Quoting sjburdiDislikedAksel: You have done great analysis here. I am still a little confused and also surprised at the results.
1. What is the total margin used of the 36K?
2. Aksel's carry respresents what? Buy and hold on dips?
3. Fixed % balance underperforms Fixed % NAV - seems results should be opposite since fixed NAV controls risks. Also how is the calculation done to sell a little of the basket if it goes down on any given day?
4. Again, Buy and Hold with Periodic outperforms Fixed % NAV and Fixed % Bal - very surprising.
5- What factor are u using for when to buy dips and sell rallies - % ?
6. With a regular buy and hold with 50-1 leverage, I think i can generate over 80% interest without re-investing. I have not yet experienced a DD greater than 15% on margin since 10/9/05.Ignored
Hey Sjburdi, glad to see you're interested in knowing more!
1. Total margin used is initially 10:1, or roughly 7,200 of the 36,000 for all the entry methods.
2. Aksel's Carry represents my own carry basket - but only the price. It shows the price fluctuations of the basket - but not the interest. This was to determine the volatility and drawdown of the basket itself, irregardless of the interest earned. The entry systems represent various ways to trade Aksel's Carry.... and you can see there's quite a difference between them all.
3. Fixed % Bal underperforms Fixed % NAV because the % NAV method scales up in an uptrend much quicker, hence, when things are going good, fixed % nav takes advantage of it, while fixed % bal is oblivious. fixed % bal will never sell any, since balance isn't ever changing. Fixed % nav will sell as the basket goes lower.
4. This makes sense if you really think about it... buy and hold with periodic is really just investing the most it can and hoping it never hits a drawdown, since it will usually have more invested than the fixed %s, it's earning more interest and profits more from uptrends.
5. 5% of the margin/NAV %.... put more simply, originally at 10:1 leverage your %mar/NAV is 20%, as this number gets smaller, you're using a small amount of margin for the size of your account, in effect, using much less leverage. On this entry metho, you buy more when that number goes down 5% of 20%, or 19% in total. In such a case, your NAV is much larger, so you're keeping up with the growth in account. If your % grows to 25% or 30%, it means your NAV has gone down, and you don't buy any more.
6. 50:1 leverage is very dangerous with any of these strategies, the drawdown on my carry basket with 1:1 leverage is 7.2%.... 7.2% x 50 = -350% drawdown... In order to have any chance of making it with 50:1 your entry point would have to be at a -6 or -7% drawdown on my basket... and that's from established historical DDs... could always go lower than that. Even 10:1 leverage is dangerous, as you'd expect to see at aleast a -72% DD, and if DD increased just 3% you'd be wiped out.
If you look at the carry basket in the last 6 months, you'll notice it's been in almost a straight line up.... don't confused the last 6 months with the last 5 years! A longer term timeframe is important to look at if we plan on investing in these in the long term.
-Aksel