FX Quant> FX Quant 11 Back Testing Results
Below are given back testing results of FX Quant 11 (ver. 12/2012), generated by our software. These results should be considered as extrapolation into the past of FX Quant 11  Currency Trading Program, which started live trading on January 2, 2013. It replaced the older versions of the strategy, which have been trading since November 1, 2008. Performance fees (20% of new net profit above high water mark) are not deducted from back testing results. To see actual trading results, please go to the FXQ / Real Performance page.
FX Quant 11 features:
 The variability of returns is low and the Sharpe, Sortino, Calmar and Omega Ratios are excellent  among the highest in the currency trading industry. The strategy is extremely robust i.e. insensitive to parameter changes (it is not a curve fitted, or over optimized system), which usually promises excellent performance in forward trading, after the back testing period.
 Transaction costs are very low (2.45% of net asset value per annum), relative to average annualized rate of return (27.9% per annum). Since bid/ask spread costs are around 10% of theoretical return, actual rates of return are 90% of theoretical returns.
 There is no upper limit on the account size. By trading more frequently (for example, 1/3 of account traded each 8 hours) the strategy can trade accounts of virtually any size without performance degradation (it would be even improved, due to timefactor diversification)
 The strategy is not affected by price slippage (it trades in small increments, by market orders, only once a day). Hence, the actual trading results are very close to hypothetical results. See "Transaction costs" above.
 Fx Quant 11 recovers relatively quickly from deep drawdowns  see the Drawdown chart and Drawdown histogram below.
 The strategy has never been negative on annual basis (see the 12 Month Rolling Return graph below).
FX QUANT 11  Ver.12/2012  HYPOTHETICAL PERFORMANCE REPORT FROM STRATEGY BACK TESTING
1. Monthly Rates of Return (ROR), Before Performance Fees

Jan 
Feb 
Mar 
Apr 
May 
Jun 
Jul 
Aug 
Sep 
Oct 
Nov 
Dec 
Total 
VAMI 
1999 
1.21%  (0.32%)  2.05%  (1.77%)  2.23%  0.45%  (1.06%)  2.57%  0.82%  0.38%  0.73%  1.34%  8.88%  1,088.8 
2000 
2.19%  1.75%  1.99%  0.11%  1.20%  2.40%  1.10%  2.01%  2.20%  2.07%  2.80%  0.74%  22.57%  1,334.6 
2001 
2.84%  3.13%  1.29%  1.87%  (0.25%)  2.33%  1.53%  1.20%  (0.56%)  2.79%  0.81%  1.83%  20.41%  1,607.0 
2002 
1.12%  1.13%  0.30%  1.21%  0.60%  (0.46%)  0.97%  2.95%  1.35%  1.23%  1.15%  (0.78%)  11.25%  1,787.7 
2003 
2.23%  (0.24%)  2.73%  1.25%  3.24%  (0.41%)  4.35%  1.24%  1.87%  0.93%  1.69%  0.00%  20.47%  2,153.6 
2004 
2.13%  3.03%  5.20%  3.63%  4.63%  5.85%  3.16%  1.75%  1.68%  0.93%  2.18%  4.16%  45.65%  3,136.7 
2005 
2.86%  2.06%  3.00%  1.80%  1.37%  (0.08%)  4.95%  0.11%  0.72%  3.47%  0.67%  1.30%  24.48%  3,904.7 
2006 
1.48%  1.38%  (3.76%)  2.62%  3.67%  5.33%  0.74%  (0.26%)  1.20%  0.25%  (1.11%)  (0.41%)  11.37%  4,348.9 
2007 
0.68%  1.18%  0.97%  (0.63%)  (0.96%)  (0.48%)  0.65%  (0.73%)  (1.05%)  1.58%  1.81%  1.46%  4.51%  4,545.1 
2008 
1.51%  1.31%  0.86%  3.48%  1.64%  1.53%  1.16%  (0.17%)  0.83%  8.44%  7.06%  0.86%  32.06%  6,002.4 
2009 
3.57%  5.50%  (0.77%)  4.42%  (1.82%)  3.54%  0.50%  0.63%  (0.10%)  1.17%  2.05%  0.80%  21.02%  7,264.2 
2010 
0.15%  (0.91%)  0.89%  1.05%  1.60%  (0.56%)  1.85%  1.03%  (1.13%)  1.72%  (0.41%)  (0.02%)  5.35%  7,652.8 
2011 
1.71%  0.39%  0.18%  0.09%  0.49%  1.16%  0.09%  (0.16%)  3.08%  1.33%  1.43%  0.36%  10.59%  8,463.0 
2012  (1.33%)  0.49%  0.34%  0.68%  (0.17%)  0.11%  (1.99%)  0.22%  0.96%  0.48%  0.90%  (0.38%)  0.28%  8,486.6 
2013  Start of live trading. See the FXQ real performance page. 
2. Performance Statistics Fx Quant 11  V.12/2012 (Before Performance Fees)




*  Total long/short position value is roughly 2 × strategy leverage. It is used for portfolio turnover and costs calculations. Leverage (long only position value) is used as a measure of exposure.
