Mastering the Market: The Trading Performance of Mark Ritchie
One of the very successful Mark Minervini Disciples
Introduction
In the world of trading, few names resonate as powerfully as Mark Ritchie. Known for his remarkable trading strategies and impressive performance, Ritchie has become a beacon of inspiration for traders worldwide. This article will delve into the trading journey of Mark Ritchie, drawing insights from a recent interview he gave, which can be found here.
Mark Ritchie's Background and Trading Evolution
Mark Ritchie II hails from a trading background, his father being a famous name in the trading world (Mark's father, also called Mark Ritchie has been covered by Jack Swagger in his Market Wizards series). Despite this, his entry into trading was not handed to him on a silver platter. Ritchie II began his journey in the trading world by learning from his father and his father's friends, who were also successful traders. He started as a correctional officer and then became a theology student. His entry into the trading world was not a calculated career move but rather a serendipitous event.
Ritchie II's trading evolution was a process of continuous learning and adaptation, but with a twist. He began his trading career at the Chicago Board of Trade, where he learned the ropes of the financial industry. Mark was focused on developing a trading style that was unique to him, one that was aligned with his personality and risk tolerance. This style is characterized by meticulous planning, disciplined execution, and conservative risk management.
There is a famous story, when Mark Ritchie II attends the Master Trader Program by Mark Minervini as a client and is the only one who puts his hand up when Mark Minervini asks: “Who believes that can make 100% in the next 6 months?”. Funny to see that Mark Ritchie manages to reach this exact target within next 6 months.
Trading Performance
Mark Ritchie's trading performance is a testament to his skill and strategy. Over the years, he has consistently delivered impressive returns. For instance, in 2021, he achieved a remarkable 17.19% return in December and a 13.02% return in June. Even in challenging market conditions, Ritchie's strategic approach and risk management skills have enabled him to stay profitable.
To truly understand Ritchie II's prowess, one must delve into his performance metrics. Let's take a closer look at some key statistics that shed light on his stellar track record.
Ritchie II's largest positive monthly return was a staggering 25.39%, indicative of his ability to identify and seize market opportunities. Conversely, his largest negative month saw a return of -15.82%, a testament to the volatility of the financial markets and the inherent risks of trading. However, it's worth noting that Ritchie II's average negative month was -4.36%, significantly lower than his average positive month at 7.35%. This highlights his robust risk management strategies and his ability to keep losses in check.
Regarding consistency, Ritchie II's performance is commendable. Out of a total of 138 months, he had 48 negative months, signifying that he had a positive return in over 65% of the months. This consistency, coupled with his resilience, is a key factor in his overall trading success.
Ritchie II's batting average, a measure of his ability to generate positive returns, stands at 34.8%. While this might appear low initially, it is important to remember that trading is not about winning every time but about maximizing profits and minimizing losses.
One of the most telling statistics is Ritchie II's largest consecutive up months and down months. He has managed to string together 10 consecutive up months, a remarkable feat that underscores his ability to maintain a winning streak. On the other hand, his largest consecutive down months stand at 4, highlighting his resilience in the face of market downturns.
Finally, the ratio of Ritchie II's average positive to negative months stands at 1.69. This means that on average, his positive months are 1.69 times larger than his negative months. This ratio is a clear indicator of his effective risk management and his ability to keep losses in check while maximizing profits.
Let's look at some visuals
Graph 1: Actual snapshot of the Mark Ritchie account
The snapshot shows Mark Ritchie II's from Jan'20 to Mar'21. The picture shows both % return and CashFlow increase. The blue line is the percent return pegged to the right hand axis showing that for the period Mark achieved a whooping 372.3% return. At the same time, his cashflow proceeds Grew from a little less than $2,000,000 to about $8,000,000.
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Graph 2: Histogram of Monthly Performance
The histogram provides a snapshot of the distribution of Mark Ritchie II's monthly returns. It appears to be somewhat normally distributed, but with a positive skew. The positive skew indicates that there are more months with positive returns than negative ones, and that exceptionally positive returns are more common than large losses. The mean is about 3%. The bulk of the monthly returns are clustered around the 0-5% range, but there are also instances of returns exceeding 15%, which can be considered exceptional. However, there are also instances of losses exceeding 5%, indicating periods of significant downside, yet managed so that they have never exceeded the up months.
Graph 3: Winning and Losing Months
This bar chart clearly shows that there are more winning months than losing ones in Mark Ritchie II's trading strategy. The green bar (wins) is taller than the red bar (losses), indicating that the strategy is more often profitable than not. However, it's important to note that losing months are not uncommon. The presence of losing months is a reminder that while the strategy has a positive track record, it is not without risk, and investors should be prepared for periods of losses.
Graph 4: Compounded Monthly Returns from $250k Investment
Graph 4 displays the compounded growth of a $250,000 investment over time, comparing Mark Ritchie II's strategy (blue line) with the S&P 500 (black line). It's clear that the $250,000 investment would have grown substantially over time with Mark Ritchie II's strategy (+$14,000,000), far outpacing the growth of the same investment in the S&P 500 (<$2,000,000). This indicates that the strategy has been highly successful in the long term. However, the blue line also shows periods of significant drawdowns, which are in line with the high maximum drawdown metric we calculated earlier. These drawdowns are a reminder that the strategy, while profitable over the long term, has periods of significant risk. Here it is important to reiterate that this is not backtesting, this is real achieved performance.
