Currency (Forex & Cryptocurrencies) Portfolio: Annual Report

In 2017, I focused less on a personal forex portfolio, and more on other portfolios as capital deposits in the latter reached the same amount as the personal FX portfolio. In this post, I will be discussing three currency portfolios; active trading strategies, carry trade strategy, and cryptocurrencies.

Active Trading Forex Portfolio

Since inception (09/29/2015, I actually started trading in 2011), personal forex portfolio is up 33%. For 2017, it returned 8.39%. For 2016 and 2015, the portfolio returned 32.82% and 117.48%, respectively. So why the big differences in percentages since inception and yearly returns? More money was deposited into the account over time. As a result, I have risked much lesser capital per trade. The portfolio size is 10 times bigger than it was in 2015, or 100 times bigger than it was in 2011. Thus, the returns in % terms are much smaller, but in nominal amounts, much bigger.

In 2017, the maximum drawdown was almost 7%. When the drawdown increased 2% in a week in the middle of the year, I knew I had to change certain positions. 2% move in a week was a big deal considering I was focused less on the personal FX portfolio. Once I closed certain positions and opened new positions, the drawdown went back to its average of 3.5% within two weeks and stayed below that level since then. Risk management is very important!

I don’t have other metrics, such as monthly returns, standard deviation, and Sharpe ratio, as I did for 2016 because the ex-broker who provided me with the useful statistics was banned from the U.S., for defrauding customers and engaging in false/misleading solicitations.

Carry Trade Forex Portfolio

During early 2017, I wanted to create another forex account solely focused on one strategy. I didn’t want the carry trade positions mixed with active positions. So I opened an account with a different broker, Oanda. I initially deposited about 4% of my capital, amount I can afford to lose.

I made some mistakes in the beginning. The first trade was shorting EUR/TRY, whose interest differential is the highest, A.K.A higher yield. I started to lose a lot of money as the only carry trade in the account kept going in the opposite direction of my favor (EUR/TRY kept rising), talks of ECB tapering its balance sheet appreciated the euro and the situation in Turkey depreciated the lira.

Within several months, my unrealized losses were about 30% of the portfolio. I couldn’t do anything about it to manage the risk as my hands were tied due to work. I had to set up the carry trade portfolio in a way I barely have to worry about the fluctuations in unrealized P/L. When work ended for the summer, the portfolio drawdown was its highest, almost 50%.

I learned that the key to successful carry trade is to leave plenty of margin in the account for the pairs to fluctuate without wiping out your account. So I deposited 1% more capital into the account to prevent margin call. Immediately afterward, I changed my positions. I shorted some of the highest yielding currency pairs with negative correlation to EUR/TRY. Within a month, the drawdown went from 50% to 30%. Currently, it is just above 20%. Risk management is very important!

For its first year, the portfolio is up 14%. The 14% comes from the interest returns on the positions as it rolled over to the next day. However, when the unrealized losses are taken into account for 2017, the portfolio is down 23%. Carry trade is a long-term trend following strategy that requires patience and risk management.

This is an instance of humans thinking they can do something well, but things go sideways when they put their actual money, relationships, etc. at risk. I initially believed I could make some money easily with the carry trade. When the time came to have a real money at risk, I made mistakes and learned a lot! This is why I won’t be overconfident in things unless I actually have a good experience in it.  Not just for professional life, but also for personal life.

Cryptocurrencies Portfolio

Ahhh. Cryptocurrencies. The hot talk of the moment. Like everybody else, I’m up big time. I started buying cryptocurrencies in July. As of this writing, the portfolio is up 143%. I know I know, 143% is nothing compared to the actual returns of the cryptocurrencies. I currently hold Bitcoin (BTC/USD), bitcoin cash (BHC/USD), Ethereum (ETH/USD), and Litecoin (LTC/USD). If all the cryptocurrencies were to drop 99%, I will only lose 5% of my capital and continue to live as usual. To clarify, I’m not actively trading them.

Shortly after the tweet, I bought bitcoin, litecoin, and more ethereum. Until then, I continued buying all three.

I bought more ethereum before the launch of bitcoin futures, as I believed….

As the ethreum was skyrocketing, litecoin was also joining in the action. I added little more litecoins then.

As I have said in the “Long Cryptocurrencies” article, “I have no idea where Bitcoin price will be at tomorrow, next week, next month, next year, next decade.