To see more backtesting results, download this Excel table (Fx Quant 11  V.11/2012). Explore all Excel worksheets (click the tabs at the bottom) and scroll down all worksheets to see graphs and performance analytics. You can also download daily rates of return from backtesting (Excel, 1 MB), with 5 day VaR calculations and 5day ROR histograms.
PLEASE ANALYZE AND THOROUGHLY UNDERSTAND THE RISK / DRAWDOWN PARAMETERS ABOVE AND THE DRAWDOWN CHART BELOW BEFORE YOU DECIDE TO INVEST IN THE PROGRAM. AS WITH ANY TRADING PROGRAM, THERE IS NO GUARANTEE THE SYSTEM WILL NOT EXCEED THE WORST DRAWDOWN FROM THE PAST. WE DO NOT RECOMMEND INVESTING MORE THAN 1/3 OF YOUR TOTAL INVESTMENT PORTFOLIO IN ANY PARTICULAR PROGRAM, INCLUDING QT  CURRENCY TRADING PROGRAM.
3. Performance Graphs and Histograms
3.1 Monthly Graphs
Note the semilogarithmic coordinates in the VAMI chart
The above histogram shows that:
1. There is very regular, bellshaped, thin tailed distribution of 5day rolling rates of return . Robust systems, which are not curvefitted usually have this type of distribution.
2. The 5day rolling rate of return (ROR) mean is positive and equals 0.299%. There is a 50% probability that the 5day rate of return will be greater than 0.299% and 50% probability the return will be less than 0.299%.
3. 5Day RORs are more clustered in the positive territory in the histogram above. There is a 31.4% probability that a 5day ROR will be negative and a 68.6% probability the 5day ROR will be positive.
4. The 5day ValueatRisk (VaR) for the 95% confidence level is 0.94%. This means that the risk of loss in a 5day period is 0.94%, with a 95% probability. The probability of loss of more than 0.94% in a 5 day period is 5%. Similarly, the 5day VaR for the 99% confidence level is 2.30%. Excessive negative RORs do and will happen, although with decreasing probability. To see these calculations open the 5 Day ROR Percentile tab in this Excel workbook.
The Drawdown Histogram above shows:
1.) how many days the system was in drawdown of given magnitude (the red colored line). The back testing period is 3638 days;
2.) what time (as a percentage of the total back testing time) the system spent below a given drawdown level (the blue colored line). For example, the system spent only 5% of time (182 out of 3638 days) in drawdown worse than 2.43%, and only 1% (36 out of 3638 days) in drawdown worse than 4.11%. These figures also give some idea on the recovery time. Calculations can be found in this Excel worksheet (1.1 MB), under the Drawdown Histogram tab.
The most important facts to remember from the Drawdown Histogram are that:
1.) large drawdowns are relatively rare (the larger the drawdown  the less the probability, although it does exist  see the 11.21% drawdown far left in the histogram above);
2.) the system quickly recovers from extremely large drawdowns. There is no answer, however, how deep the drawdown can go; statistics only show it should not last for too long. This chart also shows how important it is to be patient and not to quit trading during drawdown (which is the worst possible moment to do so).
You might also want to see these equity and position size graphs.
Compounding (see the VAMI chart above) is an efficient method for increasing your account equity exponentially, by reinvesting the profit  try this Financial Calculator. Since FX Quant 11 trades in small increments, it is one of the few trading programs suitable for monthly compounding. You can see these formulas for ROR calculations and compounding.
The above tables and charts document FX Quant 11's historical hypothetical performance based on back testing results. To see actual trading results, go to the FXQ Real Performance page (after January 1 , 2013).
Please note that performance results reported are before performance fees, which decrease returns. Interest on open positions is not taken into account in hypothetical results. There are also slight differences in profit/loss at different platforms, due to different methods for profit/loss calculation (marktomarket vs. closed trade profit/loss).
Better results (smaller drawdown and better Sharpe and Sortino Ratio) can be obtained by trading multiple trading strategies. The three currency trading programs (FX Quant 11, FX Index Arb and FX Basket Quant) can be further combined with our volatility trading programs  see this 6strategy composite back testing report.
To see actual trading results, please go to the FXQ Real Performance page.
Hypothetical Performance Disclaimer:
HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDEROROVERCOMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PLATFORMS 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 PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.
Risk Disclaimer
THE RISK OF LOSS IN TRADING COMMODITIES CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION AND INVESTMENT OBJECTIVES. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. THE PERFORMANCE QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. TRADING IN FOREIGN EXCHANGE IS SPECULATIVE AND MAY INVOLVE THE LOSS OF PRINCIPAL; THEREFORE, FUNDS PLACED UNDER MANAGEMENT SHOULD BE RISK CAPITAL FUNDS THAT IF LOST WILL NOT SIGNIFICANTLY AFFECT ONE'S PERSONAL WELL BEING. THIS IS NOT A SOLICITATION TO INVEST AND YOU SHOULD CAREFULLY CONSIDER YOUR FINANCIAL SITUATION PRIOR TO MAKING ANY INVESTMENT OR ENTERING INTO ANY TRANSACTION. PLEASE SEE THE COMPLETE RISK DISCLOSURE.