Q4 and 2006 Full Year Update – Keeping Score

All Accounts Summarized

• Quarter over Quarter Loss: 4.05%
• Year over Year Gain: 32.19%

The final quarter for 06 closed with us taking a 4.05% Loss for the Quarter but the gain for the full year was 32.19%. I stayed with some winners a bit to long and gave back some profit, but for the most part 2006 was a great year for the markets and I expect 2007 to be good too.

Speaking of the future, I’m making changes to some of my trading practices. I’ve recently been digging deeper into mechanical trading systems and I’ve been creating and back testing different trading programs. The beauty of back testing mechanical trading systems is that you can gauge how well your methods would have worked in the past using historical data. Following the systems takes the emotion out of trading decisions somewhat, although it still takes a human decision to perform the trade.

For the most part my methods have previously been trend-following driven utilizing moving averages and channel breakout systems, but I’ve recently started adding counter-trending that work better in non-trending markets. I plan to incorporate both methods into a cohesive system that I feel could provide for a smoother equity curve. Theoretically, one system could perform better as the other was flat. My back testing showed that my trend following systems were profitable only forty percent of the time and you could expect on average approximately 20 percent returns annually, while the counter-trending systems were profitable sixty percent of the time and returned nearly fifty percent average annual returns with some portfolios (in back testing). Another difference is that the trend-following systems tend to stay with trades much longer and the counter-trending systems will often have trade durations that last for only a few days. For that reason it might be hard to post every position and trade, but I'll try.