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Goodbye Microsoft

Paul — Sun, 25 Jul 2010 10:51:29 +0000

I have been weaning myself away from Microsoft products these past few years. First to go was Microsoft Outlook. Then Microsoft Office. And then recently, I am finally rid myself of the last Microsoft product that I have–Windows XP.

I have been using Ubuntu for the past two months now. Linux is certainly a lot easier to use now than years ago when Red Hat was the most popular distribution. I installed Ubuntu and the system was ready to use. No more hunting for linux drivers or installing packages one by one. Ubuntu was ready for use right off the bat.

The first couple of weeks was awkward as there are many differences between Ubuntu and Windows. I often find myself searching online to see how to perform some trivial tasks.

Setting up the Ubuntu system to just the way I wanted took some time and IT skills. But after the initial learning curve of about a week, I am very satisfied.

Both Windows and Ubuntu have their pros and cons (there are plenty of comparisons online, so I won’t compare them here), I wouldn’t say one is better than other. As a skilled computer user, I am fine either way.

The primary use of my computer is for running my automated strategies and quant programming. As such, system stability is a top priority for me. Which is why I decided to try Linux in the first place. So far, Ubuntu have lived up to its expectations. I ran the JForex platform non-stop for days in addition to my regular heavy usage without any hiccup or slowdown.

Having made the switch, I will be sticking with Ubuntu for the following reasons:

It works.
It is stable.
It is free.
It is fully customizable.
It integrates with other open source software that I use.
I like how it is always up-to-date to fix bugs and security holes.
It runs much better than XP (although that’s an unfair comparison as XP is old).

Bought 250 VEN.TO @ $6.93

Paul — Thu, 15 Jul 2010 16:08:10 +0000

I’m long Ventana Gold Corp. (VEN.TO), a junior gold mining company. Here’s a look at gold (Figure 1) and the junior gold mining company index (GDXJ, Figure 2).

Gold

Market Vectors Junior Gold Miners ETF (GDXJ)

Both figures are from Finviz.

The reason why I picked VEN in particular is related to this article in June. Ventana Gold raises $20 million in private placement. Silver Wheaton (SLW) paid $20 million for shares priced at $11.11 per share back in June. SLW is a well managed company in the precious metal industry. I’ve traded it before and it has always been on my radar to buy.

VEN has been taking a heavy beating in the past few weeks since SLW’s investment as shown in Figure 3.

Ventana Gold Corp. (VEN.TO)

$6.80 is the 50% retracement level to that recent rally (the first since the dive beginning in June). It seems to be holding well today despite market weakness.

Furthermore, EUR/USD rocketed upward and is trading around 1.29. This isn’t something to be ignored.

So I’m taking a small bet here at $6.93. Stop loss order is opened at $6.40. My risk is thus, ($6.93 – $6.40) * 250 = $132.50 + $9.90 commission = $142.40 = 1.5% of account.

Sold 140 LLL.TO@ $40.00, Breakeven

Paul — Wed, 14 Jul 2010 13:56:26 +0000

Update at Noon: Looks like I am wrong. LLL.TO is testing its recent high at $40.50. However, volume is rather low up to now.

I’m out my Lululemon (LLL.TO) position because of market softness. Bonds (TLT) are holding a support level. EUR/USD is struggling to hold above 1.27. And the oversea markets (Asia and Europe) are weak overnight. Perhaps the market is getting ready to catapult up. Perhaps it is not. But I’m not going to place my bet on anything as I don’t have a clue where it’s about to go at the moment. So I am stopping out of this position at breakeven. Preserving capital.

Moreover, recent price move in Lululemon (LULU on Nasdaq) is disappointing. Despite the market marking new consecutive highs for the past few days, LLL is stuck in a rut as shown in Figure 1.

Lululemon (LLL.TO) intraday

Purchase price of these shares were $39.86 from a week ago.

Exact return is ($40 – $39.86) * 140 = $19.60 – $9.90 commission = $9.70. In any case, I’m all cash in my account now. At least I’ve free myself from the market for the next two weeks during my trip to Hong Kong.

Here’s an updated view of the daily chart of LLL.

Lululemon (LLL.TO)

Re-learning Java a decade later

Paul — Tue, 13 Jul 2010 16:51:20 +0000

Java is the programming language that I have known and used the longest. I learned Java as part of the curriculum when I was in my first year of undergraduate study. Although reluctant at first, I can still recall the joy I felt switching over from C++. No more garbage collection! That was ten years ago.