For 2018, let’s see if I open another FX account. This one just might be algo-based.

Passive Equity Portfolio: Annual Report

Let’s get to the ugly truth. Since inception (July 2014), my passive portfolio is up only 2.18%19 times less than the market return during the period. For 2017, the portfolio returned only 3.82%, 6 times less than the market return. Um….um….um, let me try to justify the low returns.

My peers and people jealous of me would be laughing like this:

Kuroda’s evil laugh
2014-2015

When I opened the account in the summer of 2014, TD Ameritrade gave me 2 months to trade for free. So during that time, I wanted to fill the account with stocks. The only problem was I did not know which stocks to buy. At the same time, I did not know how to research potential investments.

Mostly guided by “expert” recommendations and positive headlines, I bought some stocks which destroyed my portfolio, including Ford (F), J.C.Penny (JCP), Cisco (CSCO), General Electric (GE), and General Motors (GM). In 2015, I still did not know which stocks to buy. I wanted to do my own research. I decided to research all the stocks that were bought the previous year.

From my research, I found CSCO, GE, and JCP attractive. So I decided to keep them in the portfolio. I even wrote about CSCO and GE on the blog. I did not write on JCP as I was not profoundly convinced. Funny thing is I have never shopped at JCP, just at its competitors. Even my mother did not like J.C. Penny.

I did not like F, yet I decided to keep F in the port because it was not worth getting rid of them at $10 commissions. For GM, I was on the fence. In addition to these names, I decided to research new names and bought some of them. 70% of my portfolio was in cash in January of 2015. In December, it was 42%.

The new stocks I bought in 2015 were non-dividend yielding risky names, such as Bellatrix Exploration (BXE), Twitter (TWTR), and GoPro (GPRO). All of which did not work out well to this day. BXE, because I tried to find a good energy company at the time every energy companies were distressed. I’m very active on Twitter and use GoPro most of the time. So I wanted to invest in them. At that time, I thought Twitter would get acquired, and GoPro management would start to turn things around, and the Karma Drone would be positive for the company’s financials.

2016-2017

In 2016, I continued to research new stocks. However, I did not invest in any of them. I deposited more money into the account during that year. At the end of 2016, 82% of the portfolio was in cash.

I always found real estate interesting. Used to read about them. My interest in the real estate market skyrocketed after my first ever internship, at a small real estate firm. In January of 2017, I decided to buy WPC, a Real Estate Investment Trust (REIT). During the year, I also bought Verizon (VZ). I did not want the remaining cash in the port to sit idle. So I decided to purchase free commission based short-term bond funds, very stable dividend yielding cash parking (and one high-yield ETF). At the end of 2017, 17% of the port was in cash.

Over the past month, I have been researching consumer goods companies. I’m looking to add one to the port. When I do, I will be sure to write about it.

10 Equities

I’m currently holding 10 companies; CSCO, GE, GM, BXE, WPC, JCP, F, TWTR, GPRO, and VZ.

All shares of 10 different companies belong to 1 class: domestic equity. 62% are in large cap., and 38% are in mid-cap.

On February 16, 2015, I recommended going long Microsoft (NASDAQ: MSFT) when the share price was $43.95. Since then, it is up 101%*. I made a mistake of not buying when I wrote about it. “Put your money where your mouth is, Khojinur.”

On April 12, 2015, I recommended going long General Electric (NYSE: GE). Since then, GE is down 33%*. Dividends are automatically invested in new shares. Average price I paid for the shares is $26. I’m down 29%. Despite the 50% dividend cut recently, I’m staying with the stock for two reasons. The cost-cutting will be the best bet for us the shareholders. The $7 commission fee won’t be worth it, especially since the stock was bought in 2015 when I had less money. If I can open second Robinhood account, I’ll transfer from Ameritrade to the free-commission based brokerage.

In the summer of 2015, I wrote about CSCO (part 1part 2 AND 4Q FY’15 earnings report). Since the first article, the networking giant is up 44%*. Average price I paid for the shares is $25.11. I’m currently up 57%.

On November 21, 2015, I wrote my first article on LLY and believed it was overvalued (it still is). Since then, the pharmaceutical company is up a mere 1.25%*. The second article on LLY was posted a year after the first article. I personally am not short the stock as I cannot short.

On December 26, 2015, I recommended going long GoPro (NASDAQ: GPRO) and believed it was a buy. Since then, the action camera maker and I are down whopping 59%.

