Volatility Trader Rel.3c - LIVE-A Discussion

New Signals Performance (These are the signals implemented September 1, 2010)

Gross New Signals *Performance (Fee Costs Not In):

Sep '10: +3.4% (low risk setting)
Oct '10: +19.1%
Nov '10: -7.4%
Dec '10: -9.2%
Jan '11: +7.3%

(Sum of return % as of Jan 31/11 is 13.2% in 5 months or 2.64% / month.)

*These performance numbers are generated from over-all client account performance, and do not match exactly the balance-based performance numbers reported on this system. Client accounts run at varying risk settings which usually increase the returns somewhat. Also, the numbers for Sep - Nov reported above are based on equity performance, not balance performance as we converted to balance-based internal tracking at the beginning of December 2010. See the 'LIVE-B' Volatility Trader account for the MyFXBook balance-based performance figures related to that account -- those performance figures are amplified due to higher risk settings.


Primary Factors Affecting Performance

While it may not appear so from the above numbers, the current signals in use (in particular on GBPUSD which is the bulk of our trading) are working very well and there are no plans at this time to change them. What has been happening with cable over the past half year is that it’s been stuck ranging in a 10 cent channel. If one compares the ranging activity of the past half year on cable to the trending activity of the previous 1.5 years to that, it is immediately apparent that we are in an unusually non-volatile period at the multi-month scale.

What this means for our signals which are tuned to recognize overall trends and trade within them is that they are getting a little “confused” (shall we say) by the ranging channel. We are finding that at each major reversal within the channel that these signals tend to give up a lot of what they gained in the mid-term trending action.

No matter though. As long as these signals can hold their ground and make some headway overall in these conditions, they will be poised to jump on board and trade in the right direction for extended periods of time when the channel is breached. So the bottom line is that we just need to be patient. Sooner or later when cable returns to something like the previous 3,500 pip range (as opposed to the past half year’s 1,000 pip range) these signals should do extremely well. We see this for example for short durations before we bounce off the channel boundaries – during the mid-channel trends these signals are very powerful, when they hit the channel walls they take a beating. So it appears that the approach to take is simply patience.

t.