GalleonFX - 9/8/06 C150 System News and August Commentary

it can seem very rough to have entered into the fund at the beginning of a 15% drawdown. Such clients might feel shaken and wonder if they should withdraw their funds out of self-protection. However, for those who have entered the fund since the beginning, they are happy to see that their account is up 77% since inception, and they see the 15% drawdown as a minor dip in an otherwise steep equity curve. These clients see the dip as an opportunity to put in more funds.

The 15% drawdown in August was in part due because the EURUSD and USDCHF currencies in which we trade in the C150 vacillated up and down in a 200 pip range, without trend direction or break out of the 200 pip channel. Consequently, the C150 system entered into each currency pair in equal measure on both sides of the 200 pip channel, hoping for a breakout. Though many positions hung in for many days during the channel swings up and down, some positions could not take these repeated choppy movements and were gradually stopped out. The system could not fully recover within the same month (as it has in the past) because there was no direction in either currency for the entire month. The summer season, particularly August, is when many big money traders take their holidays, and this is one reason why this month had no trend direction.

It must be remembered that every trader and every system has a drawdown, and in leveraged investments like futures or forex, it is not uncommon to have a drawdown anywhere from 15-25%. It is not the drawdown that is the reason for concern. It is the length of time it takes to get out of a drawdown. In hypothetical backtesting over 11 years, C150 system has experienced a 25% drawdown, but it has recovered from such a drawdown in less than 2 months. This is the extraordinary feat. Most successful traders or systems experience a 15-25% drawdown several times in the course of their lifetime, and they are able to survive as traders or systems because they can recover from their drawdown period in an average of 6 months time. Those who cannot get out of the drawdown in less than 6 months time must hang up their hats as traders or be junked as systems, for their clients want no part in their trading. But our system has the ability to recover from its greatest drawdown periods in less than 2 months time. This is much faster than average. Even in real time trading we have had at least a couple times where C150 has had an intramonth drawdown of close to 15%, and despite such an intramonth drawdown, we have had full recovery by the end of the month.

It is the overall return, its consistency, and the speed of drawdown recovery that are the most important aspects to consider when evaluating a system. The C150 system is one of the most powerful forex systems in the market today because it has shown impressive returns to date, both hypothetical and real, and it has revealed that it can recover from its worst drawdown periods in less than 2 months time. In the bigger picture, C150 is geared to experience extraordinary annual returns, and that is what we keep our eye upon, not a momentary drawdown month. When the next trend occurs in the US Dollar, either up or down, the C150 will pounce upon it, bringing back to its clients a continuation of its solid returns, and this Aug drawdown will appear as a historical bump along an otherwise steep equity curve.