On May 2, 2016, I recommended holding FireEye (NASDAQ: FEYE).  Since then, the cybersecurity firm is down 15%.

On January 20, 2017, I recommended going long W.P. Carey (NYSE: WPC). Since then, the REIT is up 11%*. Average price I paid for the shares is $61.44. I’m currently up 10%.

On May 9, 2017, I recommended going long Verizon (NYSE: VZ). Since then, the telecom is up 46%*. Average price I paid for the shares is $46.05. I’m currently up 47%.

*dividends not calculated

Estimated the portfolio dividend yield is 2.48% (that is very similar to the 10-year yield), with largest being 6% and lowest 0%. I plan to increase the portfolio dividend yield by getting rid of non-dividend yielding stocks and/or buying dividend-yielding stocks. That will happen fast, if I can make second Robinhood account and transfer the portfolio to there.

When I started doing research in-depth and writing down my findings and thoughts, everything started to improve. Writing is powerful!

Every new trade and investment will first be announced on Twitter. Almost always!

Active Equity/Commodity Portfolio: Annual Report

Happy New Year! I have no resolutions since every day is like a new year for me.

In 2017, I focused more on active equity/commodity portfolio than the other portfolios as I finally was able to trade free of commissions, found more opportunities there and had money saved up from off-book jobs.

WHAT A BORING YEAR…for the stock market. Sometimes, boring is good. S&P 500 was up 21.64%.

Figure 1: S&P 500 Annual Return (Includes Dividends).
Source: Aswath Damodaran, NYU Stern

The geometric average return since the financial crisis is 8.42% (2008-2017). Geometric average better reflects the returns over time since there’s always volatility in the market and volatility lower investment returns.

Since inception (November 2016), active equity/commodity portfolio is up 15.74%. For 2017, the portfolio returned 11.86%, way way below the market. No wonder active managers are not anyone’s favorites at this time.

Figure 2: Active Equity/Commodity Portfolio (Robinhood) P/L since inception (Nov. 2016).
The white line represents the start of the year.

I will address the significant drawdown you see in figure 2 at the bottom of this post.

The biggest gain of the year, both in a percentage and nominal terms, came from the first trade in 2017. The trade was long NUGT (3x leveraged gold ETF). I believed gold was unfairly beaten down and would recover around the new year as portfolios would be rebalanced and uncertainty with Trump’s economic plans at the time would force investors to hedge their portfolio. And that’s what happened in January 2016. I closed the position at 28% gain.

While trading 3x leveraged ETFs, Be cautious as they always go down even though the underlying security goes up. The structure of leveraged and inverse ETFs are different than most retail investors think. They are not a good idea to be held for a longer time and as a significant portion of a portfolio.

The biggest loss of the year, both in a percentage and nominal terms, came from the 5th trade in 2017. The trade was long TVIX (2x leveraged volatility ETN, not ETF). I believed volatility would pick up from February to March (and it did a little bit). However, after TVIX underwent 1:10 reverse split in mid-March, I did not want to risk having the ETN go to single digits once again. So I closed the position at 17% loss.

To briefly sum up, the biggest gain was 28% and the biggest loss was 17%. In positive nominal terms, the profit was three times larger than the loss (positive number).

At the time, both NUGT and TVIX were a significant portion of the portfolio (Robinhood). Over time, I deposited more money into the account as I saved up from off-book jobs and summer internship. The account is now 6 times larger than it was at the beginning of 2017. Larger account allowed me to have more flexibility and lower my exposure to a single trade.

Top 3 Trades and Bottom 3 Trades
Current Positions:

I can only go long securities on Robinhood. Current positions are VRX (The biggest gainer at the moment, 112%. 14% of the portfolio), ORCL, XIV, ILMN, OMER, PSQ, SH, COL, TEVA, MTSI, and AXON (The biggest loser at the moment, -77%. 0.5% of the portfolio).

When talking about % gains on trades, traders should also look at those trades as a % of the portfolio. If I’m going to speculate on a one-time event, such as FDA ruling on a drug, I’m going to have a small exposure to that company (such as AXON). If I am profoundly convinced on the fundamentals of the company and/or technicals of the stock, I will have a higher exposure to that company (such as VRX).

It’s important to point once again these gains/losses are unrealized. The returns are subject to change…until the position closes.

