Collective2 (Swedish) Trader of the Week:
“XLN Swingtrading” Hypothetical Results
versus ■ S&P500.
Sweden is known for flat-pack furniture, meatballs, and ABBA. If Samuelsson has his way, soon it will be known for swing-trading strategies.
My strategy on Collective2, XLN Swingtrading, is a 100%-mechanical swing-trading system. It trades large US stocks and ETFs. It's a combination of ten different strategies running across the same portfolio. The strategies have one thing in common, though, which is that they are all mean-reversion strategies. ‘Mean-reversion’ is just a fancy term for a commonplace idea: that things tend to stay the same.
We see it often in the world of sports: that mediocre baseball player who is a lifetime .240 hitter, but who suddenly hits .360 for a few weeks - we all know in our hearts that won't last, and that he'll be back at .250 soon enough.
So it is with stocks. They tend to revert to their means. A stock that has a fast and significant run-up will tend to fall back down to ‘average’ after a while. And, similarly, a stock that plummets quickly will tend to correct itself and go back up towards its trend-line, at least for some time.
So these are pretty simple ideas. But I have found the simplest ideas are the most powerful. ”
I am a full-time trader currently living in Stockholm, Sweden. I have a Masters Degree in Engineering from the Royal Institute of Technology in Stockholm. I have been interested in the markets for as long as I can remember.
On loving his job
Damn, I love trading. Love it, love it, love it. I love developing new strategies. I cannot think of doing anything else. It's a lot of hard work, and you have to spend a lot of hours in order to stay on top of everything. The business is very competitive, but it is worth it. Not only does it give me a lot of financial freedom, but it also gives me more time with my family, friends, and - most important - my son. ”
How to find a C2 strategy
When people ask me how to use Collective2 to find a good trading strategy, I point them to The Grid. For those who don't know, The Grid is a wonderful feature on Collective2.
But do not fear The Grid. The Grid is wonderful. The Grid is your friend. You can use it to filter trading strategies by numerical performance. Here is a set of filters I personally like:
Past results are not necessarily indicative of future results.
These results are based on simulated or hypothetical performance results that have certain inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under-or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown.
In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program, which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.
Material assumptions and methods used when calculating results
The following are material assumptions used when calculating any hypothetical monthly results that appear on our web site.
- Profits are reinvested. We assume profits (when there are profits) are reinvested in the trading strategy.
- Starting investment size. For any trading strategy on our site, hypothetical results are based on the assumption that you invested the starting amount shown on the strategy's performance chart. In some cases, nominal dollar amounts on the equity chart have been re-scaled downward to make current go-forward trading sizes more manageable. In these cases, it may not have been possible to trade the strategy historically at the equity levels shown on the chart, and a higher minimum capital was required in the past.
- All fees are included. When calculating cumulative returns, we try to estimate and include all the fees a typical trader incurs when AutoTrading using AutoTrade technology. This includes the subscription cost of the strategy, plus any per-trade AutoTrade fees, plus estimated broker commissions if any.
- "Max Drawdown" Calculation Method. We calculate the Max Drawdown statistic as follows. Our computer software looks at the equity chart of the system in question and finds the largest percentage amount that the equity chart ever declines from a local "peak" to a subsequent point in time (thus this is formally called "Maximum Peak to Valley Drawdown.") While this is useful information when evaluating trading systems, you should keep in mind that past performance does not guarantee future results. Therefore, future drawdowns may be larger than the historical maximum drawdowns you see here.
Trading is risky
There is a substantial risk of loss in futures and forex trading. Online trading of stocks and options is extremely risky. Assume you will lose money. Don't trade with money you cannot afford to lose.