Attachments: Diversified Trend Trading Approach

Diversified Trend Trading Approach

#2,821
Jan 19, 2018 1:03pm Jan 19, 2018 1:03pm

CARP.BLUFFS
Joined Feb 2016 | Status: CHANGES WITH PRICE ACTION | 578 Posts

[quote=Copernicus;10689693] You may have detected the change in resolution as I am now practicing what I am preaching and focusing on applying my research back in the game of full time trading for a living. I officially left the live trading back in 2012 when I wound my small fund back and returned to the land of financial controlling to help sell a business which finalised recently.....so now the plan with some good cash in the kick is to get back into the FM game and shore up some live trading results this year. Wish me luck :-)

'Good Luck Wishes'

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Good luck is another name for tenacity of purpose.
Ralph Waldo Emerson

#2,822
Jan 19, 2018 4:58pm Jan 19, 2018 4:58pm

Copernicus
| Commercial User | Joined Apr 2013 | 4,366 Posts

A Nice Balanced Viewpoint - The Future Ain’t What It Used To Be

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Article by Jessica Rabe

In a nutshell....The 60/40 classic portfolio allocation may still be a good solution but it will be a bumpy ride. I prefer the less volatile return streams of the CTA's which you can lever up.

#2,823
Jan 20, 2018 3:49am Jan 20, 2018 3:49am

Ramadas
Joined Oct 2009 | Status: Exploiting psychology of the crowds | 1,426 Posts

More black than red for 2017 for trend followers.

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But what Clarke did to get such crazy DD?

http://www.automated-trading-system....ds-december-3/

Cut short your losses. Let your profits run on. David Ricardo (1772-1823)

#2,824
Edited 5:32am Jan 20, 2018 5:18am | Edited 5:32am

Copernicus
| Commercial User | Joined Apr 2013 | 4,366 Posts

Quoting Ramadas

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More black than red for 2017 for trend followers. {image} But what Clarke did to get such crazy DD? http://www.automated-trading-system....ds-december-3/

Ignored

I have often wondered why they still are able to maintain their AUM base...but then you realise that it is not from their individual performance metrics....but rather how Clarke can be used in Fund of Fund structures to offer non-correlated benefits that the broader portfolio can benefit from.

It won't be individual investors that stay with them...but rather portfolio managers that have allocated a small fraction of their total allocation to Clarke....eg. the pension funds that are very non-correlated.

For example...look at Clarke's equity curve (blue) and then look at the S&P500TR curve (Grey) and note the very low correlation (-0.07). Now blend the two with a 50:50 mix and you can see why they are still popular.

Thats what makes some of the CTA's so appealing to the Fund Manager. Not in their individual performance....but what they can offer to allocators in blends. It is not necessarily their performance metrics that are the drawcard but rather the uniqueness of their equity curve to other industry funds and how they can be used for blends.

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Now have a look at a 50:50 blend with the S&P500TR (eg. Fusex Index). Notice how the blend now outperforms the TF (54) Index and Top 10...and the S&P500TR with only a max draw of 49%.

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#2,825
Jan 20, 2018 5:44am Jan 20, 2018 5:44am

Ramadas
Joined Oct 2009 | Status: Exploiting psychology of the crowds | 1,426 Posts

Quoting Copernicus

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{quote} I have often wondered why they still are able to maintain their AUM base...but then you realise that it is not from their individual performance metrics....but rather how Clarke can be used in Fund of Fund structures to offer non-correlated benefits that the broader portfolio can benefit from. It won't be individual investors that stay with them...but rather portfolio managers that have allocated a small fraction of their total allocation to Clarke....eg. the pension funds that are very non-correlated. For example...look at Clarke's equity...

Ignored

Yep, makes sense, thanks!

But still 5M AUM in this industry is not much...

Cut short your losses. Let your profits run on. David Ricardo (1772-1823)

#2,826
Jan 20, 2018 5:44am Jan 20, 2018 5:44am

Copernicus
| Commercial User | Joined Apr 2013 | 4,366 Posts

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#2,827
Jan 20, 2018 5:45am Jan 20, 2018 5:45am

Copernicus
| Commercial User | Joined Apr 2013 | 4,366 Posts

Quoting Ramadas

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{quote} Yep, makes sense, thanks! But still 5M AUM in this industry is not much...

Ignored

Yep....no matter how you cut it....they are still dogs..... :-)

#2,828
Jan 20, 2018 5:50am Jan 20, 2018 5:50am

Ramadas
Joined Oct 2009 | Status: Exploiting psychology of the crowds | 1,426 Posts

We can see here what type strategies are in fashion in investment world.

We can loosely say we are also event driven, but we don't know the events when we enter

. We read about them later in the news.

And look at these returns

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http://www.valuewalk.com/2018/01/inv...-fund-capital/

Cut short your losses. Let your profits run on. David Ricardo (1772-1823)

#2,829
Jan 20, 2018 5:59am Jan 20, 2018 5:59am

Copernicus
| Commercial User | Joined Apr 2013 | 4,366 Posts

Quoting Ramadas

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We can see here what type strategies are in fashion in investment world. We can loosely say we are also event driven, but we don't know the events when we enter . We read about them later in the news. And look at these returns {image} http://www.valuewalk.com/2018/01/inv...-fund-capital/

Ignored

Nice article R. Look what the benefits of having capital to allocate and simply riding off the back of the successful hedge funds using Fund of Fund structures plus a bit of leverage. It leaves the general competition in the dust.