Both PSQ and SH are inverse ETFs of the market. I have bought them as a small hedge for my portfolio as I’m long individual U.S. stocks.

Why am I long the stocks mentioned above? I will not go in-depth here.

  • $VRX: Extension of debt. Time flexibility to restructure the company.
  • $ORCL: Unfair share-price beat down after positive earnings report and market, in general, is trending higher.
  • $XIV: Because why not?
  • $ILMN: Someone is loading up big amounts of calls. Speculation it will be acquired at a huge premium.
  • $OMER: Friend’s advice (first time I took friend’s advice with actual money at risk).
  • $PSQ and $SH: Small hedge, as I mentioned above.
  • $COL: Speculated it might be acquired at 15-25% premium. United Tech (UTX) later acquires them at 18% premium.
  • $TEVA: TEVA calls were active after Allergan (AGN) was halted. Speculated upcoming positive news for TEVA. The week after, new CEO news. Sticking to TEVA as the new CEO has a great reputation and I’m confident his tenure will reward the shareholders.
  • $MTSI: Calls active and social media sentiment.
  • $AXON: Speculation on Alzheimer drug data. Chances were low, but I believed even a small positive side of the drug would help the stock price. I was wrong. Was initially 2% of the portfolio. Now 0.5%. Still open as I have nothing to lose.
Get Out?
Over 12% loss of value in less than 2 months (Fall 2017).
The face is from the movie “Get Out

As you saw in figure 2 (and figure 3 below), there was a large drawdown in the portfolio. Over 12% of the portfolio lost value in less 2 months. Why was that? It was largely due to VRX and TEVA tumbling. Both were little longer-term strategy and high conviction both companies would turn itself around. After 2 months, both stocks rebounded and hit 52-week highs afterward. Other stocks in the port during the 2 months were performing fine.

If it is one thing I learned as a trader, it is that high conviction leads to an ego which then leads to losses most of the time. So did I have an ego in this case? I don’t believe so. I was sticking to the initial trade strategy on VRX and TEVA, and there was no material news. It was the market noise. If the company fundamentals changed, then I might have changed my strategy on the trade (either close, cut down, or buy more shares).

 

Upcoming ‘Portfolio Performance’ articles will be on other portfolios.

The Importance of Downside Protection

Big-Risk = Big-Return is true for individual securities. But not for a portfolio. A common misconception for investors (and traders).

Risk-Reward has a positive correlation, but it’s not perfect.

Risky securities are diversifiable by lower correlated/negative correlated securities. By buying low correlated securities to hedge your risky security, are you lowering your upside? No. You’re lowering your downside.

For investors, capital preservation is more important than the growth of capital. The bigger the investment loss, the greater the gain required to break even. A 20% investment loss requires a 25% gain to get back to the initial investment value. Whereas a 40% loss requires 67% and 70% loss requires 233%. The best offense is a good defense.

The Importance of Downside Protection

If you invest $10,000 in S&P 500 ETF and a recession causes the market to drop 30%, the $7,000 value would need to gain 43% to get back to $10,000.

Let’s look at the following 3 portfolios, each with a different strategy:
  • Portfolio 1 is invested 100% in S&P 500 (SPY).
    • SPY’s annualized standard deviation is 15%.
  • Portfolio 2 is invested 60 and 40 in S&P 500 (SPY) and Investment Grade Bond Fund (FBNDX).
    • Both are 0.31 correlated, based on annual returns.
    • FBNDX’s stdev is 4%.
  • Portfolio 3 is invested 33.34%, 33.33% and 33.33% in S&P 500 (SPY), Investment Grade Bond Fund (FBNDX) and U.S Real Estate ETF (IYR), respectively.
    • IYR is 0.69 correlated to SPY. 0.63 correlated to FBNDX. Correlation is based on annual returns.
    • IYR’s stdev is 21%.

* I initially wanted to backtest them for 30 years, but since IYR was the only real estate ETF I could find with the earliest fund inception date (June 2000), the backtest is from Jan 2001 to Dec 2016.

** Link to the data above can be found here.

Each portfolio is rebalanced annually. Dividends and distributions are reinvested. Taxes and transaction fees are not included.

Here’s the growth of each portfolio over the past 16 years.

