Small capital project – December 2010 – January 2011




First of all my apologies for not updating the site during our summer holidays. I have managed to keep the TradeOnAuto site up-to-date, but a few other jobs have slipped between the cracks!


As you can see from the results, December and January did not work out well for us, and we ended up over 21% down. There is no sugarcoating that! It was very disappointing result.


However, at the completion of our first 12 months, we have made just over 41% on our money. By most objective standards, anybody should be pleased with a return like that. Nevertheless, having been up around 116% at one point during the year, there is a tinge of disappointment to even this result! It all goes to show just how difficult the trading game can be, particularly when you are working with a small account.


Just to remind you, a small account has a number of natural disadvantages. You will probably be risking a greater percentage of your account in each trade than you would if you had a substantial account; this inevitably makes the results a lot more volatile. A small account suffers from the “asymmetric affect" in money management; there is a big difference in moving from trading 1 contract to 2 contracts, as opposed to, say, moving from 14 contract to 15 contracts. Money management algorithms work much more smoothly with larger accounts. Finally, the trader with a small account generally has to put all he is or her eggs in one basket; a trader with a larger account can afford to diversify by trading multiple markets, or multiple strategies within one market.


So, at the end of the first year, we certainly aren’t in a position to give up our day job yet! But we are heading into our second year full of confidence. We’ve survived, made a decent profit, learned a bit, and look forward to the next challenge. As I mentioned in the previous post, we will not be interfering with the settings from month to month this year. (When we use our simulator to see what would’ve happened if we had simply maintained our settings from last February throughout the year, we can see that this experimentation cost us dearly.)



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