March 7, 2017 we started managing our first account trading the Alpha Engine strategy (shown as “Client 1” in spreadsheet). On November 11, 2019 we started trading our first account as registered advisors (shown as “Galway” in spreadsheet). The spreadsheet and graph lists the daily returns for “Client 1” up to Nov 11, 2019 when our first CTA account “Galway” started, then we list Galway’s daily returns from that date to now. The Galway account was selected because it was the first CTA managed account, and it’s returns are contiguous from Nov 11, 2019 to August 11, 2020. (For these reasons, the Galway account is also used as the representative account to calculate returns for our free demo program.)

 

Client1 and Galway accounts were traded on a flat nominal trading level of $100,000 since inception. Profits were not added back into the trading capital (non compounded). The rates of return were adjusted to reflect a monthly management fee of 2% per year of $100,000 flat nominal trading level, plus a 20% performance incentive fee charged quarterly. The Incentive Fee is charged after taking into consideration the management fee.

 

CALCULATING THE 1.766% MONTHLY AVERAGE ANNUAL RETURN THAT WE USE FOR PERFORMANCE ESTIMATES

 

The pro-forma account shown in the spreadsheet and graph below started with $100,000 on March 7, 2017 and was valued at $204,985.30 on August 11, 2020 for a total profit of $104,985.30 which represents a total return of 104.98% in 41 months. This results in an average monthly return of 1.766% before compounding.

 

CALCULATING THE ERROR BARS AND MAXIMUM DRAWDOWN THAT WE USE FOR PERFORMANCE ESTIMATES

 

The pro-forma account shown in the spreadsheet and graph below shows the largest peak to valley drawdown as -27% from December, 2018 to March, 2019, and the largest monthly drawdown of -26% on January, 2019. With an expectation that this level of drawdown is likely to happen again, we can estimate that projected future returns could vary by 30%, which we show on our performance estimator calculator as dashed lines representing return estimates that are 15% above the average expected return, and 15% below the average expected return.

 

DIFFERENCES BETWEEN ACCOUNTS DISCLOSURE: To reduce trading costs, Alpha Engine strategy enters new trades using limit orders. A limit order offers the benefit of eliminating slippage costs, but these orders are are not always filled. To increase the likelihood of being filled on a new position, AlphaEngine uses a trade entry algorithm which randomly adjusts trade entry prices so that all accounts are not placing orders for the same symbol at the same price. Different entry prices for all new positions may also result in slightly different profit or loss between accounts.

In addition to different entry and exit prices, AlphaEngine uses a unique method of adjusting trading volume based on your set trading level called synthetic fractional contracts. The objective is to increase trading volume as profits increase by periodically trading an additional contract which simulates the effect of trading a fractional contract. This additional contract traded is random and may result in different profit and loss comparisons between accounts.

Every effort has been made to ensure that trading is fair between accounts.

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