3 Portfolio Backtest (Inflation Adjusted). January 2001 – December 2016
  • Port 1 has returned annual growth rate of 3.26%, after inflation.
  • Port 2 has returned annual growth rate of 3.36%, after inflation.
  • Port 3 has returned annual growth rate of 4.75%, after inflation.

Portfolio 1 and 2 have very similar returns. However, the traditional 60/40 portfolio (port 2) took much less risk than all-in portfolio (port 1).

Port 2 had a maximum drawdown of 35% while port 1 had 51%. Portfolio 2’s standard deviation (9%) was almost half the stdev of portfolio 1 (15%).

Port 3, on the other hand, had 45% max drawdown with a standard deviation of 11%, both in the middle of port 1 and port 2. However, they returned much higher.

3 Portfolio Backtest. January 2001 – December 2016. The “Final Balance” and “CAGR” numbers you see above are not inflation-adjusted.

Also, port 3’s Sharpe ratio, Sortino ratio, and Treynor ratio are all higher than the other two.

There are a lot of things to look at when determining which portfolio might be the best for a long-term investor. My favorite is portfolio 3, although the volatility is higher than portfolio 2. REITs (in port 3) provide a strong portfolio diversification with lower exposure to market volatility and attractive dividends.

You can see the backtest here for yourself.

Investors vs. Mr. Market

Downside protection strategies may help prevent investors from their bad habits of overreacting to downside volatility and incorrectly timing the market, missing the boat of high returns. Over the past year, S&P gained 18.10% while an average investor gained half of the growth.

S&P 500 vs Average Investor Return.
1-Year up to September 8, 2017.
Source: Openfolio

If you are a passive investor, consider downside protection strategies to limit volatility and build wealth over the long-term.

Diversify portfolio with:

I endorse the idea of employing a multi-asset strategies that lower the downside potential while increasing the upside potential or even decreasing the upside potential less than the decrease in the downside potential.

I am not saying you should allocate your portfolio to every asset there is. It depends on your goals, lifestyle, risk preferences, your responsibilities, the investment % of your overall capital, etc etc etc.

How you allocate each security is up to you (or your financial advisor), or me me me me.

No portfolio is risk-free, but minimizing the downside can help mitigate the pain inflicted by market “fire and fury” and a changing risk landscape in globalization era.

If you have any questions/comments/suggestions, feel free to contact me personally and/or leave a comment below.

PS: Maybe make Bitcoin/Ethereum/Litecoin 5% of your portfolio.

PS: Active traders should also minimize the downside risk, especially if you work, have school, etc.

PS: Never mind. Thank you for reading. Don’t forget to subscribe.

Q1 2017 Performance: Equity/Commodity Trading

In the previous two articles, I wrote about my forex trading and equity investments performance for the first quarter of this year. In this article, I will talk about my 1st quarter performance for equity/commodity trading.


For the first quarter of 2017, my active trading performance for equities and commodities (commodity ETFs) was up 3.51%.

Equity/Commodity Trading Portfolio (Robinhood) P/L
The white line represents the start of the year.

For years, I could not trade equities and commodity ETFs due to commissions. Thanks to Robinhood, I’m not able to trade for free.

My first loss came from the first trade of the year. I thought energy, especially oil would go up over the next few hours, but I was wrong. So I closed my long position on Direxion Daily Energy Bull and Bear 3X Shares (ERX) at 2.13% loss (everything was tweeted out)

A month later, I made another call on oil. This time, short oil. I went long inverse oil ETF. Here’s why I thought oil would drop;

I closed the SCO position a month later at 22.55% gain, the biggest gainer of all positions closed during the first quarter of this year.

My biggest loss came from VelocityShares Daily 2x VIX Short-Term ETN (TVIX). I thought volatility would pick up in the coming month (and it did a little bit). However, after they underwent 1:10 reverse split on March 16th, I did not want to risk having the ETN go to single digits once again, so I indeed closed the position at 17.27% loss.

In nominal terms, the 22.55% gain on SCO is 3 times larger than the 17.27 loss on TVIX.

There are other positions that made and lost money. But overall, my portfolio was up 3.51% in the 1st quarter.

Current Positions:

I can only go long securities on Robinhood. My current positions are SPXS, WFC, LULU, DIS, EXPE, VRX.

I went long on Direxion Daily S&P 500 Bill and Bear 3x Shares (SPXS), which is inverse of S&P 500, because I believe investors are underestimating the negatives of Trump’s policies. Once investors realize the negatives of Trump’s fiscal policies and/or his actual policies are less stimulative as he proposed, the market will take a dump.