I haven’t done any real programming in the last few years as my engineering work has become higher and higher level. Although I have maintained my hobby in developing automated trading strategies and quantitative analysis, much of that work are mere child’s play compared to what I have done and much forgotten.

Lately, words such as “code smell“, “design pattern”, and the likes are creeping back into my world as I am comitting myself to pursuit my esoteric fascination in financial engineering.

The first step, research, was a few months of testing the possibilities to decide what I should use. Different markets, different brokers, different platforms, and different technology.

I decided to study the foreign exchange market through Dukascopy’s JForex platform using Java. Although ideally, I would be using Oanda and Python… But I’m not prepared to cough out $600 per month for Oanda’s API.

Some of the other tools that I use are RapidMiner and Weka. Both of which offer a Java API.

Having learned JForex and programmed a few strategies already, I have tested the water enough. For the past few weeks, I have been taking steps to move to the next level of my development.

However, as I play with programming more and more, I realize that I am fundamentally outdated in my programming skills. There were no interface when I learned Java. Neither was there hashset and annotation.

As such, before doing anything else, I am just going to pause for the next two weeks while I am travelling in Hong Kong and catch up on my Java knowledge (I just realized that they don’t publish those Teach Yourself in 24 Hours book anymore. The Head First series seem to be the craze nowadays).

My goal is to devour a Java book in the 15-hour flight. Let’s see if I still got it after ten years.

Bought 140 LLL.TO @ $39.86

Paul — Tue, 06 Jul 2010 15:12:53 +0000

The market may be initiating a bear rally again according to the breath indicator of Figure 1. We are seeing a positive divergence from the upticking companies above 50-dma/200-dma ratio (solid line in main graph) and the lower low on the TSX. Furthermore, TSX index price has been holding a longer term support at 11000 despite a new recent low on the number of companies above their respective 200 day moving average (top indicator) . The CDNV to TSX ratio is also showing a similar positive divergence.

Toronto Composite ($TSX)

Thus, I am taking a bullish step with a cautious long position in Lululemon (LLL.TO). There’s a strong uptrend in this one as shown in Figure 2. $37.50 looks like a long term support. However, my stop is $38-$39 zone to be in sync with the market move. Also, the gap to $37.50 support has been closed previously already in May, so a second re-test wouldn’t bold well for LLL.

Lululemon Athletica (LLL.TO)

In addition to the chart, LLL currently has an enormous 22.79% short floats according to Finviz. It is 70.51% owned by the big money with a 3.72% increase in holding in the last quarter. Short squeeze, anyone?

I took timed my entry based on intraday chart Figure 3. The top gap today held for the first hour at least and then there were some increased volume at the intraday support. I entered then.

LLL.TO intraday chart

However, LLL touched $40 and is now retraced below $39.50.

My mental stop is $39.00 and my hard stop is $38.50.

That is a risk of ($38.50 – $39.86) * 140 = $190.40 + $9.90 commission = $200.30 = 2.13%.

June and Second Quarter 2010 Trading Review

Paul — Wed, 30 Jun 2010 18:11:17 +0000

Market volatility continues in June. I took a more aggressive approach this month and executed more trades in my RRSP trading account. The monthly return is excellent but I noticed a few issues with my trading. These will be the main topic of this post.

Let’s go over some performance data. Seeing that it is the end of the second quarter, I will do a quarterly statistical report. I couldn’t do a monthly review like I used to because I trade much less frequently now.

Note that the October data is from last year’s forex trading. That was the best month I’ve had. I am attaching the data here just for comparison.

Quarterly Metric   Q2   October
Sarting Fund   $8,000.00
End of Quarter Fund   $9,404.87

Total Net Profit   $1,404.87
Gross Profit   $1,800
Gross Loss   -$395
Profit Factor   4.56   1.75
Net Profit %   17.56% 4.19%
Max. Drawdown %   3.36%   2.32%

Total Commission $155.1
Commission / Net Return 11.04%

This highlight the bane of my problem trading my RRSP. Although Questrade offers the best commission in Canada as far as I know, it is still much higher than those offered by brokers in the states. However, this is a self-directed RRSP trading account, so it’s not like I can just switch broker. I will just have to stop being so active in my trading for this particular account.

Sterling Ratio   2.54   0.65
Excess Return   17.46%   4.14%
SDev Return per Trade   2.21%   0.79%
Kurtosis   -0.93   8.53
Skewness   0.72   2.49

These statistics above show my second problem. Although I am very profitable so far, my return per trade is not consistent. The distribution is too flat and not skewed enough to the positive for my liking. A standard deviation less than 1%, a slightly positive kurtosis, and a skewness above 1.0 would be ideal.

