Sentient Trader includes a powerful Portfolio Manager tool which allows you to create portfolios, and then
view the results of trading a portfolio of instruments.
Successful portfolio management is a process that involves a good deal more than
simply studying the portfolio reports, and we encourage you to learn as much you
can about this important subject. To get you started, here are a few thoughts for
consideration:
It is very important that one trade a well-diversified portfolio.
If all the instruments that you are trading tend to move in the same direction at the same
time, then in fact all you will achieve by trading more than one instrument
is an increase in the volatility of your account, and an increase in risk. Use Sentient
Trader's Diversity Rating to see which charts (which are the results of trading
a particular cycle on an instrument) are not well diversified (and have a low Diversity
Rating).
Take note of the Percentage Time in Trades figure in the
Portfolio Report. This is the amount of time spent with open positions expressed
as a percentage of the total time. Note that it is likely that this figure
is over 100%. 100% would mean that you spent all the time with one
open trade. A higher figure (such as 200%, 300% or 500%) means that
you spent all the time with two, three or five open trades, or
perhaps half the time with four, six or ten trades open. You should
consider:
How many open trades you are willing to have at any one time. Bear in mind that
you are risking a percentage of your total portfolio value on each trade. If for
instance you are risking 2% of your portfolio per trade then if you had 5 open trades
you would be risking 10% of your portfolio.
Most experts advise that you should not hold more trades than would risk 5-10% of
your portfolio at any one time.
You could of course enter more trades once the stoploss exits of your existing trades
have been raised to a break-even level.
Carefully consider the Maximum drawdown figure of the
portfolio. This is the amount of money and date (and time if intraday) of the biggest
downward move of your equity. In other words, measured from the previous highest
balance of your account, the biggest loss that was experienced in percentage terms.
Some trading advisers recommend that you double this figure and
ask yourself whether you are prepared to lose that much of your money. If the answer
is no then you are trading at too high a level of risk, and should reduce the risk
level, or the number of charts in the portfolio. You should also be prepared mentally
to encounter the worse drawdown when you start trading. That way
if you do better then the experience will be a positive one!
Be aware of the psychology of trading. It is all very well for
Sentient Trader to clinically trade the cycles, but trading is a very emotional
process because you are putting at risk your hard-earned money. We would recommend
that you read everything you can about this subject, because it is one of the most
important aspects of trading.
The Sample Portfolio
If you are following the getting started process, then you should have built a portfolio
which includes all 24 of the sample workspaces. This is most probably an unrealistic
portfolio because of the number of simultaneous trades that you would have had to
take. And so it is time for you to exercise some critical judgement on the sample
workspaces that we have provided, and build a portfolio that suits you personally.
It might surprise you to learn that not all 24 workspaces are glowing examples of
how to trade with Sentient Trader. We have purposefully included a few workspaces
that are in fact very poor examples of successful Sentient Trading. It is now up
to you to work out which of these charts you would like to trade, and which you
will not trade. Here are some thoughts:
The Total Profit/Loss made by a chart is of course an indication of the chart's
success, but don't be blinded by this figure. Also look at these other important
details:
The Win Ratio. A chart might well have made a good profit, but it has more losing
trades than winning trades. You should realize that this is psychologically hard
- if more of your trades lose money than make money, you might well lose confidence
in the process.
The Maximum Drawdown. If the maximum drawdown is high that means that you would
at some time in this chart's history have had to endure a period of heavy losses.
Would you have had the psychological fortitude to keep trading at this time? If
not you might have stopped trading at the worst time - and taken heavy losses.
Take a look at the chart's Equity Graph. Is it smooth, or very bumpy? The best charts
are those with smooth straight lines. You should avoid charts that are very bumpy,
or volatile, and those charts that made all their profits in very brief bursts.
If those burst happened to time with your summer holiday, you could have made a
loss on a chart that appears profitable.
Why are some charts better than others? There are various reasons, including:
Although all financial instruments exhibit cyclic behaviour, some instruments move
with clearer cycles than others. That is the nature of the markets. Each instrument
has its own character (which is what the Sentient Trading Methodology is all about)
Some instruments yield better trading results on different cycles.
Some instruments exhibit a very high degree of "noise", which is effectively
the random price movement that is not cyclical in nature.
If the Phasing Analysis on a chart is not good then the trading is unlikely to be
good. The trading can only ever be as good as the Phasing Analysis that underlies
it.
Here is your challenge:
Work out for yourself which workspaces suit you the best. Everyone
has a different trading style, different levels of risk tolerance and risk aversion.
Consider trading different cycles on the same instruments:
Use the menu File > Save As, and create a duplicate workspace
Delete all the trading information using the menu Trading > Clear All Trades,
Orders & Action Signals.
Change the trading cycle using the menu Tools > Trade Settings
Learn how to build a trading history, and build one.
View the Trading Report, and adjust the Trading Matrix.
Identify workspaces where a poor analysis has resulted in poor trading. Influence
the analysis by building an Expert Model, and build a new trading history. With
the improved analysis resulting from applying your own expertise, are the trading
results better?
Do this as often as you like until you have built your own ideal trading portfolio.
