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Diversified Trend Trading Approach

  • #1,561
  • Jul 6, 2017 5:49pm Jul 6, 2017 5:49pm
Quoting Ramadas
Thank you! Since my personality type is INTP (Architect/Logician) my talent is to create, improve, simplify systems (I own a production company where for 8 years I was doing just that). https://www.16personalities.com/intp-personality
Morning R

Mate, there is a bit in those last two posts of yours that I need to spend some time discussing with you. I will respond to the queries in your last two posts between tonight and the end of the weekend to hopefully make things clearer. Given your personality type, I can see that you are after the detail, which is great to hear...but I just need a bit of time to do justice to your queries. Keep posted :-) C
  • #1,562
  • Edited Jul 7, 2017 2:43am Jul 6, 2017 6:38pm | Edited Jul 7, 2017 2:43am
Quoting Ramadas
However looking at your other thread 3% CAGR for last 17 years is not enough to pull me to the dark side...It may make sense for someone with 1 million capital, but not for someone with 10 000 USD capital.
R...this is where I am at with the portfolio currently which is explained more fully here and is a composite of 6 systems.
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There is no reason why this portfolio could not be applied with far less capital. We just adopt fixed fractional position sizing on lower capital which will reduce the lot size in each strategy. Look at the stats below. A total of 11,695 trades over the 17 year period which translates to approximately 1.8 trades per day. These trades are activated on the open of the following day post the signals generated on the prior day so this could be an end of day portfolio strategy which is far more manageable than say the EDTT which operates on the 30 min timeframe.

Once the automation is set up, it does all the hard work. All you have to do is monitor it and send trades off to your broker or deploy an API to feed directly to the broker. Then you can focus on the important side of the business which is research and development to enhance the portfolio. I am not trying to sell you on automation....just make you aware of some of the significant benefits it brings over discretionary trading.

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The portfolio is deriving a 11% compound annual return for the last 17 years with a max draw of 38%. We can scale these returns of course (as shown below with the alternative risk-weighted exposures) but at least we are getting somewhere. When you compare this against the FM's we still have a way to go....but at least we are being realistic in our expectations. I have been in the game long enough now (since 1985 both in the FM industry and as a retail trader) so I understand what sustainable returns mean....but unfortunately most retail traders do not have the memories and experience of a variety of different market conditions. What is occurring today is considerably different to that pre 2008 and pre 2000...and the returns of today from mean reversion have a limited life-span. Unfortunately a lot of people are going to get burnt if they assume that conditions post 2008 GFC are going to last.

This post showcases the history of mean reversion on the S&P500 which does carry over into forex given increased correlations. In a nutshell if traders deploy the same 'buy the dips and sell the spikes' strategies that are successful today, they will severely come undone if market conditions alter to a momentum bias.

Thanks to the risk:return trade-off we can apply alternate position sizing for our portfolio to enhance returns or reduce the volatility of returns. This is what happens when we tinker with position sizing multipliers.

More aggressive Portfolio: CAGR of 17.5% but ulcer ridden drawdown of 57.5%.
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Less Aggressive Portfolio: CAGR of 7.5% but drawdown of only 26.9%.
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  • #1,563
  • Edited Jul 7, 2017 2:22am Jul 6, 2017 9:39pm | Edited Jul 7, 2017 2:22am
DTT


Quoting Ramadas
Do you have data what was the longest losing streak of different discretionary systems in this thread?
R

Below are the stats for different risk reward weightings applied to DTT across the 24 markets described in early posts of this thread. In this test the DTT was applied to the H1 timeframe (in direction of primary trend and counter-trend) with verification provided by D1. The results reflect the techniques we applied earlier on in the thread when dealing with DTT alone.

Version 1 - 0.25% risk per trade (Note that results exclude SWAP and slippage)

 

  1. CAGR of 9.33% with Max Drawdown for the test since Jan 2015 of 2.8%

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Version 2 - 2.0% risk per trade (Note that results exclude SWAP and slippage)

 

  1. CAGR of 28.98% with Max Drawdown of 10.3% for the test period

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Based on my knowledge of market conditions, if we applied this Version 2 across the 20 or so years of the past, the max draw would be sitting at around 55%, so the strategy at these risk-weighted levels is as bit aggressive for me. I personally prefer Version 1 in relation to my risk appetite.

I will send through EDTT1 and EDTT results when I have completed them some time over the next day or so.

C
  • #1,564
  • Edited 11:48pm Jul 6, 2017 11:13pm | Edited 11:48pm
EDTT1

Below are the stats for different risk reward weightings applied to EDTT1 across the 24 markets. In this test the EDTT1 was applied to M30, H1, H4, D1, W1, MN timeframes (in direction of primary trend only - no counter-trend).

