The Portfolio Report

Once you have created a portfolio you will want to see how the portfolio performed.

Open the Portfolio Report with the menu Portfolio Manager > View Portfolio Report.

Sentient Trader will then compile the portfolio report for you. This is a process which requires the building of the portfolio from the individual charts, and so it can take a few minutes depending on how many charts are included in the portfolio, and how fast your computer is.

The Portfolio Report is then presented.

There are many tabs at the top of the Portfolio Report:

Summary: this page presents a summary of the trading of the entire portfolio.
Equity Graph: this is a graph of the equity (balance) of the portfolio.
OPEN Trades: all open trades are presented in tabular format. The number in brackets in the tab indicates how many trades there are.
CLOSED Trades: all historical (closed) trades are presented in tabular format. The number in brackets in the tab indicates how many trades there are.
LONG Trades: all historical long trades are presented in tabular format. The number in brackets in the tab indicates how many long trades there are.
SHORT Trades: all historical short trades are presented in tabular format. The number in brackets in the tab indicates how many short trades there are.
CHART NAME (S): This is the summary page for the chart whose name is given in the tab (the name of the chart is the symbol of the instrument by default). There is a summary page for each chart in the portfolio. This page is very similar to the summary page of the Trading Report of the chart.
CHART NAME (G): This is the equity graph for the chart whose name is given in the tab (the name of the chart is the symbol of the instrument by default). There is an equity graph for each chart in the portfolio. This page is very similar to the equity graph of the Trading Report of the chart.

The Summary

The summary page presents a great deal of information about the portfolio.

Diversity Rating

One has to be very careful when trading a portfolio of instruments that they aren't all too closely correlated, and thus tend to move in the same direction at the same time. If this happens then one would probably make similar trading decisions on each instrument at the same time, which is all very well when the trading decision results in a profit, but is not a good thing when the trading decision results in a losing trade, because one would then lose money on all the correlated instruments.

For this reason it is very important to understand how well diversified a portfolio is, in other words how diverse are the instruments that one is trading? Sentient Trader uses a unique method for calculating the diversity of a portfolio, which reflects the true diversity of the portfolio, in other words how it affects you as the trader. This is how the diversity is calculated:

On each and every bar Sentient Trader considers each chart.
If a profit was made on that bar then no calculation is made.
If there was no profit or loss made on that bar then no calculation is made.
However if there was a loss made on that bar then Sentient Trader considers each and every other chart on that bar:
- If a profit was made on that bar, then that is considered a positive thing, and the chart gains a positive diversity rating.
- If no profit or loss was made on that bar then that is considered to be a slightly positive thing, and the chart gains a small positive diversity rating.
- If a loss was also made on this chart, that is considered to be a negative thing (two charts both losing money on the same indicates a lack of diversity), and the chart's diversity rating decreases.

The result of all these calculations are presented at the top of the Portfolio Report, in Diversity Ratings which are expressed as a percentage.

A Diversity Rating of 100% between two charts is nearly impossible because it implies that on every losing bar of each chart, the other chart makes a profit. A Diversity Rating of 100% for a portfolio of many instruments is even more unlikely.
A Diversity Rating of between 30%-50% is considered good.
A Diversity Rating of between 20%-30% is considered poor.
A Diversity Rating below 20% is a warning that your portfolio is not diversified.

Hurst's Principle of Commonality

It is an interesting result of Hurst's Principle of Commonality that the Diversity Rating of a portfolio will always be low. Hurst's Principle of Commonality states that the prices of financial instruments tend to move with a high degree of commonality, in other words troughs and peaks are formed around the same time in many instruments. The result of this of course is that it is very hard to create a truly diversified portfolio. This is one of the ironies of trading according to Cyclic Theory.

Summary

The following details of the portfolio's performance are provided in the summary:

