1) The ending "VAMI" shows how much profit was earned for each $1,000 in the account at the start of the month, so this shows that I am up 9.3%
(Note: VAMI (value added monthly index) is a ratio that gauges performance by examining the
consistency of returns with respect to time.
VAMI is calculated by multiplying (1 + current monthly Rate Of Return) X (previous monthly VAMI). The Initial Calculation = 1000 x (1 + Current Rate of Return).
Ongoing Calculation = Previous VAMI x (1 + Current Rate of Return)
2) Notice that the maximum draw-down to generate my profit
was EXTREMELY low at just 1.10%, compared to 7.06% for the S&P 500 (SPX)
NOTE: The S&P 500 is a common benchmark for the industry that professionals will compare their performance against.
3) The "Sharpe Ratio" is a risk adjusted measurement which filters out lucky gamblers from true low risk taking performance...A ratio of 2-3 is considered very good, and anything above 3 is considered exceptional...I'm at 11.56
(NOTE: The formula for the Sharpe ratio is
SR = (µ – I) / σ,
where "µ" is the average monthly return for the period in consideration, "I" is the risk
-free rate of return, "σ" is the standard deviation of monthly returns.
Therefore, this formula yields a value that could be loosely defined as return per unit risked if we accept the premise that variability is risk. The higher Sharpe ratio the smoother the equity curve on a monthly basis. Having a smooth equity curve is a very important objective for many traders.)
4) The "Sortino Ratio" is just like the Sharpe Ratio, except that its is heavily focused on draw-downs experienced during trades...The higher the Sortino Ratio is, the better, and my ratio at 34.26 totally destroys the S&P 500 (SPX) which was at -2.44 for the same time period
(NOTE: When looking at two similar investments, a rational investor would prefer the one with the higher Sortino ratio because it means that the investment is earning more return per unit of bad risk that it takes on).
5) Many believe the "Calmar Ratio" is the best way to objectively measure risk adjusted returns, and mine is 459.73 vs the S&P at -4.59
(NOTE: When investors must select from a broad universe of possible investments, it helps to explicitly consider risk and return as factors of overall investment success.
The lower the Calmar ratio, the worse the investment performed on a risk-adjusted basis over the specified time period; the higher the Calmar ratio, the better it performed).
6) I traded 18 days (I ended up averaging just an hour or so of trading per day during this particular period, basically around 5 hours of trading per week) and made money on 17 of those days for a 94% win rate
7) I only lost money on 1 of those days, and as stated before, the loss wasn't even a fraction of what the buy and hold "conservative investor" would have experienced in a S&P 500 index fund!
Incidentally, I should mention how when we first started, we ran a trade room together 4 days a week, just 3-4 hours a day, so just a 12-16 hour work week...
Back then, we wanted to show live, in real time, how a person could generate an average of 4% a week or better, when you take the total return generated over the year and divide it by 52 weeks in a year.
The point was to reflect how compounding an account with that kind of average return, could ultimately replace a full time income through that part time effort, over a reasonable 2 to 4 year period, starting with as little as $2,500.
We were amazed at how some of our clients were easily beating that, though the point here isn't how much you can make...
Rather, the potential, as well as how positive and consistent the trading experience can be when you're faithfully applying this analysis and forecasting methodology...
However, let's come back to where I am today, thanks to this methodology, because that's not the best news...