Version 1 - As per trade risk%'s applied in this thread (0.25%M30, 0.25%H1, 0.25%H4, 0.50%D1, 0.50%W1 and 0.50%MN) (Note that results exclude SWAP and slippage)

 

  1. CAGR of 11.18% with Max Drawdown for the test since Jan 2015 of 5.7%

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Version 2 - A more aggressive version where we multiply trade risk per timeframe by 4x.

 

  1. CAGR of 33.47% with Max Drawdown for the test since Jan 2015 of 19.4%

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I will get EDTT to you shortly.

C
  • #1,565
  • Edited 11:49pm Jul 6, 2017 11:24pm | Edited 11:49pm
EDTT

Below are the stats for different risk reward weightings applied to EDTT across the 24 markets. In this test the EDTT was applied to M30, H1, H4, D1, W1, MN timeframes (in direction of primary trend and counter-trend).

Version 1 - As per trade risk%'s applied in this thread (0.25%M30, 0.25%H1, 0.25%H4, 0.50%D1, 0.50%W1 and 0.50%MN) (Note that results exclude SWAP and slippage)

 

  1. CAGR of 13.73% with Max Drawdown for the test since Jan 2015 of 6.7%

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Version 2 - A more aggressive version where we multiply trade risk per timeframe by 4x.

 

  1. CAGR of 30.26% with Max Drawdown for the test since Jan 2015 of 25.8%


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Mate, this is my favourite version but it takes too much effort for a single trader. You need a team working around the clock. Also in terms of performance the EDTT1 is the preferred outcome. For practical reasons however if you want to trade this yourself, the DTT is worthy of consideration.

Cheers

C
  • #1,566
  • Jul 6, 2017 11:50pm Jul 6, 2017 11:50pm
Sorry guys about the edits of the charts above. I had stuffed up some of the field criteria for EDTT1. All fixed up now. :-)

C
  • #1,567
  • Jul 7, 2017 12:34am Jul 7, 2017 12:34am
Quoting Ramadas
Concerning your suggestion of 1D timeframe, it creates too large SL for me....and not enough signals. 4h and 30m creates just enough signals.
Fair enough. Mate I may have led you down the garden path with the D1 timeframe. The DTT actually trades on the H1 timeframe but just takes directional cues from D1. Sorry if I stuffed you around on this.

Quoting Ramadas
So if Tharp's definition of 6 market states is true, then minimally you need only 6 robots for the portfolio?
Two of those market conditions are virtually un-tradeable (the sideways vol and low vol options). IMO you just need to try to keep clear of these conditions. That's why I ensure price really has to stretch to trigger an entry and I avoid sideways congestion like the plague. The other 4 conditions you should be able to capture with in-trend and counter-trend strategies (eg. momentum and mean reversion styles).

Quoting Ramadas
I wonder what DD they had there: {image}
The turtles were particularly aggressive mate with DD's of >50%. You can get more info here from these live podcasts with Richard Dennis, Jerry Parker and Brian Proctor.

http://www.toptradersunplugged.com/t...tor-parker-07/

http://www.toptradersunplugged.com/t...tor-parker-08/

Cheers

C

PS I will dig into the queries of the next post this weekend mate.
  • #1,568
  • Jul 7, 2017 2:36am Jul 7, 2017 2:36am
Quoting Copernicus
{quote} Morning R Mate, there is a bit in those last two posts of yours that I need to spend some time discussing with you. I will respond to the queries in your last two posts between tonight and the end of the weekend to hopefully make things clearer. Given your personality type, I can see that you are after the detail, which is great to hear...but I just need a bit of time to do justice to your queries. Keep posted :-) C
I am sorry to take you precious time, Copernicus, no hurry.
Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
  • #1,569
  • Jul 7, 2017 2:45am Jul 7, 2017 2:45am
Quoting Ramadas
{quote} I am sorry to take you precious time, Copernicus, no hurry.
No worries R. It's great that you are interested :-)
  • #1,570
  • Edited 3:30am Jul 7, 2017 3:00am | Edited 3:30am
Discretionary methods of yours are attractive to me because of the ratio of CAGR vs DD is over 1 and I plan to attract investors...

Here we can see some results I plan to achieve (2 years is not much, I know)

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Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
  • #1,571
  • Jul 7, 2017 3:07am Jul 7, 2017 3:07am
Quoting Ramadas
Discretionary methods of yours are attractive to me because of the ratio of CAGR vs DD are over 1 and I plan to attract investors... Here we can see some results I plan to achieve (2 years is not much, I know) {image}
Totally understand mate. You are off to a very good start. Having investors under your belt with a management fee and performance fee is the ultimate way to build your retirement.

What I love about the discretionary systems under the SDC are their risk-weighted efficiencies. I don't see quite the same efficiency with the automated strategies. I attribute this to the SDC itself and the trailing stop that insists that immediately following entry that price needs to maintain it's momentum to stay in trend.

