Can You Beat The Market Consistently?

Any investor/trader reaches a certain point of their financial journey where the logical question pops: “Can I beat the market? Is it at all possible to beat the market in the long run, consistently?”.

 

There is a bigger question here, should I trade/invest on my own or go for mutual fund/financial advisor? Should i simply keep investing in an index? 

 

Somewhere along the way all these mix up. When you are reading below, keep in mind that I’m relatively “active” trader even if measured by my longer term “swing/investment” strategy and I also use leverage.

 

As a rule of the thumb, those who seek active management of their funds, usually tolerate higher risk. Those investors are willing to accept higher drawdowns but are also looking for better returns (than the benchmark).

 

Such individuals are usually in their 20s/30s/40s. The common concept is that the older you grow, the lower the risk you should take. 

 

Below we are going to look at raw numbers, where taxes, dividends, inflation and cost of trading are not taken into account, simply because they will vary depending on your residency. 

 

The purpose of this article is to show whether it is:

  • Possible to make money from trading at all?
  • Possible to beat the market (SP500 as a bench)?

 

Below we are going to have a look at two of my accounts. The first one (Alfa) is probably one of the oldest accounts I have kept in Meta Trader Platform. The second one is based on FX Delta software/strategy and also traded in MetaTrader for the sole purpose of using third party verification like myfxbook and fx blue, for both of them. 

On a side note, MT5 starts to look more like it, especially when it comes to algorithmic trading but this is another subject. 

STRATEGY 1 – ALFA SWING/INVESTING

I’m still relatively young (33 at the time of writing this piece), so  my historical performance doesn’t go that far. Given the years of education, mistakes, losses, adjustments… I don’t have that much real trading experience to assess and make significant conclusions (like comparing 20-30 years of performance).
 
However, the performance that I do have available (once I stopped losing lol) shows that my way of trading is actually overperforming when compared to the SP500.
 
It must be mentioned that, while the FX Delta Account (see below) was started and traded ONLY once the strategy had defined and stable rules, the swing/invest strategy was shaped on the go. That means, inconsistencies are hidden inside the performance chart below. I’m glad to report though, that at this stage, rules are clear and defined, which I hope will produce less volatile results.
 

 The longer term account, available on myfxbook HERE accounts for the period between February 28th 2017 till December 30th 2021 (last position closed on this date at the time of writing). This is almost 5 years worth of data slightly above 1000 trades (1016) and return on investment of 120% compared to SP500’s performance for the same period of time of 102%

 

 

 
ABOUT THE STRATEGY
The account shown above mainly holds FX exposure (there might be a few Gold/Silver positions) and is really dedicated to longer term trading strategy that I have developed and curated over the years. Being a swing/long term approach it really doesn’t consume a lot of time which makes it a perfect addition to the rest of my trading portfolio that is oriented to the shorter time frames.
 

 

 

Join the Traders-Terminal to get access to Alfa Swing/Invest strategy.
STRATEGY 2 – FX DELTA
Most, if not all tools that I’m selling on my website, were initially developed for my needs. FX Delta software is a good example. It is the first ever full system, that i have developed. Up to this date (5 years later) It keeps delivering great results. 
 
FX Delta strategy is 100% OPEN and FREE for everyone to learn and use. Only the software that semi-automates the idea is paid. CLICK HERE TO WATCH THE VIDEO.
 
As I decided to make the strategy public, I’ve started an account trading FX Delta alone. I wanted to show the real power behind the idea (and I did 🙂 ). The performance that you are looking at, covers the period from February 28th 2017 till August 2018. This is 1.5 years or 17 months. The total number of trades is 189. I think that’s more than enough to get a feeling where the strategy stands given that this is a short term trading approach. 
 
 
In the 17 months FX Delta delivered 29.19%  return, compared to 19.64% for SP500.
 
fx delta vs sp500
 
CONCLUSION
 
As you probably noticed, the numbers we compared were raw, meaning no taxes, fees, inflation rate or dividends are taken into account, simply because those additional costs will vary in the location where you reside.
 
The idea of the article is to show that YES it is definitely possible to make money and YES it is possible to outperform the market by using shorter term trading and swing/investing on leverage. 
 
The questions that are left without a definitive answer in my opinion are:
  • How will the numbers chance once we apply inflation/taxes/cost of trades and all other relative costs? This is something that you may try to find out for yourself specifically as it will vary for everyone.
  • Is the performance going to improve or deteriorate over larger period of time? Only time will tell but fingers crossed.
  • When it comes to Alfa Strategy, without a doubt, there was a learning curve, which in terms of precise periods is hard to determine Such as – I stopped improving on March 1st 2018. How would the performance look now when the strategy has defined/stable rules (excluding the initial period).
  • This is all manual/semi-manual trading but in all cases the human factor plays the largest role. What kind of performance could be achieved on fully automated framework?
  • Trading on leverage is completely different from buy and hold. Make sure you do your homework before you jump into the deep.

Yordan Kuzmanov
Traders Terminal