Smart Auto-Trading: 2017 Trading Results
Smart Auto-Trading, is one of the first trading platform to use Artificial Intelligence at its core to actively trade US Equities. Its auto-trading technology simplifies stock investing down to a few easy steps. In this report, we will be looking at SC Model performance, Stock Circles’ model strategy.
By the end of 2017, SC Model Strategy had accumulated almost 2 years of auto-trading data in both simulation and trading mode, providing a good base to evaluate its performance vs. the S&P 500®.
Artificial Intelligence Trading
At Stock Circles, 2016 was all about verifying the hypothesis that ‘AI stock investing’ can provide value above the S&P 500® performance. After proving the hypothesis with flying colors in 2016, 2017 was mainly focused on solidifying the platform while testing Smart Auto-trading’s best strategy a.k.a. SC Model.
Trading results featured in this report use the S&P 500® as the comparison benchmark. Smart Auto-Trading actively screens the S&P 500® to find positive stock stories and auto-trades them on a continuous basis. Although Smart Auto-Trading monitors all the components of the S&P, SC Model auto-trades only 5 stocks at any given time. Because it does not trade all 512 stocks contained in the S&P simultaneously, SC Model performance is based a subset of the S&P components.
Unless stated otherwise, all results depict a performance before brokerage commission and/or Investment Advisory expenses. Dividends that would have been obtained from time to time, were not recorded by the system for the period. The data represents therefore an incomplete picture and is aimed solely at describing the behavior of SC Model in market for the purpose of illustrating its historical gross performance against the S&P 500® benchmark.
- Trading Capital: $25,000
- Compounding: No (profits were not reinvested)
- Leverage: No
- Dividends: Not calculated
- Trading Style: Long, Continuous Trading
- Stock Universe: S&P 500®
- Instructions: Buy Intraday Most Positive
- Budget divided into 5 trading slots ($5,000 per slot)
- Buy stocks with prices between $20 and $1000
- Profit Target: $50
- Stop-Loss: Algorithmic: 5 Day Negative
During the 2016-2017 period, the S&P 500® was experiencing a bull market. According to YChart the benchmark ended 2016 with 11.96% and 21.83% for 2017. More data therefore will be needed to assess the behavior of the model in volatile or down markets.
In this blog, you will see the term 'Profitable Trades' from time to time. In the context of an actively trading robo such as Smart Auto-Trading, the 'Profitable Trades Rate' measures the ability of the strategy to realize a gross profit on a transaction. Profitable in this context means gross profit before expenses and dividends. Once the system buys a security, it waits to see if that trade will sell higher than is original cost basis. If it does, then the system records that trade as a 'Profitable Trade'. This measure helps Engineers and Analysts assess the quality of their system. A high Profitable Trade Rate may not necessarily correlate with higher returns as this indicates that the system might need to slow down considerably to accomplish a high mark. Slowing down a strategy may bring more risk as 'Unrealized' Assets may stay in-market longer. It may not be appropriate in all markets.
In 2016, the Profitable Trade Rate was 69.24% while Profitable Trade Rate climbed to 90.76% in 2017. SC Model was set to take $50 profit each time a stock realized this amount.
Trading results at the end of 2016 demonstrated gross profits were recorded at 51.66% before expenses vs. 11.96% for the S&P 500® for the same period.
Improvements were also noted in other key evaluators. For example, average drawdown days went down from 6 to 4 and consecutive losses were eliminated.
Loss Making Trades
Losses in 2016 averaged $-82.50 and were happening regularly with losses 31/100 trades. In 2017, we saw losing trades averaging $-212.57 but they only numbered 9/100 trades. SC Model had a algorithmic stop-loss that features exiting on negative sentiment from February 2016 to October 2016. After that date, the stop-loss was validating price trends as an insurance policy. This software change reduced the amount of trades but had for side effect to create bigger losses.
2017 yielded 35.93% profit before expenses vs. 21.83% for the S&P 500®, a performance 1.65 times over the benchmark. The relatively lower profit margin compared to the previous year could be explained by a set of major improvements to the stop-loss used by the model in October 2016. Key software improvements such as the one mentioned above were warranted to help balance performance vs. expense ratios.
Although the data above is captured before expenses, we were interested in understanding if there were any reduction in trades from the previous year.
In 2016, Smart Auto-Trading’s model strategy performed 1,476 trades while 2017 saw only 498 trades. It executed 66% less trades than 2016. Trade optimization had for benefits to lower churn and improve expense ratios.
A lower expense ratio meant more money in investors pockets. 2016 results, after expenses at $3.95/trade for 1,476 trades, would have meant expenses of $-5,830.20, effectively reducing profits down to 28% from 51.66%. In comparison, 2017 saw 498 trades, expenses of $-1,967.10 and a net profit of 28.06% from 35.93%. All and all, 2017 made the same profit as 2016 after trade commissions were calculated.
During 2016-2017, Stock Circles’ Model Strategy consistently produced profits above that of the S&P before expenses.
In 2017, it’s posted a 21.52% improvement in profitable trades over 2016. It performed 249 trade roundtrips with a profitable trade rate of 90.76% and concluded the period with 35.93% gross profits before expenses.
While Smart Auto-Trading is still young, the technology is showing stability and consistency in yield from account to account, month to month. Besides producing sizable profits, the test revealed that the main benefits of the intellectual property comes from systematic investing. The technology brings consistency and order to stock investing while saving time. It frees investors from constantly needing to look at their account and encourages them to commit themselves to building their nest egg over time.
About Stock Circles
Stock Circles Inc., is an Internet Investment Advisory firm headquartered in Los Angeles, CA. It operates a robo-advisor / robo-trader that uses Artificial Intelligence at its core to auto-trade the S&P 500®. The Company‘s mission is to simplify stock investing using technology.
If you are interested in ‘AI stock investing’ or just curious about how technology can help you become a better investor, you can register and try Smart Auto-Trading today in simulation mode free of charge.
General Disclaimer: Stock Circles Inc. (Stock Circles) is an SEC registered Investment Advisory. It operates a Service (Smart Auto-Trading) that make use of Artificial Intelligence concepts to screen and monitor stocks on an ongoing basis. Stock Circles is referencing here an automated, actively trading strategy running in simulation mode. No manual trading took place. Unique experiences and past performance does not guarantee future results. There is always risk associated with trading securities. Actual results are influenced by market conditions and/or service availability and accuracy.
Risk: Stocks trading involves substantial risk of loss and is not suitable for every investor. The valuation of stocks may fluctuate, and, as a result, clients may lose more than their original investment.
If the market moves against you, you may sustain a total loss equal to the amount you deposited into your account. You should not engage in trading unless you fully understand the nature of the transactions you are entering into and the extent of your exposure to loss. If you do not fully understand these risks you must seek independent advice from your financial advisor.
Any content on this blog should not be relied upon as advice or construed as providing recommendations of any kind. It is your responsibility to confirm and decide how best to use the provided material. Trade only with risk capital; that is, trade with money that, if lost, will not adversely impact your lifestyle and your ability to meet your financial obligations. Past results are no indication of future performance. In no event should the content of this blog be construed as an express or implied promise or guarantee.
None of the content published in this blog constitutes a recommendation that the above strategy is suitable for any specific person.
HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.