The Corona crisis spooked many investors at the outset. Fear spread and Portfolios were sold. Almost all asset classes fell. Dramatic scenarios played out in the stock markets in February through March 19 of this year. However, the panic was still there even after the market had risen 15% again. This can be seen, for example, in the VIX(R) index, often called the "fear index," which, after peaking above 80 points, was still hovering between 30 and 40 points as recently as April.

In the media, many "experts" have orated about all different kinds of recovery of the economy and the stock markets. Many numbers of the alphabet had to be used for this. V-, U-, or L- or maybe W-form?.

Analyses show that many investors (especially professional investors) initially assumed a W-shape - a quasi double-dip formation. However, this did not happen. Therefore, many professional and private investors had to enter the market when it had already risen 15% and further. The low in mid / late March have probably met the fewest investors.

At Traderama, we have taken the first eight months of 2020 as an opportunity to examine the performance of emotionless investment and trading systems. The Corona Crash, which doesn't happen every day, is a prime example to test the reliability of systems and derive trading patterns for wealth management. All investors who still believe they can invest better than the computer should read this analysis carefully.

The computer was the better investor in the Corona crisis

Comparison of the average return. We have not retained the returns for the presentation and have therefore worked with a constant capital investment per trade. If the earnings were not distributed but reinvested, the returns as of September would be approx. 1% higher.

Average return (%) of the 6 US stocks Quant packages
(mode: distribution of income)

Average return of the 6 Germany shares Quant packages
(mode: distribution of income)

PERFORMANCE OF ALL QUANT SYSTEMS (From January 2020)

We have calculated the performance separately for packages with US shares and packages with Germany shares. The six Quant packages with US shares are summarized on the left. The six Quant packages with Germany shares are shown on the right. It is clear to see that the US systems have generated significantly more profit than the German systems.

The timeline shows that the highest gains were achieved in April. The US systems have already generated a positive profit in March - despite distortions on the stock market. This is due to the fact that the systems had a large number of positive trades in mid to late March. unemotional have been received.

Comparison with top funds:

The Traderama systems also perform significantly better compared to many funds. While the 10 largest funds on German equities realized an average performance of -1%, the Traderama systems have generated more than 4 % plus. They also outperformed the US equity funds. For these funds, we calculate an average performance of 10% for the 10 largest funds in the Growth and Value segments. Traderama achieves more than 14 % performance in the same period.

(Data evaluation: 01 January 2020 to 24 September 2020)

 

Trading systems manage risks better than humans

Risk management is a central element of quantitative trading systems. It is designed to protect both the individual position and the entire Portfolio from dramatic losses. It is an airbag and an emergency button at the same time.

The Traderama systems have an integrated stop management system, which is used to sell positions immediately if they do not develop in the desired direction. We use a stop logic that from 5% below the purchase price sells the position the next day "best".

The analysis shows that the number of positions sold by Stop Management increased significantly in March.

While on average about 15% of all trades are closed via stop management, almost 65% of trades were closed via stop management in March.

That one can also achieve very good profits in a volatile downward phase with emotionless trading is shown by the following evaluation.

Shown are the average profits of the trades that reached the target versus the average losses of all trades that were sold by Risk Management.

In the hot and highly volatile market phase in March 2020, the best results were achieved on average with our long-only systems. The results for April 2020 are also very good and the average loss from the stop-triggered trades has even decreased significantly.

OUTCOME:

Some of the best trades were made in a market phase in which many investors, full of emotion, only sold without considering what opportunities this market phase offered. Emotionless trading systems have taken advantage of these opportunities.

How long you stay in a position is also important for trade management. During the Corona peak, all trading systems shortened the holding period of trades to a few days and trades were either aborted or quickly ran into the target. The shortened holding period of a position avoids unnecessary risks.

In stable upward phases of a market, one is happy with long holding periods. It is important for investors to distinguish quickly and decisively between different market phases. Trades entered from April 2020 onwards have already had a longer holding period.

Results: 

Those in the stock market must be careful to consistently close out positions even on the downside to free up capital for a better trade. This analysis of Quant systems also clearly shows one of the biggest problems investors have in down phases. Positions are often liquidated only when the bottom of a price trend is approaching. Then it often goes down again quickly. Quant systems avoid this "sitting out" of a position and work emotionless the signals.

The holding period of a trade must be adjusted

Holding period of trades (days) per month (average of 12 Quant packages)

If you act systematically, you should follow the system

It is sometimes very difficult for humans to blindly rely on a system. However, the number of situations in which the system is wrong is often much smaller than human decisions.

By the fact that man discretionary and non-mutual decisions the success rate of a person not repeatable. It does on a machine. And that is the good thing about a Quant system. It is possible to test and verify the performance of the system over many market situations.

Why it is important to continue a system consistently even if there are a few losses is shown in the following graph.

It is almost impossible to identify the bottom of the movement in a crash. But the systems just work through it - with risk and money management. Numerous analyses show that the best profit is made in the first recovery phase after downward exaggerations.

The Traderama Quant systems have In April, more than 70% of the total profit for the year 2020 generated. So that was back in April. Those who missed this phase of the market missed out on much of the year's gains. Since many investors were still betting on a W-shaped rally, this is likely to have been a great many investors who were not yet invested or only slightly invested in April.

Quant Systems to do it yourself

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