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Diversified Trend Trading Approach

  • #1,721
  • Jul 22, 2017 3:44am Jul 22, 2017 3:44am
Quoting Copernicus
{quote} PS Ralph Vince has appeared on FF before.....it's good to know that the gods occasionally pop in from time to time. He might even give our resident quant gurus like PipMeUp and FXEZ a run for their mathematical money and keep them honest/tic :-)
Wow, I feel as I touched the sky :

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Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
  • #1,722
  • Jul 22, 2017 3:49am Jul 22, 2017 3:49am
Quoting Ramadas
{quote} Wow, I feel as I touched the sky : https://www.youtube.com/watch?v=TJFcbHOgXOc
When I first bumped into him on FF a few posts prior it took my sceptical brain a few takes before I realised who he was. Fortunately I didn't let loose with teasing insults.

Nice tune R :-)
  • #1,723
  • Jul 22, 2017 4:10am Jul 22, 2017 4:10am
Quoting Copernicus
{quote} Morning R Yep that Definitive Guide is a beauty...but you need a good holiday or two to get through it all. :-) I haven't run the Kelly formula or Ralph Vince's Optimal f over the data set for a few reasons. 1. Laziness. 2. If I was seeking to max out my performance with limited capital and not trading a portfolio....then it would be worthwhile considering some diluted version of these methods. At full tilt these position sizing methods will have you developing a neat ulcer despite their mathematical power. If you were planning to enter...
I understand it is easy and simple to bet fixed fraction. But you know how it is.... as with missing trends.... I am thinking about not leaving money on the table, if possible.

I found this blog, where writer also loves Excel as you and prepared Excel sheet for calculations. He has some evidence of better system with the name Expected fixed fraction.

Attached Image


Here is the link. Excel file is in the text of the post below, but I attach it to this post too.

http://evilspeculator.com/fixing-the...sition-sizing/
Attached File(s)
File Type: xlsx Expected_Fixed_Fractional_Calculator.xlsx   16 KB | 287 downloads
Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
  • #1,724
  • Edited 4:37am Jul 22, 2017 4:23am | Edited 4:37am
I ran the calculator for your double position size DTT recent report and got this (if I did it correctly):

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That would mean that for your system of double risk 1.04 % per position would be optimal?
Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
  • #1,725
  • Jul 22, 2017 4:42am Jul 22, 2017 4:42am
Quoting Ramadas
I ran the calculator for your double position size DTT recent report and got this (if I did it correctly): {image} That would mean that for your system of double risk 1.04 % per position would be optimal?
Thanks for this R. Very interesting :-)
  • #1,726
  • Jul 22, 2017 4:43am Jul 22, 2017 4:43am
For 4x position sizing "death wish", optimal would be 2.17%?

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Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
  • #1,727
  • Jul 22, 2017 4:55am Jul 22, 2017 4:55am
Quoting Ramadas
For 4x position sizing "death wish", optimal would be 2.17%? {image}
I see where Christian Smart is coming from regarding a decay (delta between theoretical versus geometric expectancy) associated with the effect of both fixed fractional position sizing and the impact of compounding. T'is good stuff R. Let me mull on it.
  • #1,728
  • Jul 22, 2017 5:11am Jul 22, 2017 5:11am
Quoting Copernicus
{quote} I see where Christian Smart is coming from regarding a decay (delta between theoretical versus geometric expectancy) associated with the effect of both fixed fractional position sizing and the impact of compounding. T'is good stuff R. Let me mull on it.
Whatever you wrote here is waaaay over my head.
Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
  • #1,729
  • Jul 22, 2017 5:13am Jul 22, 2017 5:13am
Quoting Ramadas
{quote} Whatever you wrote here is waaaay over my head.
It's over mine as well. I just wanted to sound clever....:-)

Only kidding. It goes like this. Have a look at the results of post 1705.

The base model produces a CAGR of 13.57% with a Max Drawdown of 6.7%. Now normally we would think that if we doubled our position size then we should get a CAGR of 13.57% x 2 = 27.14% and a Drawdown of 13.4%....however this is not quite right due to the compounding effect of reinvesting profits.

The actual result produced in the x 2 "I'm a confident bastard" version is a CAGR of 23.71% and a Max Draw of 13.2%. This variance (or decay lag) is attributed to the compounding effect over the time series. It is close so we can use the doubling position size doubles CAGR and Drawdown as an approximate generalisation but when the $ count, it can become significant. :-)
  • #1,730
  • Jul 22, 2017 5:18am Jul 22, 2017 5:18am
Interesting Trend Trading approach, I am mostly Auto Trading
and like to know more about different styles of trading on actual charts
Reading now the first 230 posts and hopefully many doubts will be cleared
hopefully there won't be many questions
Thank you Copernicus and Ramadas you been great
The arriving better than the arrival, the journey has just started
  • #1,731
  • Jul 22, 2017 5:27am Jul 22, 2017 5:27am
Quoting jenbols
Interesting Trend Trading approach, I am mostly Auto Trading and like to know more about different styles of trading on actual charts Reading now the first 230 posts and hopefully many doubts will be cleared hopefully there won't be many questions Thank you Copernicus and Ramadas you been great
Great to have you on board jenbols. Ramadas might have a few time saving suggestions for you to avoid having to wade through the Tolstoy epic. :-)
  • #1,732
  • Edited 7:57am Jul 22, 2017 6:01am | Edited 7:57am
June Results are In for the Long Term Trend Following Fund Managers - and the Sad Saga continues

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I've looked at clouds from both sides now......"bring out the dead".... So the tale unfolds for June which is simply an extension of the poor trend following regime that has been experienced since Jan 2015......but for the trendies out there you will be aware that we may just be turning the corner this July. Let's keep our fingers and toes crossed.