95th Percentile P&L   $421.15   $70.11
5th Percentile P&L   -$102.13   -$33.60
Net Profit Mid 90% Only   $0.29   $46.34

Total # of Trades   14   34
Percent Profitable   61.54%   44.12%
# of Winning Trades   8   15
# of Losing Trades   5   19
# of Break-even Trades   1   0

Average Trade Profit %   1.18%   0.12%
Average Winning %   2.59%   0.66%
Average Losing %   -0.83%   -0.30%
Ratio Win% / Loss%   3.12   2.21

Max. Conseq. Winners   5   4
Max. Conseq. Losers   3   6
Largest Winning Trade   $464.05   $171.79
Largest Losing Trade   -$116.75   -$44.17

Most of my winning are due to this Cenovus short in May and this CIBC short in June.

Avg. Time Held 5.17 days 2.18 hours

Aside from trading my RRSP account, I have finally opened a live forex account at Dukascopy. My time remains split between developing automated strategies for trading forex and manual equity trading as usual. My JForex contest strategy in June ends up near the bottom again as I took the wrong side of the move on USD/CAD.

The JForex contest will start with a new set of rules for July. Namely that strategies need to be fully automated and winnings from each trade cannot be excessive (50%) to prevent an all-in approach that’s been dominating the contest. My revised strategy is ready. It is now version 2.14 since the first release in April.

Goal for July

My goal for July is to learn the indicators part of the JForex API and to program my first custom JForex indicator from my other collection.

I will be away in Hong Kong for two weeks in July for some family matter. So there’s not much time to work.

Bought/Sold 250 TCK.B.TO @ $34.10/$33.68, Loss -1.2%

Paul — Mon, 28 Jun 2010 18:17:39 +0000

What I thought would be an intermediate term hold turns out to have lasted mere minutes. I bought Teck Cominco (TCK.B.TO) after a small bounce at $34 support during lunch today. Figure 1 shows the clear support level. Also note the fact that my recent shorts haven’t been working, so I thought I would go with the flow and go long.

Teck Cominco (TCK.B.TO)

However, the market edged lower almost immediately after my long entry (something I haven’t done in a while). TCK cracked the $34 support swiftly to $33.80, my mental support. My alert was sounded and I kept an eye on it afterward.

But then not long after $33.80, my hard stop at $33.70 was filled and TCK traded down to $33.66 or so. It has now stabilized around $33.80 as of 2pm. Figure 2 shows the intraday chart of TCK.B.TO.

TCK.B.TO intraday chart

Loss for this trade is ($33.68 – $34.10) * 250 = -$105 – $4.95 * 2 commission = -$114.90 = -1.2% of account. My account is now experiencing a 3.4% drawdown since the high on June 8th.

I can’t help but feel that this was a stop hunt. TCK is creeping higher at the moment. However, as my initial position was stopped out, I am not going to re-enter this trade just yet. Let’s see what it does near the close today.

I am labelling this particular trade as a bad trade because my stop was clearly too tight based on the time frame that I am observing. I should have reduced my position size and widened my stop to account for the recent volatility.

Update: TCK gapped down 7% the day after. At least my exit was timely.

Sold 4 MFC 10OCT Puts 17.00 @ @1.43, Mark $16.27, Loss -0.5%

Paul — Mon, 28 Jun 2010 17:14:51 +0000

Not much is happening in the market as it is trading in a tight range. This is not good for my options as the time delta will slowly eating away my premium. So I’ve decided to unload this position at a small loss just now as the market is testing support across the board.

The U.S. dollar index is testing $86 resistance. Oil is testing $78 support. S&P500 is testing the 1070 support zone.

Purchase price for these puts were $1.48 per contract last Wednesday. When Manulife Financial (MFC.TO) was trading at 16.38.

Loss is ($1.48 – $1.43) * 100 * 4 = $20 – $13.95 * 2 commission = $47.90 = 0.5% of account.

As you can see, the commission is horrible on my RRSP trading account at Questrade. I will wind down trading options from now on and move back to trading forex in the summer. My live account at Dukascopy is ready…

Update: The market finally broke support the day after this exit. This was not a good exit as I lost patience. MFC is testing $16 support on June 29th opening hour and I don’t expect it to hold. This could turn out to be a winner if I had held.

Manulife Financial (MFC.TO)