QB Pro – February

The first full month with all clients on the system was awesome. The MAM earned $45,199.63 across all client accounts. My company account made $1,247 on a starting balance of $2,500.

Withdraw profits

Remember that you should withdraw anything above your desired risk level out of the account on a monthly basis. I removed $750 from my personal account on Friday. That’s a total withdrawn profit of $4,997.66 on a single deposit of $2,000. The total lifetime profit on the account is $5,997.66.

Now that I have two months of risk capital completely set aside, I’m finally at a point where I’m totally comfortable upping the balance at risk. The starting balance for March 2015 is $3,000.

Future plans are to risk anywhere from 20-50% of lifetime profits on a monthly basis in order to compound returns without risking a complete wipeout. I’m only doing that because I have $4,000 set aside to recapitalize the account if things go bad.

Risk level

I polled my existing traders and the consensus ranged from leaving the risk level unchanged to dropping the risk by ~25%. I left the leverage unchanged after the poll, but the next week changed my mind.

The account equity was around $120,000 at the time (we started the month at $132,749.27). Watching 5 open positions levered 58:1 on an account that size kept me awake at night. The agreement we all made was that this is a high risk account and everyone accepts the very real risk of loss.

I never expected to raise that much money (my goal was 40k) and it’s seriously altered my thinking. The performance fees even managing 100k are substantial. Like any intelligent businessman, I intend to do everything in my power to continually earn that business.

Translation: I really, really, reaaaaally don’t want to lose your money.

The image above represents an out of sample equity curve for the upcoming trading system running a maximum allowed leverage of 7:1. It’s QB Pro 2.0. The chart shows the profit and loss in dollars over a year and a half period.

The tests were conducted in a custom backtester that I spent about 40 hours developing. A developer has audited the code looking for flukes to explain the performance – we haven’t been able to disprove the results.

We’ve been working on converting the code into MetaTrader 4 for two weeks now. Whenever the code is ready, I’ll launch it in a demo account to confirm identical performance on the same data. I don’t have an ETA on the changes. Trust me when I say it’s a top priority.

Assuming all goes well (fingers crossed!) on backtesting and demo trading, then the next step will be to trade it live on very low risk settings. My goal is to keep your accounts alive and healthy until I’m able to roll out the updated system. That’s why I ultimately lowered the leverage in the MAM accounts by 25%. My company accounts also lowered the leverage by 25% – I’m taking the same risks as my traders.

The historical risks of blowup on 70:1 leverage are undetectable on a historical basis with version 2.0. That’s compared to the 8.5% monthly risk of blowing up that I told everyone before they started trading QB Pro.

Is the expected monthly risk of blowing up 0%? No! Of course not. If a Swiss central bank type of move occurs and you have a leveraged position in the wrong direction, well, it’s lights out for the strategy. No amount of backtesting can guard against that type of loss.

One of the forthcoming, key changes to the strategy is that it won’t be purely mean reverting. It should know when to throw in the towel and start trend trading instead of fighting it. This a critical change and will allow me to fully sleep at night. The trading performance won’t be all or nothing. My expectation is that the risk will decrease dramatically while offering traders the same levels of potential returns whenever it’s available.

Should I bet the farm?

Obviously not. I’ve answered this person’s inquiry and am satisfied that the car is a superfluous asset (it’s just sitting there, so why not sell it?). That said, I get extremely nervous when I get emails like this.

I’m asking because I want to sell my car to make money to fund to account.

The risk of QB Pro is presently unchanged. It’s lower than I originally quoted because the leverage is lowered, but it’s still very substantial. If you’re thinking about adding money into the account, then please do not add more money than you are willing to lose.

That’s true regardless of the trading strategy. If you can’t lose it, then don’t risk it. Period. End of story.

If you’ve been thinking about adding money into the account but it’s not pure “punting money”, i.e., it’s more like an investment, then I’d encourage you to hold off until the version 2.0 is available. I feel more comfortable managing those types of funds and would prefer that you hold off until I have something less historically risky to offer.

MAM Fees

If you have a question on the fees charged in your account, then please email info@quantbar.com. I want to make sure you understand how the fee is calculated if you have any concerns.

Remember that your fees are charged based on the account equity from a month end to end basis. The account equity is taken on Jan 31. We made a profit in February, so the fee is the profitable difference between the equity on Feb 27 and Jan 31, assuming it’s above your high watermark.

It is not based on the closing trade balance. Because QB Pro had open trades on Jan 31, the balance reports you run in MetaTrader will differ from equity profit you made in February. Again, this is due to the fact that open trades existed on Jan 31. The difference should be relatively minor.

If you see a major discrepancy such as 50% of profits or something, then please let me know. I know of one instance where the MAM software didn’t recognize balance changes of a client as deposits, so they were instead marked as profits and he was almost overcharged. If you see an error, I very much want to make it right. I’m dependent on the software’s accuracy and you spotting the discrepancy is the only way it’ll ever be corrected.

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