Total Profit/Loss: the amount of money made or lost
Number of Open Trades: the number of open trades in the portfolio
Open Trades Profit/Loss: the profit or loss situation of all open trades
Total Winning Trades: the number of winning trades
Total Losing Trades: the number of losing trades
Total Winnings: the total amount of money made by winning trades
Total Losses: the total amount of money lost in losing trades
Average Winning Trade: the average amount of money made in a winning trade
Average Losing Trade: the average amount of money lost in a losing trade
Most Winning Trades in a Row: the longest number of winning trades without a losing trade
Most Losing Trades in a Row: the longest number of losing trades without a winning trade
Win Ratio : the ratio of wins to losses as a percentage (50% would be an equal number of winning and losing trades)
Win Ratio LONG trades: the ratio of wins to losses as a percentage (considering long trades only)
Win Ratio SHORT trades: the ratio of wins to losses as a percentage (considering short trades only)
Profit Factor One (win/loss ratio): the ratio of wins to losses expressed as a ratio (1:1 would be an equal number of winning and losing trades)
Profit Factor Two (ave. win/ ave. loss): the average size of a winning trade expressed as a ratio to the average size of a losing trade
Total Time Period: the time period from the beginning of the first trade to the last bar of data (note this period is not from the beginning of the analysis because if you have not built a trading history then this time period would be very deceptive)
Total Time in Trades: the amount of time actually spent with open positions
Percentage Time in Trades: the amount of time spent with open positions expressed as a percentage. Note that it is possible, even likely that this figure is over 100%. That is because Sentient Trader works out how much time is spent with one trade open. In the example given above this figure is 1110% , meaning that effectively the entire time period was spent with 11 trades open.
Total Time in Winning Trades: the amount of time spent in winning trades (note that some of this time might have been spent with the trade in a losing position)
Total Time in Losing Trades: the amount of time spent in losing trades (note that some of this time might have been spent with the trade in a winning position)
Average Duration of Winning Trade: the average time duration of a winning trade
Average Duration of Losing Trade: the average time duration of a losing trade
Average Time Between Trades: this is the average time you spent between trades (looking for the next trading opportunity). In the case of a portfolio it is likely that this figure is not given (as in the above example), indicating that there was no time in which the portfolio had no open trades.
Average equity change (in one bar): the average amount of money that was made or lost per bar (per day if the chart is a daily chart, per minute if the chart is one-minute chart)
Annualized % return: this is the return on your investment expressed as a percentage rate of return so that it can be compared with the return you might get from other investments
Maximum drawdown: this is the amount in percentage terms 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.
Maximum drawdown (in one bar): this is the biggest loss experienced in a single bar (in one day if the portfolio consists only of daily charts, or one minute if the portfolio consists only of one minute charts) in percentage terms.
Maximum gain: the opposite of the maximum drawdown is the maximum gain, also given as a percentage, and the date (and time if intraday) on which this gain was experienced.
Maximum gain (in one bar): this is the biggest gain experienced in a single bar (in one day if the portfolio consists only of daily charts, or one minute if the portfolio consists only of one minute charts) in percentage terms.

Rating your trading

There are various different ways of rating a trading system, and it is important that you understand them. Purveyors of trading systems will often sell a system on the basis of a single figure, such as the Win Ratio (in the above example the Win Ratio is 61%). However a single statistic such as that tells you nothing about the true success of the system.

At the very least you should consider two statistics:

The Win Ratio (also described in Trade Reports as Profit Factor One)
The Average Win to Average Loss ratio (also described in Trade Reports as Profit Factor Two)

It is in the combination of these two numbers that a true understanding of the success of the trading system can be gleaned.

Note that by means of the Trading Matrix of the Sentient Trading Methodology you can tailor a trading system to favor one or other (and to some extent, both) of these numbers.

The Equity Graph

The Equity Graph presents a graphic representation of the equity of your trading account for the portfolio. There are three lines plotted on the Equity Graph:

The main equity line (which is colored blue by default. Sentient Trader uses the color of the line-on-close chart style which you can change in the Options)
The drawdown line (which is colored red). This line shows on an intra-bar basis what the drawdown on your account would have been. On days of high volatility the line will be visible below the equity line.
The gain line (which is colored green). This line shows on an intra-bar basis what the gain on your account would have been. On days of high volatility the line will be visible above the equity line.

There are three buttons at the foot of the Portfolio Report:

Done: clicking in this button will close the report.
Save: this allows you to save each and every tab (or only selected tabs) in the Portfolio Report for later perusal.
- The summary pages can be saved in a rich text format (.rtf format) which can be opened in any word processing program
- Equity graphs are saved as JPEG (.jpg format) images which can be viewed in any graphics program.
Print: the various tabs of the Portfolio report can be printed.

Portfolio Management is not simply a matter of viewing the Portfolio Report. Take a look at our suggestions for effective portfolio management.

Getting Started Roadmap for Trader Edition

Getting Started Roadmap for Analyst Edition