It was a tough trading week as all portfolios were down on the week and down on the month and at worse case drawdowns.
Why is this market so tough? There is plenty of opportunity in the markets but the challenge has been the drastic changes in volatility. I spent some time this weekend looking at VIX data and calculating yearly averages and standard deviations going back to 1990.
There were some eye popping stats on the VIX in 2017. Did you know that in 2017 the VIX not only had the lowest average VIX reading for the year but also the standard deviation of the VIX was just 1.35. Take a look at our VIX research to see how rare these numbers are in 2017 and how drastically they have changed in 2018.
In 2017, we updated our portfolios for lower and lower volatility and traded emerging strategies with short track records and more and more countertrend strategies. Some of these strategies had larger stop losses than profit targets. I don't typically like to trade that way but in a countertrend low volatility market, you have to employ strategies like that if you want to actively trade. Those same strategies, such as Gap Fill and Reverse and CounterTrend MAX perform poorly in high volatility markets.
In the end 2017 was a VIX trap.
We update the portfolios again for the week starting on March 25, 2018. We eliminate many strategies and narrow the focus of our portfolios. You will get the updates sent to your email today, Sunday, March 25, 2018 if you have not received them already.
The results below are hypothetical results based on the trading system signals. We trade the strategies and portfolios but we don't trade all systems, all of the time, and do use some discretion when determining which strategies to trades. We also do take additional discretionary trades. Some of the trading system trades shown may be taken while other trades may not be taken, based on our discretion. For this reason, the information here should be considered informational and educational and can represent how our trading software operates on different platforms.
For the purpose of this blog post, since we do use discretion in our live trading: All trades presented are NOT LIVE TRADED IN A LIVE ACCOUNT and should be considered hypothetical.