The Five Minutes a Day Trading strategy has delivered again, with another profitable month. This is the fourth successive winning campaign. The analysis shows that losing months are always possible, but the combination of a reliable signal and a higher reward to risk ratio lowers the overall risk of trading. Most importantly it obeys the cardinal rule of trading – having a plan, and sticking to it.

This table summarises the results of the four 5MADT strategy months so far:

campaign summary

One of the most enjoyable aspects of this 5MADT (apart from profitability) was the chance to hear from traders implementing the strategy, and the tweaks and twists they applied.

The parameters for this 5MADT were quite different to the previous three. Tighter entry rules and significantly closer stop loss and take profit targets meant on many days the trades were entered and closed within five minutes – the smallest time commitment yet. Here’s the detail of the trading month:

20131031 final results

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  • Following wins on the first three trading days, the strategy remained in profit for the whole month, freeing up trader capital.
  • 19 buys and only 3 sells – an extraordinary ratio, possibly reflecting the overall 160 point rise of the index over the month. However, sell trades were more successful, with a 67% hit rate, versus the buy hit rate of 42%. The overall hit rate of 45.5% was well above the break-even point of 29.5%.
  • Generally, successful days were influenced by local rather than international factors. Days where overnight moves dominated more often resulted in a stop out, as the market adjusted to the global news at the open and then traded sideways.
  • The tighter trading parameters presented challenges. On two occasions, the trade was triggered within 60 seconds of the rate set, making it a scramble to enter the trade. While this meant the trading took less than five minutes, future research will look for opportunities more in line with the previous campaigns that allow a more careful order entry.
  • A trader executing the strategy may not have gained all 60 points – stop entries by their nature are subject to slippage, especially in fast moving markets. The study does not include slippage, as it will differ from trader to trader, depending on factors like the time of order entry and the size of trade.
  • It’s clear from trader comments that the entry methodology must be spelled out in detail at the beginning of the campaign.

 

This ends our daily reporting on the strategy, but of course any trader could implement the strategy in the future. Here’s the strategy outline for those looking to do their own calculations. And some notes on Stop Entry Orders and the use of order boundaries

Now I’d like to hear from any traders who followed the month. Did you use the strategy? Did you modify it? What was your experience? Do you have any suggestions for improvement?

Soon we’ll start the search for the next 5MADT instrument, for a likely February 2014 campaign. Have you noticed any market quirks for Leo the quant to investigate?

Finally, thanks to all those who generously contributed their views, thoughts and comments throughout the month.