Do algorithmic trading strategies work?
You know, I’m a bit of a sceptic when it comes to the financial industry. Claims of astonishing success often leaves me speechless. You’ll find promises of false hope everywhere. If it were true, you’d probably be a millionaire by next week.
But that’s not how it works. The stock market isn’t a financial giveaway. Long term success takes patience, skill, and plenty of hard work… not exactly the sales pitch many people are looking for.
Now, the thing about being sceptical, is that it cuts both ways. While I critically assess the claims that others make, I also know that some people look at me with disbelief. Some even think that I’m running a scam. Here’s a post one person put on Facebook:
Greg’s essentially saying that if my trading system is so good, then why don’t I use it myself? And while he’s not very nice about it, he raises a valid point. I always want to know the track record of people advising me. And I don’t expect others to be any different toward me. It’s fair to expect that if I “talk the talk”, I “walk the walk”.
So let me tell you what I’ve been doing. I put half a million dollars into a new trading account back in September 2015. My aim was to build a real life track record using an algorithmic trading system that’s almost identical to the one I offer publicly.
You see, I don’t just talk about trading stocks. I actually do it myself. And there’s no better way to show you this than by having a dedicated “Motion Trader” account. Let me show you how it’s been going:
As of 20 September 2019, my profit (including dividends and costs) was $447,657 — that’s a total return of 89.5%, or a compound annual growth rate of 16.1%. Excluding dividends, the total return is 72.2%. By comparison, the All Ordinaries is ahead by 34.7% over the same period. My return (excluding dividends) is beating the market by a margin of 208%.
But it hasn’t all been smooth sailing — it never is. There’ve been two double digit drawdowns. On both occasions my account lost around $100,000. That’s the reality of trading… stocks don’t move higher in a straight line.
The key is to have patience and discipline during the down periods. The traders most likely to come out the other side are the ones who believe in their process, and stick to their plan. My account’s growth since late December is a case in point. The nearly quarter-of-a-million dollar gain wouldn’t have been possible if I’d panicked and sold-up during the downturn.
And remember, this isn’t a simulation. The graph closely tracks my pre-dividend portfolio. My biggest profit is an open gain of 747% in Jumbo Interactive. Of the other 26 stocks in my portfolio, four are ahead by over 100%. There are another 13 holdings showing double digit gains, plus five that are in the red. As I often say, let your profits run. The largest open loss is just 13.4%.
So that’s a bit of my story. The true sceptics still won’t believe me. They’ll continue to post comments insisting it’s all some sort of scam. I doubt there’s anything I can say to change their minds. They seem firmly of the belief that everyday people can’t get ahead… and that everyone’s out to rip them off.
And you know what, that’s shame. There’s a lot of valuable advice available on all sorts of things. I know my own situation is better due to some of the amazing people and services I’ve found over the years.
I’ll let you judge me for yourself. But hopefully, you’ll never become an ardent sceptic. While I can’t promise instant riches, I believe I can help you build your trading skills. And by using the same process as me, I believe you have every chance of being successful.
So that’s all for this week. If you liked this video, or even if you didn’t, scroll down and leave me a comment, or maybe a thumbs up. Also, if you’re watching this anywhere other than my website motiontrader.com.au then head over and have a look.
So until next time, I’m Jason McIntosh, and let’s find some trends this week.
I'm Jason McIntosh, the creator of Motion Trader. My career began in 1991 on the trading floor at Bankers Trust. Nowadays, I trade my own systems from home in Sydney.
Motion Trader is for investors who value robust analysis, data driven entry and exit signals, commentary, and education. I use engineered algorithms to identify when to buy and sell ASX stocks. No biases or guesswork, just data driven signals.