It's totally new and free! Risk control spreadsheet 2010.1 available

I am very pleased to announce, the 2010.1 version of Rational Move Risk Control Spreadsheet is finally available!

Highlights of the new version:

  • More practical Kelly criterion calculation
  • Capital growth projection with approximated tax effect
  • Position size calculator
  • Drawdown tracker

Please give it a try!

About my blue and red graphs. It's all about risk control and discipline.

Capital growth

Capital growth

Drawdowns

Drawdowns

Yesterday, I added my new graph to show the drawdowns from the recent 100 trades. I call it red graph, pairing with my blue graph that shows the capital growth. You can find those graphs in the second column under “Current risk exposure” indicator.

Both of the graphs are very important for me to sustain the growth and avoid bankruptcy. In the blue graph, you see the cycle of rapid growth period and stagnation period. At least with my current trading method, having stagnation period is inevitable because the market simply does not allow me to make easy money. What is worse than losing money is not knowing that I am in stagnation period and keep betting regular size rather than smaller ones or even stop trading. With the blue graph, I am reminded visually as soon as the market condition worsens. I would bet smaller and smaller and finally stop trading until the condition improves.

The red graph is about controlling myself and avoid taking more risk than I can. When drawdown is 0%, it means I am making new record of my capital growth (remember, the x axis is the number of trades, so if no trade, no new data to be added.) I cut loss as soon as I get the first evidence of the market moving against my prediction. No body can be right 100% in the market and temporary drawdown is inevitable even for a successful speculator. The most important think is keep the drawdown rate under control, and avoid gambler’s ruin. When the red graph starts to show a drawdown of some degree, I am immediately reminded that I should take a breath to see if I am emotionally compromised (a little Star Trek here).  Then I force myself to bet smaller and less frequently until I will have a new convincing breakthrough trade.

The blue graph tells me if my strategy is fitting to the current market condition, and the red graph tells me if I am disciplined. I think they are very powerful tool.

Just to touch on the techy part, I am using Google Chart Tools. I love this. You need a little skill to code it especially when you want to automatically feed the data to chart, say from Google Spreadsheet. Fortunately I code much more complicated stuff in my day job, and I don’t have much trouble using it. There are people who develops easier to use graphical user interface for this chart tool. Here is one example. Though I leave the instruction on how to use these handy tools to other web sites and books, I may provide a tool that would work with Rational Move risk control spreadsheet when I get a time and energy to implement it.

Real time trading tweets

The plan in the article may get rejected any time, so please check out my tweets on Twitter.

Current risk exposure:

"","","","","$29,058.30","","","","","","","","","","","","","","","","","","","","41.95%","","","2.00%","","","","","","","","","","","","","","","","","","","","","","","","","","","",""
Rational Move always use stop loss orders, and this is the worse case potential loss over the capital for the currently open positions. This is unrealized loss is less or equal to the risk exposure.

Capital growth

From recent 100 trades (%) The growth right before the 1st trade is set to 0%.
About this graph

Drawdowns

From recent 100 trades (%)
About this graph

Total returns

Since inception
(Aug 10, 2009)
Year-to-date Quarter-to-date
0% 0% 0%
This is a normalized value: the return on each trade is normalized against the capital just before the trade execution. This way, it is eliminating the effect by the capital change from deposits and withdrawals. The calculation thus reflects the trading performance of each trade. The value does not contain unrealized profits and losses. RM's trading strategy never risks more than 5% of the present capital. Not including subtraction by tax.

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