Well, 2008 is upon us and I wanted to take some time to look back at 2007. From an investment point of view, that is.

This was the year I embraced quantitative analysis. My main goal was to eliminate emotion from my trading. A complete list of “bad behaviors” I was attempting to exorcise would be another post of it’s own. So I set out to develop a trading system of my own.

I stumbled on Amibroker and used that as my platform. As an aside, I’ve since looked at some other products (that is a subject for another day) but none has been able to touch Amibroker for speed or for price.

The system is loosely based on the Flare Out Growth Model by John Markman which I had followed during the late 90’s bubble. The system will only go long stocks over $3 on the TSX.

Results

The system was begun on May 23, 2007 and has performed well — although not as well as I had hoped.

Performance from May 23, 2007 – Dec. 31, 2007:

System                  10.3%
S&P/TSX Composite index -2.4%

So, I am outperforming the index by a fair margin which is good. On the downside, the maximum drawdown was a gut wrenching 24% during the August sub-prime meltdown.

As noted, there are weaknesses in the system so I’m hoping that my good fortune continues into 2008. Current positions can be tracked here.

Categories: Finance
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