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BOOK YOUR FREE STRATEGY SESSION NOW >>How was 2020?
It was quite an unusual year for sure, and the world has changed in many ways. It was mainly due to the Corona virus: in March it caused the market to plunge like it did in 1929.
My collaborator Francesco Placci and I want to show you how our systems actually worked and what extraordinary performances they made.
Prepare to be surprised, because even if we did just fine, we could have done even better!
Enjoy the post!
Hi guys, Andrea Unger here.
Today I'm here with Francesco, ciao Francesco.
Hello everyone!
Francesco is here, we both...
I'd prefer to be alone and you will soon discover why, but we will talk to you about our performance in 2020.
It was a strange year, you know. We had an incredible crash in the early March and then on to April and so on incredible moves.
Did we survive, speaking about trading, these moves?
Yes, we are here! Why and how, this is what we want to show you.
First of all, Francesco, you have prepared some slides.
Yes, correct.
...and I can show you.
So here we go.
This is a very nice sheet. We see an outstanding 71.32% which is an incredible result.
You know when I talk about the standard performance we can expect, and you know that this is something that is really really incredible.
The equity line, the blue line you see there, is also an incredible nice line. You can see the green line is the SPY, so it's a benchmark, and you see how actually, during the big crash, the blue line did not move at all, more or less.
What is bad in this slide?
The bad thing is the name in the top left corner of the owner of the account which is Francesco Placci.
This means that this is not my performance, it's Francesco's. And mine is obviously worse than this, because if not I would not be this angry.
Francesco, good performance, more or less 0 drawdown and...
6%...
...and great end of the year.
Yeah!
Can you tell us more about this?
It has been a very amazing year, talking about trading obviously, and it is quite surprising because you know, when the market goes crazy it is difficult to stay calm and continue your trading activity. This is obviously not normal, because when I achieve 20% I'm more than satisfied, but this year, due to the high volatility of the markets, probably the trading system which needs volatility has been able to achieve a very great performance.
I have to admit that a great part of this performance is due to the Bitcoin future, which I started trading around April more or less, and you know, cryptocurrency this year... I think the performance of the Bit future has been around... more than 200%...
200% more or less, yes...
Yes, more or less, and this obviously allowed me to achieve this performance, and I'm obviously quite satisfied of this. The main aspect that satisfied me is the drawdown, because you know, becoming older I'm less...
6%, around 6% as maximum drawdown which is great, but how was it possible to see such a quiet shape in March and April?
Yeah, I have to admit that I took a pause in trading. I left only few trading systems active because I was a bit scared about the situation, you know it was so...
It is funny, because it's the same I did. I'll tell you later about this...
This was a wrong decision as you know, because in this period our trading systems, and especially the mean reverting trading system on the S&P, achieved very very important performances. Obviously this was a mistake but you know the emotional part of each trader... You have to manage this feeling and I probably did wrong, but you know, also the mental aspect is important in trading.
So I decided to stay more calm, to live more comfortably, and I decided to reduce my exposure in trading during that period.
If you show the next slide, you can see my equity line, and here it is.
Well, first of all 40.26%. This is... If Francesco were not here it would have been a great performance, but now with Francesco and his 70%, this is peanuts.
So I'm the weaker one but I'm happy because I'm a friend of Francesco of course. In any case, similar to Francesco, you can see that March, more or less, has no moves at all.
Francesco reduced his activity, I stopped completely. I switched all systems off because I was afraid of the situation.
It was a discretionary decision which should be avoided by us as systematic traders, but considering that our systems follow the behavior of the markets, and seeing markets going crazy, I believed that the behavior would not keep on being the same.
I mean I believed that the markets would move in a completely different way from what we could expect, and what we could expect is somehow written in the scripts of our systems.
So I switched it off, I was able to sleep at night, but the next slide shows you, through our software Titan, what the systems would have achieved normally with all systems active.
Well, this is starting from 2019, so it's two years, so don't look at that... But you see there January or exactly this is January, and here you see a big run to the upside, and this is exactly when I was not trading. It was a smart decision, wasn't it?
I must admit it, and the same Francesco because he mentioned the same.
We left a lot of money on the table.
I don't really regret this, because again I had a positive year. I'm happy with it and I was able to sleep at night during a period when I would have had serious trouble if my systems were trading, because you all know what the markets were doing.
Of course, seeing how much money I left on the table is disappointing, but if I made no money at the end of the year I could, maybe, regret more.
Having closed at 40% I'm happy, okay I'm happy in spite of this wrong decision.
The good news is that my systems, and also Francesco's, were doing well. So this is obviously a positive news for a systematic trader, which means that the systems were, in any case, responding properly to the markets.
You remember how in past years I more than once mentioned that the markets which show a greater degree of stability for the systems are the big Bonds and miniS&P.
Sometimes I was even tempted to trade only Bonds and miniS&P and leave all the other markets on their own.
This is the theoretical performance of my systems on Bonds and miniS&P and also in this case you can see that the big wins, this is only 2020, the big wins were achieved during the crazy markets.
It's also interesting how the red line, which is the unfiltered portfolio, made even better in that period and then lost some money at the end of the year.