A lot of people think tax rate will be reduced to 15%. I have been watching some of Trump’s TV interviews, especially on Fox News, and it seems Trump himself does not believe tax cut will be 15% or lower. He basically said it might have to be little higher, say around 20%.

I also watched Trump’s body language and I believe Trump is not confident in what he’s saying about his fiscal stimulus plan as he was during the campaign.

So when the actual plan is released, investors will be disappointed.

SPXS is also a small hedge for my portfolio as I’m long individual U.S. stocks.

I’m also long on Wells Fargo (WFC), Lulelemon Athletica (LULU). I believe the plunge on LULU is overdone and could fill half of the gap. WFC fell after the earnings report last week. General bank earnings are trending higher and Well Fargo is no different. I went long on WFC also due to technical purposes.

I’m also long on Disney (DIS). I bought just at the start of rumors that Apple (AAPL) would buy Disney.

I’m also long on Expedia (EXPE). See this awesome tweet thread.

And finally, I’m long Valeant (VRX). I went long on the pharmaceutical company the day after Bill Ackman revealed he cut his $4 billion loss.

Valeant recently extended the maturity of their debt until the early 2020s, which gives them about 5 years to restructure their capital and the company. Plus, they have over $5 in cash for each share.

Just because Ackman lost big on VRX does not mean he’s not a great investor. He is a great investor (that’s why he’s rich?). If you watch his presentations and talks, he knows about he’s talking about. He does his research and deeply cares about other people. At least that’s what I think.

The current positions I mentioned above can change at any time or reverse. Thank you.

Q1 2017 Performance: Equity Investments

In the previous article, I talked about my performance for Forex portfolio in the first quarter of 2017. This article will lay out the equity investments portfolio performance for the 1st quarter. Unlike for forex, I don’t have much performance results for equity investment portfolio….at least for now.


Cash is trash.

For the first quarter of 2017, my stock investment portfolio was down 1.31%.

In the 1st quarter, I bought W.P. Carey (WPC). In this Seeking Alpha article, I laid out why I bought the diversified REIT.

Also during the quarter, I bought short-term bond ETFs. Such ETFs are Vanguard Short-Term Bond ETF (BSV), iShares 1-3 Year Credit Bond ETF (CSJ), Vanguard Short-Term Government Bond ETF (VGSH), and PowerShares Emerging Markets Sovereign Debt ETF (PCY).

I bought those ETFs for four reasons;

First, I had a lot of cash sitting in my portfolio. Cash did not add any value to my portfolio.

Second, the ETFs barely moves and yet offers attractive dividends that would be distributed every month, with low expense ratio. Instead of having cash be lazy, the ETFs provided free money since they barely moved in price.

And lastly, the ETFs were commission-free through my broker, Ameritrade. When opportunities arise, I can freely liquidate the ETFs position(s).

All three reasons provided me with great flexibility and free money. The average SEC 30 Day yield from the “big four” is currently 2.43%.

And lastly, I also bought iShares Core Conservative Allocation ETF (AOK). I bought this ETF for the same reasons I bought the “big four” ETFs; low risk, low fees, and attractive dividends.

The portfolio of the five ETFs mentioned above returned 2.77% in the past 5 years, with the largest quarterly loss at 2.65% in the 4th quarter of last year and the largest quarterly gain at 1.70% in the 1st quarter of last year. Year-to-date, it’s up 1.32%.

Estimated investment portfolio dividend yield is 2.8%, with largest being 6.4% and lowest 0%. I plan to increase the portfolio dividend yield by getting rid of non-dividend yielding stocks and/or buying dividend-yielding stocks.

I did not sell anything in the portfolio during the first quarter. However, I’m planning to make some changes this quarter, which will be released in the 2nd quarter performance article. But first, I will probably tweet out the changes.

32.30% of my portfolio is currently in cash. I plan to cut that in half. How will I do it? I’m not sure yet. I’m doing research on multiple companies. The one that stands out will be bought and an article about it will be posted, mostly likely on Seeking Alpha.

 

Note: Equity/Commodity active trading portfolio (Robinhood) performance will be posted later.

Update: “Q1 2017 Performance: Equity/Commodity Trading” article is posted.

