Managed Accounts

So I have a lot of connections on LinkedIn, so I get all kinds of “statements” shuffled in to the digest.

There are things I immediately hit the unfollow button on, these are the obvious scams. You know, mostly cell phone screen shots with no obvious duration shown, just a piece meal with a REAL flag Photoshopped over.

Do I keep the connections? I let them look at what I am doing and give them a chance to do the right thing. I only delete the aggressive jerk types and the total frauds.

I’ve been trading for a long time to know what is realistic / attainable.

Today I saw a “Managed Accounts” list with I believe 10-12 different accounts and just a percentage for “gains” in an excel chart.

Scammiest thing ever. I wanted to immediately unfollow, but then after losing the post altogether I felt regret for not taking a screen shot.

There are a number of things to talk about here.

One single percentage is totally meaningless: is that increase on the balance or the equity (for these two things rarely are equal)? Was there any capital injection for instance to avoid a margin call? This would raise the balance too, you know.

I myself trade like a fund. It is not impossible to trade 10 different accounts and have all trades settled by the end of the day. These accounts would not be called managed accounts, but rather traded accounts.

If you manage an account, that means that you are using means of protection other than stop losses. Most likely hedging infrequently.

In my video titled “Yie Are Kung-Fu /30 K Profit Factor?!” I show both a monthly Balance and an Equity statement.

When you are managing an account, you always have a net position size which is either positive and negative, and seldom are without any holdings at all. You would be rolling in and out of longs and shorts, and would have an exposure on balance.

Sure, money making is the ultimate goal, just like when you are day-trading, but your objectives would multiply – you would want to:

  • align your naked exposure best fit with the perceived next move
  • gain and not lose equity vs balance
  • build up equity with short term, quick roll in & outs occupying little to no margin
  • pay attention to which holding side would contribute swap for overnight holding
  • pay attention to margin usage, hedge when you find it wise / necessary
  • inject capital only on last resort
  • use dynamic sizing giving weight temporarily to higher conviction

All off numbers can be attributed any sense in the light of an examined period. There are mere changes towards an ideal state that may never be accomplished.

So, let’s pull up the statement from the end of January, we’re curious about the holdings and the equity here.

If you add up the short positions held, it was 1.85 lots. Since my calculated Trading Size was 4.5 lots, you can see that the account was not heavily burdened, and the Equity/Balance Ratio speaks of 32% draw down with the nominal value expressed as Floating.

This Friday has a lot more to go, but for the sake of this article, I do a “one week later comparison” with its current state.

For the current week the following things can be said:

  • the balance grew by 1,097.59
  • the equity grew by 1,538.40
  • the draw down decreased to 25.44%
  • on balance I am currently 1.45 lots long after taking on 2.85 lots long and closing 0.45 lots short
  • due to equity growth, trading size is now at 5 lots

and we are not even discussing margin percentages at this point.

As you can see, one single percentage number would not paint any realistic picture, not even the shade of it.

Fund management is all about realizing when market changes occur and making beneficial alterations.

This is why it is worth celebrating when an indicator weakness gets corrected to be able to more accurately interpret in the future to bring about better bottom line numbers.

For instance, a reversal divergence wasn’t picked up before, so I had to allow for the comparison high to be lower by a few pips – it is now.

The following call had to be eliminated, for the RSI sequence’s last 2 values were too close to each other for a usable reference point.

And it is correct now.

Further changes may be necessary, but I never said otherwise. Development is a process just as managing an account.