If you know the next slide is the monthly, so it's an easier line, okay.
You see actually that it is a very positive year.
Is this due to Bonds or to miniS&P?
The next slide shows the behavior of miniS&P only, and here we have two interesting news. The first is the outstanding performance during the crash.
This is really impressive not because it made well but, as Francesco also mentioned five minutes ago, most of miniS&P systems are built on a mean reverting model, a counter-trend model, because normally this market goes down and then jumps up or rebounds.
During the crash I, but also Francesco, we were afraid of what we were seeing, and it was really a challenge to trade buying the bottoms, because those bottoms seemed not to exist anymore.
The markets were going down and down and down, and obviously we were too much afraid of jumping in somewhere expecting, or hoping, for a rebound before hitting an eventual stop-loss. But apparently this is what happened.
What we see here is that our systems were able to spot the best turning points, temporary turning points, during that crazy phase of the markets.
Good news for sure for the systems, good news for our nerves but we switched them off because probably seeing... and believe me, such a performance is not only due to the wide range of movement, but also because many systems were entering together, so we would have had a big size, in terms of contracts, in the market, and under those conditions I believe it would have been really harming for our mental stability.
In any case, the second interesting thing you can see here, which is the monthly, it's the same actually, okay.
It's that after April, May, more or less, the miniS&P systems were no longer able to achieve anything.
This is interesting because you see that if I decided to trade only miniS&P after the crisis, I would have made some losses even there.
Yeah during a strong bull market.
In spite yeah... because the systems don't simply jump in and wait. No, they trade the market. But the moves after the big crash in the index future, the miniS&P, were apparently different from the normality, from the standard behavior.
It's like when you get drunk and then it takes a while before you come back to your normal behavior.
So I'm happy I did not decide to trade only Bonds and miniS&P, this is the good news. I'm happy I traded other markets, also Bitcoin.
By the way, in some videos on the blog you find that I mention I'm not trading Bitcoin because I had not enough data to build systems. This is an old information because in the meantime some data were collected, and I was able together with Francesco to develop some very simple stuff which in any case works and produces profit.
So we are both trading on the Bitcoin future.
Francesco also mentioned that the Ethereum future is coming, early next year. So something that we will probably look into in a short while.
Now, the miniS&P is not working apparently. This means that the market is out of phase, but I believe that we will soon see the normal miniS&P back.
This happened in the early 2009, 2015, 2018, in many cases we saw the miniS&P completely out of shape, but then the normal miniS&P came back.
What is good is that Francesco had a very good performance, better than mine, but our partnership allowed me to learn a lot about volatility, because Francesco is a real expert in volatility. Thanks to his contribution I was able to introduce systems that are also taking advantage of volatility increase in miniS&P.
Normally volatility is a trigger to switch systems off but, thanks to the knowledge of Francesco, I was able to build some systems which were understanding somehow, or trying to understand, the difference from the standard counter-trend behavior of miniS&P and the trend-following behavior that takes place when volatility goes to very high levels.
Abnormal volatility, during abnormal volatility the behavior of the miniS&P changes...
And I was able to develop these systems. I'm happy to have these systems, I didn't trade the systems because they should have traded in the theory when I switched everything off, but this is my fault.
This is more or less the summary. Do you want to add something to this, Francesco?
No, just that it has been a very particular financial year. You know, we have seen a drawdown of about 35% on the miniS&P, 50% on the European index and a negative price for Crude Oil, VIX at 80 and Bitcoin with a performance of more than 200%, so it is quite satisfying.
It's satisfying to achieve such performance, so I'm quite happy as Andrea obviously is, and let's see the next year what the markets...
I hope they go back to normality because this would mean that also the world will go back to normality after this crazy 2020 obviously.
So I mean... All we can do is to wish everybody a great 2021. If you are a trader we wish you great performances, but I wish everybody to see a good 2021 compared to 2020, not a great deal because compared to this terrible year everything can only be better! But I really hope to see the world going back to what it was before this terrible period.
From my side best wishes, Francesco up to you.
Me too, happy new year to everyone!
So, happy 2021 to everybody and we keep in touch on our channels.
Ciao
Bye
We'll help you map out a plan to fix the problems in your trading and get you to the next level. Answer a few questions on our application and then choose a time that works for you.
BOOK YOUR FREE STRATEGY SESSION NOW >>Andrea Unger here and I help retail traders to improve their trading, scientifically. I went from being a cog in the machine in a multinational company to the only 4-Time World Trading Champion in a little more than 10 years.
I've been a professional trader since 2001 and in 2008 I became World Champion using just 4 automated trading systems.
In 2015 I founded Unger Academy, where I teach my method of developing effecting trading strategies: a scientific, replicable and universal method, based on numbers and statistics, not hunches, which led me and my students to become Champions again and again.
Now I'm here to help you learn how to develop your own strategies, autonomously. This channel will help you improve your trading, know the markets better, and apply the scientific method to financial markets.
Becoming a trader is harder than you think, but if you have passion, will, and sufficient capital, you'll learn how to code and develop effective strategies, manage risk, and diversify a portfolio of trading systems to greatly improve your chances of becoming successful.
