The Money In / Money Out (MIMO) Alternative Equity Curve that I discussed the other day has really grown on me as a way of demonstrating the performance of a spread betting portfolio in a way that is indifferent to whether one is day trading (putting money in and taking profits out regularly) or position trading (running a longer term portfolio with only occasional deposits or withdrawals).
To recap: in this view of trading performance, what goes on inside the spread betting or other trading account is hidden inside a “black box”. The current “paper” value of the account including any unallocated cash is irrelevant, and the only thing that matters is how much money you have been able to take out of the account compared with how much you ever put in.
I have updated my original sample MIMO equity curve to hide the fact that I didn’t really “cash in” the other day as I had hinted, and to show the fact that I did make a real-life withdrawal of £215 yesterday– thereby taking my cumulative credits to this account down from £775 to £560.
|BLACK shows deposits and withdrawals, RED shows total cumulative amount deposited (-) or withdrawn (+)|
The aim, of course, is to get the red bars above zero to show that I have taken more money out of this account than I ever put in, at which point I would truly be trading other people’s money. As explained the other day, I could take this graph positive at a stroke due to the (not visible here) latest account portfolio equity valuation being higher than my cumulative net deposits to date, but that wouldn’t leave any other people’s money or my own to continue trading with and profiting from.
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Disclaimer: this posting is for general education only; it is not trading advice.