Q1 2017 Performance: Forex

As you may know, I published my forex performance for 2016 and since inception. From now on, I will also share my quarterly performance. March 31st marked the end of first quarter, here are my performance results for FX trading.

Forex Trading Performance – Q1 2017

For currency trading, I was up 2.15%. I know, it’s low (in % terms at least). But, allow me to explain.

Before this year, my currency trades used to be in 1,000 units (or 0.01 lots), lowest I can trade. Since I usually had about 10 positions, each of 1,000 units, the nominal amount was large enough. After depositing more money and getting a clear picture of my Forex performance, I decided to increase my trades to 2,000/3,000 units (or 0.02/0.03 lots) for each position.

Getting a clear picture of my performance – average gain/loss, drawdown, trade duration, the percentage of profitable trades, etc – helped me improve my performance significantly.

This quarter [Q1], I further minimized my drawdowns. By minimizing drawdown, I minimized my returns. And that works for me. Stable uptrending P/L with a low risk.

It is true Forex is way riskier than other assets classes due to its leverage, mostly 1:50. But, that does not mean your portfolio has to include a lot of risks.

While 2.15% return this quarter from Forex trading is low, it’s still big in nominal terms for me and I’m getting a much better understanding of my weakness/strengths as I look through the metrics.

I don’t have the key metrics (besides the returns) and charts to share with you for this quarter for one reason: FXCM was Banned from the U.S. (I’m not even surprised after what happened on January 15, 2015).

FXCM is a retail FX broker and my former broker. They were banned by CFTC for defrauding retail foreign exchange customers and engaging in false and misleading solicitations.

As a result, FXCM customers were automatically changed to a different broker, Forex.com by Gain Capital Holdings, on February 24th. Unlike FXCM, this broker did not offer an analysis of trades. In addition to that, a third-party software did not offer an analysis of trades for Gain Capital’s customers since the broker did not allow the software to be connected with it.

Good news is that I’m currently in process of changing the platform to MetaTrader, which will make it easier for me to track performance metrics. The other platform, ForexTrader made it harder for tracking key metrics.

For the next quarter’s results, you can expect to see more performance metrics for FX trading.

Live On Twitter

As you may know, I tweet out trades/investments I’m making. That’s one of many reasons you should follow me on Twitter if you haven’t already. One of many ways I measure success is through twitter followers, believe it or not.

Here are some of the tweets:

My target for annual FX return is 15%, with minimal violability (less than 4% drawdown).

Interested in investing in me? Feel free to privately message me for more details. The minimum investment is $1,000.

 

Note: Equity/Commodity portfolio performance will be posted later.

Update: “Q1 2017 Performance: Equity Investments” article is posted.

Update: “Q1 2017 Performance: Equity/Commodity Trading” article is posted.

Equity/Commodity Portfolio Performance: Inception & 2016

In the previous article, I laid out my performance for Forex portfolio since inception and for the year 2016. This one will briefly lay out the equity/commodity portfolio performance. Briefly, because I don’t have much statistics on it than for FX……for now.

Before going further, I should note: “Average price” includes Dividend Reinvestment Plan (DRIP) – the dividends I received were used to buy additional shares in the company.


Since inception (summer of 2014), I’m down 31%. I’m currently holding 9 companies, including the ones I wrote article(s) about; GoPro (NASDAQ:GPRO), General Electric (NYSE:GE), and Cisco (NASDAQ:CSCO). I don’t have Eli Lilly (NYSE:LLY) since my broker doesn’t allow me to short.

All shares of 9 different companies belong to 1 class: domestic equity. 59.4% is in large cap. 18.89% in mid cap. 3.66% in small cap. And 18.05% in “other domestic equity.” Will change the allocation this year; international equity, fixed income, etc.

On February 16, 2015, I wrote about Microsoft (NASDAQ:MSFT) when the share-price was $43.95. Today, it’s trading at $62.14. I missed the opportunity to go long on it.

On April 12, 2015, I wrote about GE and believed GE was a strong by (it still is). Since then, GE is up 12.30%, from $28.06 to $31.51 (dividends not calculated). Dividends are automatically invested in new shares. Average price I paid for the shares is $25.99. I’m currently up 21.24%.

In the summer of 2015, I wrote about CSCO (part 1, part 2 AND 4Q FY’15 earnings report). Since the first article, CSCO is up 7.97%, from $27.99 to $30.22 (dividends not calculated). Average price I paid for the shares is $24.85. I’m currently up 21.61%.

