Choppy markets challenge my strategy

Author: Ronald Guerrini

Covestor model: Breakouts and Reversals

My model experienced a 1.45% loss for December and underperformed the benchmark S&P500 by about 2.3%.

It was a choppy month and the model did not capture any significant trends in any stock or ETF.

Are you pleased with how your model performed overall in 2011?

In short, no.  It underperformed in absolute measures versus  the benchmark over 2011 and also suffered greater drawdowns.

In what environments did it perform better or worse?

It underperformed in most conditions, with the bright spot towards the end of the year where it posted positive returns.

In light of that, how are you adjusting your strategy or model for 2012?

As this model aims to capture trends and needs to avoid invoking the pattern day trader rule, it is difficult for the model to perform well in choppy markets as 2011 was. 

How do you compete against big hedge funds and institutional investors who use your strategy, with far greater resources? What’s your edge against them?

I am not aware of any big hedge fund or institutional investor using a similar strategy to mine.  The benchmark I use is the S&P 500.