From the September 1, 2017 AlgoLab Update
“This past week (ending Sept. 1) has been tremendous for AlgoLab subscribers and once again, confirmation that the AlgoLab trading system really does generate outsized returns during periods of widespread market volatility.”
Some like sammy may remark “OK, that was great but what happened the rest of July and August !#$%@?”
Many new subscribers (real $$$ or trial accounts) who signed up in late June or July will be confused or at least disappointed at the unpredictability of their AlgoLab trading results. A supplemental question might then be “Are the stock markets, Fx or commodity prices predictable?” You know that answer.
Some AlgoLab Insight
From the website;
AlgoLab’s trading algorithms are designed to cut losses short, and let profits run. Over short periods of time, large gains should outweigh small losses, and the same process happens over longer periods of time. This creates a smooth, upward sloping equity curve over the years.
AlgoLab House Account - the 1 Year Performance is not very smooth but at least up significantly!
Still, what about My Account during the rest of July and August? The answer is the same as in the above statement with the explanation that AlgoLab tries very hard to generate profitable trades during sideways markets but relies on volatility, an up/down movement of price to capture a profit. During July and August the volatility was lower than is ideal for a large number of profitable trades. During low volatility periods, profit will be down and in fact in trying catch profitable trades a significant proportion of trades then result in small losses. Conclusion: During low volatility periods there will be drawdowns!
The account below started August 12th with the same funds and trading the same symbols as sammy above yet the result looks so much better. There was a small drawdown from Aug. 14 to Aug. 27 before beginning the big run-up Aug. 27th through Sept. 1. Notice that in this situation there can be a big initial P/L difference from the sammy graph when trading commenced several days later.
The design objective for AlgoLab is to be fully automatic with manual options for the adventurous folks. Some people who study the market will be able to switch settings in an attempt to improve results. Regardless, the intent is to have more subscribers experience AlgoLab with excitement and a smile right from the start….. however there will be drawdowns. What we ask is that you first understand the nature of algorithmic trading, trust the effort and testing that has gone into AlgoLab and know that Greg is continuously trying to improve AlgoLab for you. In the meantime please ride out a few of the run-ups and drawdowns until you see how the longer term trend develops. We think you will be pleased.
Managing the Drawdowns
There are some manual techniques to help reduce the losses during the drawdown period such as pausing trading. Passtime, NewFox and czopc have occasionally paused their accounts thereby reducing drawdowns during a few periods. This seems to have been effective. One risk to this strategy is that if the timing of doing this is off one may miss a portion of a run-up.
We will be working on new features within AlgoLab to notify you of a drawdown period as Greg has manually done previously by email. Ultimately the goal is to teach AlgoLab to more elegantly navigate through the drawdowns for you.
Stay tuned for Greg’s progress in future articles PLUS read his book on how AlgoLab is designed to manage risk: http://unbouncepages.com/free-ebook-27022049/