As you may recall, the week of March the 12th, we made the decision to implement an additional tracking method for a new specific pantheon portfolio with $100,000.00 is assets or based on our leverage model $400,000.00 in buying power. Instead of tracking just Return on Capital Exposed, we have decided to also track Return on Assets Under Management (AUM) for this portfolio. By tracking both ways of performance, we can now model our trading styles to maximize our overall Return on Investment (ROI) while reducing our overall trade risk.
Given this short week we did not think we would hold up our trading performance track-record. To our surprise, with the erratic trading behavior of HEAT we knocked our performance out of the park. This week has been our single best week ever.
Through this portfolio research, we have been able to determine a few key components to our theory. First, we should not trade more than $100,000 in risked capital. Second, we should not use leverage of more than 4:1. Third, we should not expose more than 35% of the risked capital. Forth, we must institute tight stop losses of .07 to .10 (this week we expanded our stops to .15 .25 )on every trade and finally, provided we continue to use a 1 min, 5 min and 15 min Fast and Slow Stochastic as our leading indicator before entering a trade, we can mitigate our trade risk helping us have more successful trades. Since we started this new portfolio, we have had an 82% success ratio of winning trades vs. losing trades.
We look forward to continuing our testing for our model and bring you our results as they happen.
Here is the inception P&L for our portfolio.
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Our trading style is not for everyone and involves a high degree of risk. We use every attempt to mitigate our risk by incorporating defensive trading measures to preserve our capital. We exercise tight stop losses and never think we are smarter than the market. We have learned to never trade on a tip or a hunch cause we never seem to come out on the winning side of the trade. We do our own research before we execute a trade. If we are not feeling 100% before we start our trading day then we won't trade until we do. We will NEVER force a trade just to make a trade.
Pantheon Traders incorporates a short-term trading strategy we coined the “Controlled Bounce”. This strategy is implemented by executing trades in stocks that have seen a market anomaly in their share price. We have found that historically a 25-30% next day reversal is more often than not the norm on a stock that has been the recipient of either a positive or negative percentage change of more than 11% intra-day. In order for this reversal to be confirmed to trade, the individual issue’s volume must exceed 2(x) average trading volume prior to the market close with a stochastic crossover above 20.00. For this trade, we implemented a leverage ratio of 4:1.
