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I started this trading program on August 3, 2011, and as of today (December 3, 2012) it has been one year and four months. The last time I published progress reports was four months ago, and here is the update.

Date of inception

8/3/2011

Initial funding allocation for this strategy

$248,400.00

Number of shares of DIA I own now

400

Net from trading and dividends received, after commissions, from the date of inception

$17,631.63

Return on the cash reserve/allocated, from the date of inception

7.10%

Return on the cash reserve/allocated, annualized, from the date of inception

5.31%

Cash on hand

$213,773.78

Break even price for the DIA on hand

$86.57

Market value of portfolio

$265,813.78

The annualized return on the initial capital is 5.31% including all the dividends accrued. It is below par if I compare it with the long-term growth of the DJIA itself. It grew at an annual rate of 6.26% compounded during the past 80 or so years . On top of that, DIA is now providing dividends at a rate of about 2% per year. But, it is OK.

Chart below showing the progress of the net of this program tells some stories about this strategy.

(click to enlarge)

The progress of the accumulated net of the program can be broken up into neatly two sections: (1) before 1/1/2012, and (2) after 1/1/2012.

The major cause of this is the apparent change in the behavior of the market just before 1/1/2012 and after that. This is clearly shown in the chart below.

(click to enlarge)(click to enlarge)

I started this program buying and selling 100 shares of DIA when the price of DIA had dropped or raised $2. But, On or about 1/1/2012, DIA broke above $120 as shown in the chart below and I became cautious and started to trade at a price interval of $2.50 instead of $2. The trading frequency diminished dramatically after that, as shown in the chart below, which shows the monthly trading volume of the program. Some volatility returned in the middle of 2012 as indicated by the slight increase in the trading frequency of this program.

(click to enlarge)

As reported previously, in late July of this year, I have amended my trading strategy as follows.

  1. Within the Bollinger Bands of -1 and +1, I would trade 150 shares each at a price interval of $1.50,
  2. Between Bollinger Bands of -1 and -2 as well as +1 and +2, I would trade 100 shares each at a price interval of $2.00, and
  3. When Bollinger Band is above +2 or below -2, I would trade 100 shares each at a price interval of $2.50.

I adopted this new strategy at around July 20, 2012. The effect is, as you can see in the Net chart above, the progression of net after August 2012 became slightly steeper.

About 80% of my portfolio is still in cash, as shown below. Fiscal cliff or not, I am prepared for a downside of the market.

(click to enlarge)

On the other hand, I still have 400 shares of DIA to sell if the market rallies in the near future.

The annualized return on this investment has been dropping as shown below and it has reached a low point of 5.31%. We shall see what happens next.

(click to enlarge)

Source: Poor Man's Program Trading After 16 Months