Graph 5: Monthly Trading Performance by year of Mark Ritchie II (2010 to 2022)
Lastly, Graph 5 gives a snapshot of Ritchie II's monthly trading performance from 2010 to 2022. Each year is represented by a different colored line. What's evident from this graph is the consistent positive performance across the years, with a few dips representative of the risky nature of trading.
👉If you are interested to receive the monthly data in excel drop me a message below and I will send it to your email (as long as you are subscribed to the newsletter so that I have your email).👈
Here are some measured criteria that might also be interesting:
Mean Monthly Return: 3.28%
Median Monthly Return: 3.34%
Standard Deviation of Monthly Return: 0.08
Annualized Return: 47.26%
Annualized Volatility: 0.26
Sharpe Ratio: 1.80
Sortino Ratio: 3.79
Maximum Drawdown: 41.21%
Monthly Gain to Pain Ratio (GPR): 3.16
Mean Monthly Return (3.28%): Mark Ritchie II's average monthly return is significantly high. When compared to a typical average monthly return of the S&P 500, which historically hovers around 0.8% - 1%, this strategy offers superior returns on average.
Standard Deviation of Monthly Return (0.08): The standard deviation is higher than what you might typically find with large-cap equity funds or the S&P 500, indicating that the returns of this strategy are more volatile. This suggests that while the strategy has periods of high returns, it also has periods of significant declines.
Annualized Return (47.26%): The annualized return far outpaces the historical average annual return of the S&P 500, which is around 7-10% when adjusted for inflation. This indicates a highly effective strategy over the long term.
Sharpe Ratio (1.80): The Sharpe ratio of this strategy is higher than the typical Sharpe ratio of the S&P 500, which is generally below 1. A higher Sharpe ratio means that the excess returns (returns above the risk-free rate) of Mark Ritchie II's strategy are more consistent and not the result of taking on an excessive amount of risk.
Sortino Ratio (3.79): The Sortino ratio, which only penalizes negative volatility, is also higher than what you'd typically find with the S&P 500 or similar equity benchmarks. This implies that the strategy handles downside risk well, providing investors with less anxiety about potential losses.
Maximum Drawdown (41.21%): This metric indicates a significant risk. It tells us that at some point, an investor could have experienced a drop of over 41% from a previous high. This level of drawdown is considerably higher than what you'd typically experience with an S&P 500 index fund and suggests periods of significant risk in the strategy.
Monthly Gain to Pain Ratio (GPR) (3.16): This value shows that the sum of the gains during winning months is more than three times the sum of losses during losing months. Compared to a hypothetical perfectly balanced strategy (GPR = 1), this ratio indicates that the strategy's winning months are quite profitable.
Trading Strategies and Technical Analysis
Ritchie II's trading strategies are a blend of technical analysis and a fundamental understanding of the markets. He leans on the former for market entry and exit points and the latter for a comprehensive understanding of the instrument he is trading. For instance, he has mentioned that he is using a '60-minute, daily and weekly chart' to get a macro view of the market. He also mentioned the use of pivot points, moving averages, and trendlines in his technical analysis.
Ritchie II cited the trade with Uranium ETF as a good example of his trading strategy. He identified a low-risk entry point by using a trendline from the 60-minute chart and timed his entry using a pivot point on the daily chart. His exit was also well-timed as he exited the trade just before the price plummeted.
Ritchie II emphasizes the im
portance of post-trade analysis. He believes that reviewing your trades and understanding what worked and what didn't is crucial for continuous improvement as a trader. His reflection on the RVLV trade is a perfect example of this. After a successful trade, he reviewed his decision-making process and realized that he had been overly cautious, which prompted him to reassess his risk tolerance for future trades. According to an interview from Mark Ritchie II his average long term loss is less than 5% and the hard line in the sand is 10%. In the case of RVLV the 20% win, represented 4R winner.
Lessons from Mark Ritchie
Mark Ritchie's trading journey offers valuable lessons for both new and experienced traders. One of the key takeaways from his approach is the importance of risk management. Ritchie believes that managing risk is not just about minimizing losses, but also about maximizing potential profits. He advises traders to focus on low-risk entries and progressive exposure to manage their risk effectively.
Another important lesson from Ritchie is the importance of continuous learning. He believes that there is no shortcut to experience and encourages traders to learn from their mistakes and continuously strive to improve their trading skills.
Ritchie also emphasizes the importance of perseverance. He believes that most people overestimate what they can achieve in the short run and underestimate what they can achieve in the long run. He encourages traders to be patient and persistent in their trading journey.
Conclusion
Mark Ritchie's trading journey is a testament to the power of perseverance, continuous learning, and effective risk management. His impressive trading performance and unique strategies offer valuable insights for traders looking to improve their trading skills and achieve consistent profits.
Ritchie's approach to trading is not just about making profitable trades. It's about understanding the markets, managing risk effectively, and continuously striving to improve. His trading journey serves as a reminder that success in trading is not just about making money, but also about the journey of learning and growth.
For more insights from Mark Ritchie and other successful traders, stay tuned to our blog. And as always, happy trading!