Social Trading

4 min. reading time
5/9/2019

Interview with Top Trader "DieDatenbankDE”

The ayondo Top Traders form the heart of the Social Trading Community. By publishing their trading strategies, Followers can automatically subscribe to them by executing the published trades on their own trading accounts. An interview with "DieDatenbankDE" gives us more insight into his trading strategy at ayondo.

Interview with Top Trader "DieDatenbankDE”

The ayondo Top Traders form the heart of the Social Trading Community. By publishing their trading strategies, Followers can automatically subscribe to them by executing the published trades on their own trading accounts.

When selecting the right Top Trader, Followers use many criteria but an important indicator for Followers is undoubtedly the performance achieved. ayondo Top Trader "DieDatenbankDE" achieved a healthy 6% in April - the highest performance among our current Level 5 traders.

So congratulations on the performance and the recent ascent into the fifth and highest level of the ayondo trading career! An interview with "DieDatenbankDE" gives us more insight into his trading strategy at ayondo:

 

What does your trading strategy look like? Which products are traded?

When we developed the concept for "DieDatenbankDE" in 2005 we first asked ourselves the following question: What must an investment concept have to be able to eternally function? We didn't want to be satisfied with anything less than that so two essential and irrefutable stock market pearl of wisdoms needed to be adhered to.

The first one that makes the key difference, especially in long-term equity investments, is this:

Let profits run and cut losses.

Sounds trivial but it’s difficult to implement, especially in discretionary trading. Discretionary traders too easily sell profitable positions too early, or worse still "sit out" losses making them cheaper in the event of a loss, i.e. the loss position increases. Other mistakes are also possible such as panic selling on weak trading days.

The second piece of wisdom is:

Diversification of the investment

Not just one to five stocks should be bought but a whole pool of stocks should be traded. Our back-testing provided a fascinating result: almost all the stocks tested have a positive performance, provided that the strategy is pursued over the long term.

Many pitfalls of stock investing can be circumvented however if we succeed in establishing a set of rules that run automatically and do not involve discretionary intervention. In order to define the trading rules, research was first carried out over months in which hundreds of stocks were examined and evaluated with data back stretching back to 1998. The model was then gradually developed.

Each stock in this pool is monitored individually and fully automatically. Only stocks in an upward trend are purchased. Each stock has the same entry and exit criteria to avoid over-optimisation.

Building blocks of success

Since we monitor each share individually, the heterogeneous development of the shares in the index are taken into account. If you compare the strategy with the purchase of an ETF, you will see a completely different weighting. If there are difficulties with individual stocks (for example the serious under-performance of utilities over the last 10 years), then these are not bought by the strategy over long periods of time. In index products however the weak performance is fully supported.

The strategy is a defensive long-term method and differs considerably from "buy and hold".  Shares that fall are sold or not bought at all. Rising stocks are accompanied on a long-term basis and stocks in sideways movements are also held as long as possible. Since we don’t know how a share will develop in the future, dividends bolster the stocks over time, giving them a chance to continue on an upward trend.

Investments are always equally weighted. We give every share identified as worth buying by "DieDatenbankDE" the same opportunity to contribute to the performance. Each share is bought with the same weighting, should a BigCap crash, the index suffers, but the impact on the "DieDatenbankDE" strategy overall is not particularly strong.

There are some indications that the "DieDatenbankDE" strategy will be successful in the long run:

- The last 10 years were successfully realised.

- The strategy follows clear, promising rules.

- Even stocks with poor performances contributed to the profit margin overall if they are traded long enough.

- Dividends save us in lean times.

- In the crash we have an investment ratio of almost zero.

- Weak stocks are avoided over long periods of time.

 

How is your risk management structured?

Through strict risk management we have always managed to beat the risk parameters of the market in recent years. These in particular are:

  DieDatenbankDE Germany30
Maximum Drawdown 13.76% 23.30%
Monthly Volatility 2.30%  3.79%
Value at Risk 3.41% 6.57%

Two main risk management tools are responsible for this:

  1. Each share in this pool is individually and fully automatically monitored and has a fixed stop loss.
  2. Short Germany30 trades are used as hedges in certain stock exchange phases.

 

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The performance represented is historical; past performance is not a reliable indicator of future results and investors may not recover the full amount invested. This information should not be interpreted as investment advice or any recommendation