It makes you think that the secret sauce is so much easier in the portfolio management space riding off the coat-tails of others rather than doing all the hard yards yourself.

Here is an example of what can be done simply blending the top risk-weighted performers in the CTA space. I could double the performance returns to a CAGR of 17% and max draw of 36% just by further leverage....and it is far safer leveraging up these diversified CTA's with a track record of high risk-weighted returns than simply choosing your own risky single strategy and applying high leverage.....like we do in this retail space.

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#2,830
Jan 20, 2018 6:04am Jan 20, 2018 6:04am

Ramadas
Joined Oct 2009 | Status: Exploiting psychology of the crowds | 1,426 Posts

Quoting Copernicus

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{quote} Nice article R. Look what the benefits of having capital to allocate and simply riding off the back of the successful hedge funds using Fund of Fund structures plus a bit of leverage. It leaves the general competition in the dust. It makes you think that the secret sauce is so much easier in the portfolio management space riding off the coat-tails of others rather than doing all the hard yards yourself. Here is an example of what can be done simply blending the top risk-weighted performers in the CTA space. I could double the performance...

Ignored

This is exactly what I do when I put on my investor hat. I showed you yesterday.

Cut short your losses. Let your profits run on. David Ricardo (1772-1823)

#2,831
Jan 20, 2018 6:55pm Jan 20, 2018 6:55pm

nonlinear
Joined Sep 2007 | Status: simmer down now | 1,251 Posts

How much discretion realistically comes into play in systematic long term trend following, at least in terms of choosing intruments to take entries (that is assuming one follows the system rules but chooses to take or not take entry signals for different instruments, i.e., sugar but not coffee). It seems that choice is where a primary performance diffenrce occurs year to year for some trend followers, at least from what I hear and read.

#2,832
Edited 7:33pm Jan 20, 2018 7:15pm | Edited 7:33pm

Copernicus
| Commercial User | Joined Apr 2013 | 4,366 Posts

Quoting nonlinear

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How much discretion realistically comes into play in systematic long term trend following, at least in terms of choosing intruments to take entries (that is assuming one follows the system rules but chooses to take or not take entry signals for different instruments, i.e., sugar but not coffee). It seems that choice is where a primary performance diffenrce occurs year to year for some trend followers, at least from what I hear and read.

Ignored

Hi NL

Yes mate....given that the large majority of trend traders use similar setups and rules (systems), the primary reasons for style drift in terms of performance returns relates to:
1. The choice of investment universe;
2. Position sizing used (to leverage up the equity curve profile); and
3. The choice of timeframe used.

This produces style drift within the classic trend following camp that clusters around a mean as described below.

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Variants outside these clusters can be predominantly attributed to further style drift from system alterations that fall outside the classic TF styles of divergence trading. For example those that offer better risk-weighted returns (in red) deploy blended portfolios of systems with trend following plus mean reversion. The ones that sit above the cluster offer more volatile offerings in a more select number of instruments or are of longer term duration becoming more like a 'buy and hold' program.

Clenow investigated this and was able to mimic the performance of the different programs simply by having a knowledge of the instruments they traded (their selected universe) and their equity curve profile. This just demonstrates that if we apply some logical principles around the central ideas of the successful long term CTA's.....that they can be mimicked.

Now of course given that these styles can be quite easily replicated in the hands of a competent portfolio manager....the argument is raging at the moment between the long standing trend followers such as Transtrend and the 'replicators' which are new kids on the block offering similar performance metrics but with far lower fees (eg. 2 and 10 as opposed to 2 and 20 etc)...to get market share of AUM. The traditional CTA's state that it is easy in hindsight to replicate their performance......but difficult in practice when deep in drawdown to apply and stay loyal to the strategies....and hence this is what justifies the 2 and 20 fee arrangement. Of course the replicators just call 'blah...blah....blah' to this). I tend to agree with the traditionalists such as Transtrend because at least they have had a proven track record that they can stay consistent to their strategy.

Cheers

C

#2,833
Jan 20, 2018 8:38pm Jan 20, 2018 8:38pm

Copernicus
| Commercial User | Joined Apr 2013 | 4,366 Posts

Time to chill :-)

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#2,834
Jan 21, 2018 2:57am Jan 21, 2018 2:57am

Ramadas
Joined Oct 2009 | Status: Exploiting psychology of the crowds | 1,426 Posts

Jerry twitted about CTA performance in 2017

Teaser in form of graphs, which are much liked in this thread:

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Please note short term strategies performance. Similar to my experiences.

Attached File(s)

AlternativeEdge+Snapshot+-+A+Review+of+CTA+Performance+2017+US.pdf 928 KB | 595 downloads

Cut short your losses. Let your profits run on. David Ricardo (1772-1823)

#2,835
Jan 21, 2018 3:49am Jan 21, 2018 3:49am

Copernicus
| Commercial User | Joined Apr 2013 | 4,366 Posts

Quoting Ramadas

Disliked

Jerry twitted about CTA performance in 2017 Teaser in form of graphs, which are much liked in this thread: {image} Please note short term strategies performance. Similar to my experiences. {image}

Ignored

Very nice mate. It gives me further ideas on how we can report on these beasts to offer great insight into their performance :-)