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- Automated Stock Market Trading System |
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CAF Performance and Risk |
Every investor has different levels of risk they are comfortable with. It is very important to understand your tolerance for risk. The following charts show the performance and risk of the three different Cost Average Fishing strategies. The CAF-M strategy is the most conservative. CAF-MO adds more risk/reward. The CAF strategy is the most aggressive producing the biggest gains but with significant risk. All three strategies are long-only strategies that don't include any short sales. MoneyMachine lets you pick and play the strategy that you are most comfortable with.
The backtest performance and drawdown charts shown below start with initial capital of $100,000 and include commissions at the current Interactive Brokers rate of 1/2 cent per share or $1 minimum. Stocks are chosen from a universe of 900 (the S&P 500 component stocks plus the S&P 400 midcaps) when they meet proprietary buy conditions. Since 2/1/2002 the CAF-M, CAF-MO, and CAF strategy generated 2347, 2531, and 7512 trades, respectively. The CAF strategy is pretty much always fully invested.
Not included in the performance curve is interest and dividends which can add further gains for CAF-M and CAF-MO. For example, the account shown in Real Trades started with $101K, $15K additional contributions along the way, and now is $177K as of 2/26/07. The profits show $54K, but in reality its closer to $61K.
CAF-M Performance/Risk
The CAF-M strategy is the most conservative of the three MoneyMachine strategies. It is recommended for safety minded investors. It buys only stocks in a dip that are above their 60 day Moving averages. The worst drawdown it has seen over five years ending Feb 26, 2007 is only around 5%. Despite that low drawdown, it has still managed to produce a whopping 26% average annualized return and 83% winning trades! Of course there is no guarantee that it will continue this great performance and maintain the low drawdown in the future.
Daily peformance of CAF-M strategy since Feb. 1, 2002 starting with $100,000
Daily realized percent drawdown of CAF-M strategy since Feb. 1, 2002
CAF-MO Performance/Risk
The CAF-MO strategy adds a litle more risk/reward. It plays the same CAF-M stocks but also includes Oversold stocks, ones that have taken a beating and should be due for a bounce. During the big dot bomb of 2000-2002, there were lots of oversold stocks available. Since then, there have not been many. Even so, the CAF-MO strategy returned a whopping 40% average annualized return over five years ending Feb 26, 2007. But the drawdown jumps to 16%. Of course there is no guarantee of this continued risk/return.
Daily peformance of CAF-MO strategy since Feb. 1, 2002 starting with $100,000
Daily realized percent drawdown of CAF-MO strategy since Feb. 1, 2002
CAF Performance/Risk
The CAF strategy is the most aggressive. It plays all stocks above or below their 60 day moving averages. It always has plenty of stocks to choose from and so is always pretty much fully invested. The CAF strategy returned a staggering 58% average annualized return over five years ending Feb 26, 2007. But it did so at significant risk, loosing 20% of it's capital at one point. Of course there is no guarantee of this continued risk/return.
Daily peformance of CAF strategy since Feb. 1, 2002 starting with $100,000
Daily realized percent drawdown of CAF strategy since Feb. 1, 2002
2006 Actual trading account performance using MoneyMachine vs market indexes. CAF-M strategy (28%) returned more than double the S&P 500 (13%)!
If you are intrigued at the idea of getting started with the MoneyMachine system but are worried about having a computer control your finances, you can always sign up but use Interactive Brokers "Paper Trading" account initially. This account contains $1M of "funny money" but let's you trade it as if it were real.
