Model T System In 2012

results2012_MT_200pct_yr

Model T Forex Trading System Results: Jan02 to Dec31, 2012

 

Performance In 2012 = 170.2% Profit

It’s not 8,000%/week, but it’s still a fairly decent result.

Certainly 170.2% is far better than 3% on savings account!

But… and (unfortunately) there’s always a but (!)… let’s see what happened in 2012 that affected forex trading directly and indirectly.

Trading Forex in 2012 was, for most traders, a bit of a hectic experience. Volatility was high, and during the last months of the year it was even higher!

No surprises there, of course.

What else? For those of us who traded EUR/USD in 2012, a couple of reminders:

  • Europe flirted with euro-disaster, facing all sorts of problems in Greece, Spain, Ireland, Italy, speaking different languages (metaphorically and for real!), and so on and on. By year’s end, problems were far from over in Europe.
  • The US had more QEs than most believed possible, political frictions across the aisles, presidential elections, fiscal cliff issues, etc. For America as well, by year’s end problems were far, far from being over.

Didn’t you have the feeling Vegas was a dream world – or at least a lot more entertaining than trading forex – in 2012?

  • Nonetheless, Dr. Tumbili and his simple Model T Forex Trading System heroically made their way into 2013, healthily ahead of the game by a surprising 170.2%!

Much better than most engineers, that’s for certain.

Surprisingly enough, though, much better than most professional forex traders as well! Cool…

Now… Shall we take a look at the rest of the numbers?

 

Model T Forex Trading System - Results 2012 - Analysis

Model T Forex Trading System – Results 2012 – Analysis

Model T Forex Trading System - Results 2012 - Analysis 2

Model T Forex Trading System – Results 2012 – Analysis 2

 

What Do These Numbers Tell Us?

We’ll be dissecting each one of the results later on. For now, let’s just focus on the good, the bad and the ugly!

 

The good news:

  • Even at a fairly low Risk Exposure (2% per trade), the Net Profit was 170.2%;
  • Healthy 1.46 pos/neg pips ratio, an 18.6% profit on total pips (pos+neg);
  • Fairly low number (15.3%) of all trades have been stopped.

The bad news:

  • Very high Weekly Maximum Loss (-10.1%);
  • Very high Maximum Drawdown (-27.9%).

The scary news:

  • More than 2/3 (68.1%) of all trades were losers;
  • A 3:1 daily ratio (in pips) between profit (6.1 net pips/day) and spreads (2 pips/day).

 

Let’s See What All This Means

For starter, the 170.2% high Net Profit, combined with the high 27.9% Maximum Drawdown, suggests:

 

For the above good news:

  • Even though 2% is a relatively safe Risk Exposure, it was too high for 2012. First indication that Risk Exposure will probably need to be reduced in 2013;
  • 18.6% profit on total pips (pos+neg) is good, but not exceptional. It’s a delicate balance, to be watched closely in 2013;
  • Stop Loss was well positioned, for the reasonable 15.3% of trades stopped.

For the above bad news:

  • A 10.1% maximum weekly loss is fairly dangerous. By the time I’m convinced that changes may be needed in my system, 3 to 4 week could have gone by, with potential losses approaching 30% to 40%. This is hypothetical, of course, but unacceptable nonetheless. This number should stay below 7% weekly, max 7.5% for this particular Model T System (due to its somehow slow reaction to changes);
  • The Maximum Drawdown is a number watched by all traders. Actually, it’s THE number to be watched. Let’s say, for instance, that a system generates 1,000% profit a year, but the Max DrwDwn is 90% of the account. Dr. Tumbili, or anyone else for that matter, would run away from that system, or at least seriously reduce its risk exposure to almost zero. Which, at the end, wouldn’t produce 1,000% profit anymore, of course! Going back to the Model T, 27.9% is definitely high. It should stay below 20%, which will force me to review the Model T risk exposure for 2013.

For the above scary news:

  • If Dr. Tumbili knows that 2/3 of his trades will be losers, he needs (more than ever) to let the winners run! Letting the winners run is a very SCARY proposition in times of high volatility, regardless of the millions of times he heard the famous cliche phrase “let the winners run”. Probably the robot will be a “must have” in 2013, even for Dr. Tumbili;
  • A gross 8.1 pips/day average profit in almost 2 trades/day average needs a low-spread trading broker. If your spread on EUR/USD is 1 pip/trade and you open 2 trades/day, your net profit will be 6.1 pips/day (i.e., 8.1 – 2). But if your broker gives you 3 pips/trade on EUR/USD, your net profit will be 2.1 pips/day (i.e., 8.1 – 6). So, avoiding high spreads and too many trades/day is important for any system, but it’s key for this particular one.

Simple? Great… That’s the way we’d like to always keep things around here!

Next we’ll try to figure out the reasons for some distortions we found in the numbers above. We’ll need to go a bit deeper into details, but still not deep enough to dissect all results. That will be done – as said above – in the blog, in due time.

Let’s take a look at the Model T Trading System performance for Dr. Tumbili (the Monkey Trader’s Account) in 2012, month by month, and week by week.

 

The Monthly And Weekly Numbers
Model T Forex Trading System - Monthly Results 2012

Model T Forex Trading System – Monthly Results 2012

Model T Forex Trading System - Weekly Results 2012

Model T Forex Trading System – Weekly Results 2012

 

What Do We See At A Glance?

Well, for one thing, it’s pretty obvious that something changed after August 2012.

We see a steady, healthy reality up until July. Then, for some reason, the patient seems to have caught a cold after that.

Now the Million Dollars Question:

Was this a cold… or was it pneumonia?

In other words:

  • Is the Model T Forex Trading System still structurally sound to be traded in 2013?
  • Or what shook its performance after August 2012 is permanently embedded in the market’s behavior?

The Model T Forex Trading System self-adapts to certain market movements and changes.

Some changes, though – like the 400 pips Max DrwDwn – happened between Nov’08 and Dec’21. Only the analysis of the first few months of 2013 will determine if markets will resume their ”good behavior”, or continue into the same pattern of the last period of 2012.

The definite proof about what happened with the Model T numbers after August 2012 will come after studying the details of the daily trades.

 

What To Consider For 2013
  1. The growth in volatility was certainly responsible for the high Drawdown in the last months of 2012.
  2. Dr. Tumbili and I are convinced that high volatility will continue throughout 2013.
  3. All things combined, for 2013 Model T Trading System we should consider the reduction on Risk Exposure a priority.
  4. Other changes may – and probably will – arise as a consequence.

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See you at the next page: Adjusting Parameters For 2013.