Below are the results for the Trend Following Index that represents the equal weighted compiled returns of 54 Trend Following funds that have been in operation since 1 January 2000.

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As a class of trading style, the diversified trend followers are now testing their all-time high drawdowns of 15.09%. I can see the grins on the faces of the mean reverting community as they revel in our pain....however let's see who has the last laugh.

We are still here you bastards!!!!!
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Anyway....now that bit of naked aggression is over we can continue........

Here are the results of the Top 10 in terms of Raw CAGR.

Top 10 - Raw CAGR
A CAGR of 14.97% with a Max Drawdown of 19.69%.......or a MAR ratio (CAGR/Drawdown) of 0.76.

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The top 3 in this category are as follows:

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.....to be continued.......
  • #1,733
  • Jul 22, 2017 6:10am Jul 22, 2017 6:10am
June Results con't

Now time to get a bit more excited.

Here are the results of the top 10 in terms of risk adjusted return (using the MAR ratio). Don't you just love that white line. These guys are an investors dream. All gain with very little pain.

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....and the top 3 in terms of MAR for the entire 17 year plus period is......*drum roll please*

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Well that's it for this month's roundup. Hopefully there will be better news and a few smirks of our own next month.

Cheers

C

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  • #1,734
  • Jul 22, 2017 8:22am Jul 22, 2017 8:22am
Quoting Copernicus
{quote} Great to have you on board jenbols. Ramadas might have a few time saving suggestions for you to avoid having to wade through the Tolstoy epic. :-)
Thank you appreciated
The arriving better than the arrival, the journey has just started
  • #1,735
  • Jul 22, 2017 12:30pm Jul 22, 2017 12:30pm
Quoting Copernicus
{quote} Great to have you on board jenbols. Ramadas might have a few time saving suggestions for you to avoid having to wade through the Tolstoy epic. :-)
I think start with DTT on the beginning of the thread and demo it to see if it fits your personality.
Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
  • #1,736
  • Jul 23, 2017 12:03pm Jul 23, 2017 12:03pm
I was listening to podcast https://www.trendfollowing.com/2017/...llowing-radio/

where Jack mentioned another way to diversify: different parameters of the strategy.

So it seems DTTR is diversified even more than other variants, because SDC parameters are different between the markets.
Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
  • #1,737
  • Jul 23, 2017 1:38pm Jul 23, 2017 1:38pm
From the post #1064:
Quote
Current Open Positions
Not much to speak of with the unrealised profits currently sitting in the portfolio. If it wasn't for the Yen pairs, there would almost be zilch remaining. Given the limited war chest available as unrealised profits, we can't afford to get overly aggressive next week and need to play defensive.

What do you mean by play defensive?
Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
  • #1,738
  • Jul 23, 2017 3:30pm Jul 23, 2017 3:30pm
Hi C,

In your forward running systems, are you trading all these 4 asset classes? I think fixed income is missing?

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Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
  • #1,739
  • Edited 10:17pm Jul 23, 2017 6:48pm | Edited 10:17pm
Quoting Ramadas
I was listening to podcast https://www.trendfollowing.com/2017/...llowing-radio/ where Jack mentioned another way to diversify: different parameters of the strategy. So it seems DTTR is diversified even more than other variants, because SDC parameters are different between the markets.
That's a great podcast.

I apply those principles in the fully automated versions. For example the portfolio comprises simple breakout strategies with different Donchian settings to capture the short range, medium range and long range breakouts.

There is lots we can do to the discretionary techniques to more fully embed these principles into the strategies. For example we could apply a 1.0 SDC, 1.5 SDC and 2.0 SDC across the same DTT technique to spice up the mix etc.

....but yep R. I agree with you. There is lot's more we can do to the make the discretionary strategies more robust. If we want to keep things simple on H1 yet capture various swings and trends of different duration, then having variations of the SDC on the same timeframe would be the way to go (eg. 1.0, 2.0). This will allow us to keep the screens simple and avoid having to establish different chart profiles for the different variants. This is far easier to do on ProRealTime than it is to do on Mt4 BTW. :-)
  • #1,740
  • Jul 23, 2017 6:56pm Jul 23, 2017 6:56pm
Quoting Ramadas
From the post #1064: {quote} What do you mean by play defensive?
When my war chest of unrealised profits starts getting low (reducing my margin of safety buffer) or when my drawdown starts building I start to further stretch the placement of my pending entries away from price. Clearly market conditions are unfavourable and the reasons for these symptoms appearing. So by placing my pending orders further away from current price I am reducing trade frequency during unfavorable market conditions (avoiding over-trading).

This technique defends my capital base and allows me to manage drawdowns with more discretion than I achieve on my fully automated systems. One of the advantages of a discretionary system over a fully automated one.

When beneficial volatility picks up and these harder to reach trades are triggered, I will then start considering whether or not to push the pending orders closer to current price to take advantage of the more favorable market conditions.

I hope this makes sense mate?

C
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