What this means is that on every bar the trail ratchets up or down requiring that the current momentum, defined by the historic extent of the SDC, continues on. You know that immediately after entry your trail is stepping towards break-even. This particular technique places it's emphasis on risk management. Profits are just a fortuitous outcome.

I just have to be careful however when comparing the discretionary strategies to the automated ones. Having 3-5 years under your belt of discretionary results is still a long way off having a track record with 17 plus years.
  • #1,572
  • Jul 7, 2017 3:13am Jul 7, 2017 3:13am
Its' Friday evening.....and time to take a chill pill. Time to queue the music :-)

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  • #1,573
  • Jul 7, 2017 3:16am Jul 7, 2017 3:16am
Quoting Copernicus
{quote} Totally understand mate. You are off to a very good start. Having investors under your belt with a management fee and performance fee is the ultimate way to build your retirement. What I love about the discretionary systems under the SDC are their risk-weighted efficiencies. I don't see quite the same efficiency with the automated strategies. I attribute this to the SDC itself and the trailing stop that insists that immediately following entry that price needs to maintain it's momentum to stay in trend. What this means is that on every bar...
Just browsing my FB and found this.
Maybe it will interest you as an addition to your robot army:

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Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
  • #1,574
  • Jul 7, 2017 3:26am Jul 7, 2017 3:26am
Quoting Ramadas
{quote} Just browsing my FB and found this. Maybe it will interest you as an addition to your robot army: {image}
Cheers R. Steve Burns is no slouch. He and Covel had a session the other day. I will put it on my to-check-out-list.

http://trendfollowingradio.com/ep-56...rend-following
  • #1,575
  • Edited 3:58am Jul 7, 2017 3:39am | Edited 3:58am
Food for Thought

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1. Be Thankful You Dont Have to Pay Mom and Dads Interest Rate
2. Record Complacency: Is The VIX Trying To Tell Us Something?
3. What if the broker prohibits arbitrage trading?
4. Fractal Adaptive Moving Average | Trading Strategy (Setup)
5. Why Investors Shouldnt Give Up on Momentum Investing
6. Dynamic Asset Allocation for Practitioners, Part 1: Universe Selection
7. Dynamic Asset Allocation for Practitioners, Part 2: The Many Faces of Price Momentum
8. Dynamic Asset Allocation for Practitioners, Part 3: Risk-Adjusted Momentum
9. Directional volatility key to turnaround for CTAs, RPM argue
10. Not much worthwhile on the podcast front this week. But this was interesting regarding Adaptive Markets.
11. and a new predictive indicator from John Ehlers;
11. and here was a bit of good guidance from Perry Kauffman on pitfalls of optimisation.

Enjoy

C

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  • #1,576
  • Jul 7, 2017 4:18am Jul 7, 2017 4:18am
Just another flash crash........indicative of a perverted market.

That would have hurt those on the wrong side of silver.

XAGUSD

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  • #1,577
  • Jul 7, 2017 6:55am Jul 7, 2017 6:55am
What would Copernicus do here concerning drawing SDC?

Larger TF 4h on cable:
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And the questions:
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Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
  • #1,578
  • Jul 7, 2017 7:11am Jul 7, 2017 7:11am
Hi R

There is nothing to excite me into pulling the trigger finger on H4. My interpretation is that it has had a fair bit of sideways consolidation. I need a significant trend to develop to get me interested. Have a look at where my pending orders are. I am forcing price to stretch into these zones to confirm that we have a trend on.

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Below is how all the timeframes stack up on EDDT. Note that I stil have a short trade active on W1. It hasn't been knocked out yet.

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In general it is a bit messy across all timeframes. There is not much conviction that the primary short trend has ended. I expect a continuation of the primary trend short.....but I try not to predict.....*well at least try very hard* :-)
  • #1,579
  • Jul 7, 2017 7:11am Jul 7, 2017 7:11am
Dear C,

If you are researcher of the mind, as am I, then I cannot recommend these books highly enough. They will not only supercharge your trading, but everything in life.

Mind is a tool with its advantages and disadvantages which we should be aware of and utilize and not be victim of. Books contain latest scientific research.


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Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
  • #1,580
  • Jul 7, 2017 7:19am Jul 7, 2017 7:19am
Quoting Ramadas
Dear C, If you are researcher of the mind, as am I, then I cannot recommend these books highly enough. They will not only supercharge your trading, but everything in life. Mind is a tool with its advantages and disadvantages which we should be aware of and utilize and not be victim of. Books contain latest scientific research. {image} {image}
Mate...you are a gentleman and a scholar. I have Kahneman's excellent book but will order your 'Trade Mindfully' recommendation from the mighty river in South America. Much obliged R. You guessed it....I love a good read. :-)

PS. It is being delivered by the Kindle tribe as I speak. I need a good read.
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