YouTube Video Notes: G7FX In Depth US Crude Oil Analysis and Fully Audited Stats Review Part 3

YouTube Video Notes: G7FX In Depth US Crude Oil Analysis and Fully Audited Stats Review Part 3

So, in the video I describe how these items are there but in January they are all one way. Look at January, January you can see the market’s been rallying quite a lot, right?

The stock market’s making highs all the time. The news has generally been one way. The elections are out the way, the vaccine news has pretty much been accepted as being a positive because all the drug agencies have signed off the majority of the vaccines. They’re already starting to roll them out.

That wasn’t the case in December. Same with the election uncertainty where, regarding Trump, we weren’t certain whether some of his legal challenges were going to be successful or not. So that uncertainty was there and then obviously, the Brexit thing, we didn’t know whether the deal was going to pass or not.

In January it’s done. The deal’s done so you can see January the market’s rejoicing with all this news whereas in December that wasn’t the case, right? It was two-way. I’m saying all of this because this is what I was thinking to myself in December.

I was sitting there thinking this news could go either way. Any of these three items, therefore, don’t get too biased one way or the other.

So, the point is that as you can see in my MyFXBook stats, I took a little bit more risk on the short side than I did on the long side but the reason I talk so much about those fundamentals is it’s reflected in my statistics. It was pretty much fairly balanced (longs vs shorts).

I didn’t really have a strong bias. If you look at some of my previous MyFXBook’s or my trading; if generally I think the sentiment is quite positive, then you’ll see that reflected in my stats. I will be going one way whereas December was very uncertain and therefore it’s reflected in my trading.

So, the point is I have a kind of feel for what the sentiment is in the market and trade accordingly. I don’t get too caught up or obsessed with one particular direction in a market like November or December. There was a lot of decision making that needed to be made at a political level that we weren’t sure of so hopefully that’s really useful for you.

I know I talked a lot in this video, but I wanted to do a real like solid video this month just because I had a lot of questions around December. In particular people asking me if I was still around. Well yes, I’m still very much around. I had a fantastic month. I’ve been doing this for a very long time. I know how to deal with these types of risks.

As I said in this video, I just wanted to highlight those two major points; one being in this type of environment don’t over trade – be aware of the risks. Number two, if there is uncertainty don’t get caught up by one bias or the other.

So finally, in the video as you can see, I’ve got all the stats here. So, November I had a little bit more drawdown than I would have liked and then same for December. You can see the last sort of three months, really my drawdown has been slightly higher than the earlier part of the year and a lot of people ask me why I split out the months. Well, there is one of the major reasons.

I’ve said it many times before; there’s a plethora of reasons but at the end of day the results are so significantly positive in alpha that it should be obvious why this stuff is split out.

When you’re generating this sort of alpha it doesn’t make sense to be doing things like compounding aggressively. If you’re doing two percent a month, I understand the argument around compounding; it makes complete sense. Obviously by compounding you can get yourself to double digits in one- or two-years’ time. However, I’m often doing that in a month which would force me to increase my size significantly every month which I am not going to do for various factors. There are psychological things, there are practical things there’s liquidity restrictions, there are so many things.

Just another reason that I’ve been quite vocal about the fact I like to split it out; so, I can monitor my draw down as aforementioned. It’s very normal in a professional environment at the end of the month to have a look at risk-adjusted performance.

So, my point is that I had slightly higher drawdown than I would have liked and I like to split it out because I can then see straight away that in some parts of the year, in particular, in the middle part of the year where things were quite settled, I had a lower drawdown. I can then see looking back at it when I do my reviews that I can really drill down into December/November. Drawdown was higher than normal, so do I need to make any adjustments and so on.

I have spent maybe a hundred hours reviewing trades over the last month; that’s how much I dedicate to my craft. Even after 20 years, I spend over 100 hours reviewing some of my trades. The conclusion I came to after looking very deeply was that I was probably okay when I was taking my risk. I looked at some of the things I could have done differently and to be honest, in the cold light of day looking back, I was quite satisfied with the amount of drawdown I was taking on individual trades.

Especially when I had a look at some of those political risks, event risks, how long I was holding on to trades, and what my maximum adverse excursion was (which I’ve talked about in the past). A lot of these things I went into in depth, and by splitting it out into months, a lot of these things I can compare easily and see if I can make slight adjustments so that January can be better. So, I came to the conclusion that most of it was down to the political and some event risks that I talked about and that’s why I went into so much detail.

Hopefully that was useful!