On November 21, 2015, I wrote my first article on LLY and believed it was overvalued (it still is). Since then, LLY is down 13.98%, from $85.50 to $73.55. Second article on LLY was posted very recently.

On December 26, 2015, I wrote about GPRO and believed it was a buy. Since then, GPRO (and I) are down whopping 52.62%, from $18.34 to $8.69.

For the last year, my equity portfolio is down 12.61%. Because of $9.99 trade fee and low capital, I have refused to buy some stocks I wanted at times.

I recently opened Robinhood, broker with $0 commission. I’m planning to use it to actively trade equities and commodities.

As to commodities, I’m up 8.25% since inception (fall of 2016). I’m currently holding 50 shares of Direxion Daily Gold Miners Bull 3X Shares (NUGT), which is up 24.03%.

I might change my broker to Interactive Brokers (IB) from TD Ameritrade, as IB offers more tools for portfolio analysis.

If you didn’t like this performance/article, read the “Forex Portfolio Performance: Inception & 2016.” Maybe you’ll like that performance/article enough to like me again.

If you do, follow me on Twitter (@Khojinur30). I tweet out my trades live. If you don’t, peace.

Forex Portfolio Performance: Inception & 2016

 

WHAT A YEAR! Market sell-off. Complete reverse afterwards. Full of surprises, from Brexit to Trump (not for me since I predicted them).

During the global markets crash in August of 2015, I completely lost all the money I made that year plus some more in forex. Witnessing markets free fall – faster than Luke skydiving 25,000 feet without parachute – for the first time ever crushed my account to death. (For the record, I wasn’t trading in 2008 and had absolutely no idea what was unfolding that time).

Thinking euro will go to the parity level by the end of 2015, most of my positions were crowded in shorting EUR (The Big Short). Just when I thought euro would follow the markets, it acted as a safe-haven.

Lessons learned the hard way:

  • Always keep enough cash for emergency and/or new opportunities (could not make new trades)
  • Do not keep most things in one place (EUR short)
  • Do not let the perceptions – media, traders, experts, you name it – fool you (“Euro is not a safe-haven asset”)

Taking all these lessons, I completely changed my strategy and will continue to tweak it to adapt to the current conditions. After taking a break from trading in September (2015), I opened a new forex account.

Started off strongly, with high standard deviations, but enough for me to sit through that. High-risk/High-reward. As I continued tweaking my strategy, I reduced the swings in the P/L.

Figure 1: Forex Portfolio % Returns Since Inception (09/29/2015)

Starting in August 18 of this year (2016), my returns have been very stable, trending upwards (see Figure 1). It went from 144.49% return to 184.42% as of the last trading day in 2016. Last August, I made a significant chance to my strategy which led to stable returns trending upwards. I continue to tweak my strategy little by little until significant change is needed. Repeat.

Since inception (09/29/2015), I have returned 184.42%. In the second half of this year, I deposited more money into the account. In turn, the % returns you see in the pictures above and below, has a huge difference in nominal amounts.

Figure 2: Forex Portfolio Performance Since Inception

In 2015, I returned 117.48%. This year, I have returned 32.82%. Since the inception, percentage of profitable trades are 50.70%, with the average gain per trade 3.82 larger than the amount of average loss per trade.

Sharpe ratio is 1.13 (not good yet), with average monthly return of 11.01% and 33.79% standard deviation of monthly return. Compounded monthly rate of return is 7.22%.

I predicted Brexit and profited bigly off it. 30.77% of the profit came from pair GBP/USD. Thanks Brexit. How did I predict Brexit?

Predicting Brexit – 6 tweets
Figure 3: Top 3 FX pair P/L as a % of the total P/L

Largest loss was 5.21%, from pair AUD/USD. I don’t know what to blame except myself.

As to predicting Trump’s win, the profit was a fraction of Brexit profit, via other pairs than Mexican peso currency. The day after the election, the peso suffered its largest one-day drop since the Tequila Crisis of the 1990s. Too bad I did not have access to peso pair at the time. How did I predict Trump win? Tweet 12.

If you invested $1,000 in me at the inception, that money would have been worth $2,844.23 today.

You can still invest in me. Minimum investment is $1,000. Contact me for more details.

Thank you.

Update: “Equity/Commodity Portfolio Performance: Inception & 2016” article is posted.