Despite the latest partial US federal government shutdown dragging on to a record duration, Wall St has managed to cling on — so far — to its post-Christmas gains, the Dow Jones trading close to the 24,000 mark. Of course, these gains are only partially clawing back what was lost in December, but the stock market has been behaving more robustly than we saw back in late 2018, when sentiment seemed very fragile indeed.
Similarly, the FTSE 100 hit its highest level in more than a month last week, but it will come as little surprise if we see some chop in the days ahead, given the key parliamentary vote on Brexit withdrawal terms this week. Needless to say, EUR/GBP could also be in for a bumpy ride for the same reasons.
The top trader that we are looking at today has a fair amount of European exposure, both in terms of FX and stock market positions, and has been accruing a slow, but steady profit over the last few months with a quite conservative risk profile. The account is called TraderScout1 and these are some of their key metrics:
Now, the overall profit of 2.48% is modest, but it’s worth putting this into perspective alongside some of the risk metrics, which are appealingly low. First of all there is the maximum drawdown: at just 2.82% this is extremely low for an account that has been up and running with real money for almost a whole year. Second, they have a sub-1% volatility score and an overall risk score of 3.
The performance is more impressive when considered against the context of the performance of the financial markets in recent months. As we can see from the chart above, comparing TraderScout1’s performance against the benchmark DAX, they have hugely outperformed this stock index.
Let’s dig into the data a bit further in order to see how things look when considered on a month-by-month basis:
Things were a bit hit and miss over much of 2018, but they achieved a nice sequence of consistency in the last quarter of the year, pushing them to an overall yearly gain of 2.69%. It’s also worth noting how contained the down months were — yes, there were several months when they slipped into the red, but these were generally very small and the worst month in the whole year was May with a negative performance of just 0.62%.
The final thing to consider is which instruments they have been using for their trades. Let’s see how that breaks down:
As we commonly see, there is a substantial exposure to the DAX, which is significant when we consider the out-performance of that index as discussed above. A healthy portion of their trades are made with the NASDAQ 100, though, meaning that their exposure is at least split to some degree between Europe and what is going on the other side of the Atlantic. The balance of their position is largely taken up with FX positions, meaning that the overall portfolio has a reasonable degree of diversification to it.
In summary, this is a trader whose low risk metrics suggest a cautious approach that may appeal to a certain segment. Hand-in-hand with that, the profits that they have generated have been modest. While the course of their profit and losses have been a little up and down, based on the track record so far, they have managed to keep the profits in excess of the losses and it will be interesting to see as the months progress whether they maintain that pattern.