Crypto Portfolio Journal - 12/27/2023
My Trading Performance Journal
👋 Hey there, Pedma here! Welcome to this month’s free edition of Pedma’s Newsletter. Each week, I'll share with you a blend of market research, personal trading experiences, and practical strategies, all aimed at making the world of systematic trading more relatable and accessible.
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Portfolio Performance
About 1 year ago, right after the FTX collapse, I was wondering if crypto was the right sector to be trading. It was a tough year for most traders in this industry. Imagine experiencing a massive bear market since late 2021, and then one of the major exchanges collapses. News outlets and mainstream media, all attacking crypto as a scam industry that no one should be touching. The world was a dark place back then. Yet we kept going on the mission. The mission of potentially one day being exposed to a better regime. I think that this year we’ve hit that better regime.
I am closing the year on one of my best performances of my career. I’ve never experienced the dollar and percentage returns of this year. And this new regime might only be getting started. Below is a detailed chart of my performance this year plus a print of the dashboard of my crypto net worth in Binance for further confirmation.
If you are familiar with my work, I trade very low frequency systems based on the weekly timeframe. I’ve opened 101 trades since August-23 with an average hit rate of 41% and I hold these positions on average for about 14 days. This performance is spot-only performance and none of it was achieved through margin. Trading spot maintains my risk under control and I understand how much I can allocate at all times. I don’t need more exposure for the risk I have set for this system. All I need is the money I have in the account and that is enough.
One of most important lessons I’ve learned this year is that the key for this performance doesn’t necessarily lie in specificities of the system. It is on how well I manage risk when the regimes aren’t favorable. How well do I manage risk when we have regimes as in late 2021-2022. It doesn’t matter how good your system is if you take a 80% drawdown when the market turns. It will be extremely hard to compound capital then. Most traders will do well given current market conditions. It’s not hard to perform when the market is going up because you can buy virtually anything and do decently well. The key is in what you do once the market turns. Can you survive a multi-year bear market without destroying your account? That is the question I am always asking myself.
I think that I can. I’ve managed to survive my first multi-year bear market and not only survived, but thrived. I find meaning going through the bad times and being able to survive. The good times are easy, everyone’s happy. The work begins when the easy times end. When you have to face yourself in the mirror, despite bad performance and keep going. Truly understand that market conditions affect your performance more than anything else, and keep moving forward. I remind myself as I am writing this of the quote from Rocky Balboa.
It's not about how hard you hit. It's about how hard you can get hit and keep moving forward. How much you can take and keep moving forward.
It’s the same with trading. You will get hit, your edge will decay, the market will change, and you need to keep moving forward despite that. Keep innovating and finding new solutions for the problem you’re facing. I am not trying to add glamour to the situation, it can get pretty grim. But that is the job of the trader. If you want stability you can go get a job. If you want a chance at life changing returns you might be able to achieve it given the right edge and most importantly, the right market conditions.
On The Randomness of Life
Back in early 2022 I decided to start sharing my ideas more actively on twitter since people were enjoying what I was saying at the time. This was one of the best decisions of my career. I managed to grow it to over 10k followers now and gained so many connections and friendships that I couldn’t imagine. Some connections allowed me to try new ideas and projects that completely changed the trajectory of my career. Before I was more active on social media, I was pretty secretive and kept everything inside thinking that someone might steal my edge. The return I got from putting my ideas out there instead of hiding them, can’t be compared to whatever returns I was getting at the time. I will be forever grateful for my past self to do that. Small actions done everyday, will have ripple effects that we can’t possible estimate for. Just do something simple every day, done well, and watch what happens.
One of the reasons I am starting this newsletter is because of a friend of mine showed me the potential of it. Both in a business perspective but also on a brand perspective. And I am happy I also started writing here. My goal is to build a long-term transparent track record into my performance and to have undeniable proof that despite all my flaws, at least I do risk my own capital in the markets. At least I do put my hard earned money behind my ideas. People can criticize my ideas in whatever way they see fit, but I do put money behind them. I am not like those that advertise their amazing skills at trading but they don’t actually do it. Their business is selling subscription fees to their subscribers and entertain them with an unrealistic belief about what being a trader really is.
Disclaimer: The content and information provided by the Trading Research Hub, including all other materials, are for educational and informational purposes only and should not be considered financial advice or a recommendation to buy or sell any type of security or investment. Always conduct your own research and consult with a licensed financial professional before making any investment decisions. Trading and investing can involve significant risk of loss, and you should understand these risks before making any financial decisions.v
Hi Pedma. Could you also, please guide on some risk optimization guidelines to control drawdowns.