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Diversified Trend Trading Approach

  • #3,341
  • May 2, 2018 7:51am May 2, 2018 7:51am
Quoting Ramadas
Trying building some towers not pyramids. It should not be big complication if there is only 2 same parts. This case is USD NOK.... Using distance between first and second entry of 0.5 daily ATR. {image} {image}
Let me know how it goes R :-)
  • #3,342
  • Edited 8:12am May 2, 2018 7:54am | Edited 8:12am
Quoting Ramadas
Jerry Parker quoted: "Additional assets and a more diversified risk budget consistently generate higher risk-adjusted returns. Diversification, in all its forms, allows trend following CTAs to harvest returns with reduced exposure to idiosyncratic asset shocks." from {image} {image}
It makes me want to return to some of my old tests on single systems. If I use a blend of the same system across different timeframes despite the unappealing qualities in isolation...... such as a simple Donchian breakout.......I just know it is going to give me great risk-weighted returns. I remember in the old days how I used to optimize variables. What a shocker. The game becomes so much easier with simple methods of diversification.....and hence the need for non-discretionary fully automated solutions.

Volatility adjusted position sizing and diversification across systems, timeframes and asset classes......it is as simple as that...which will allow you to resurrect any of those old timeless strategies such as the MA crossover, donchian breakout......etc. etc. etc.. and turn them into sustainable long term solutions for uncertain markets. The secret sauce does not lie in the system itself provided it has an edge....but simply in your methods of position sizing and diversification:-)

One of the biggest problems that hold traders back is the inefficient deployment of capital from rules such as the 2% trade risk rule etc.....however it is a necessary rule when trading an isolated instrument with an isolated system given the great variability in market returns from different market conditions. However if you take the time to understand what diversification is about....then that rule can be put to sleep....and then hey presto....the game suddenly becomes far easier and a game changer simply due to the more efficient use of finite capital within uncertain market conditions.
  • #3,343
  • May 2, 2018 5:34pm May 2, 2018 5:34pm
Here is to someone on this thread.....and so say all of us :-)

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  • #3,344
  • May 3, 2018 6:35am May 3, 2018 6:35am
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  • #3,345
  • May 3, 2018 10:40am May 3, 2018 10:40am
USD JPY had a good run.

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JPY pairs going south today.

Already entered CHFJPY

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and ZAR JPY

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Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
  • #3,346
  • May 3, 2018 11:19am May 3, 2018 11:19am
Perspective:

Two Galaxies Separated by Tens of Millions of Light Years, but Appear to be Colliding Due to Forced Perspective. [3276x2928] (imgsrc.hubblesite.org)

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Notice also small galaxies around these two "colliding". Each can have 300-400 billions stars.
Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
  • #3,347
  • May 3, 2018 6:23pm May 3, 2018 6:23pm
Quoting Ramadas
USD JPY had a good run. {image} JPY pairs going south today. Already entered CHFJPY {image} and ZAR JPY {image}
That period of volatility across markets in my universe is starting to dry up for me. I am watching that unrealised profit that has built up flow down the plug hole :-(

What was a 6% unrealised profit is now 2.45%

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  • #3,348
  • May 3, 2018 6:28pm May 3, 2018 6:28pm
Quoting Ramadas
Perspective: Two Galaxies Separated by Tens of Millions of Light Years, but Appear to be Colliding Due to Forced Perspective. [3276x2928] (imgsrc.hubblesite.org) {image} Notice also small galaxies around these two "colliding". Each can have 300-400 billions stars.
Whats a few million light years between neighbours?

Don't wait up for the impending collision between the Milky Way and Andromeda. It is going to be a doozy. Let's see if it has a higher body count than Marvels Infinity Wars :-)
  • #3,349
  • May 3, 2018 6:33pm May 3, 2018 6:33pm
Quoting Copernicus
{quote} That period of volatility across markets in my universe is starting to dry up for me. I am watching that unrealised profit that has built up flow down the plug hole :-( What was a 6% unrealised profit is now 2.45% {image} {image}
may be u should work w swap free account. thinking loud out
WaBaS Where are Buyers and Sellers
  • #3,350
  • May 3, 2018 6:42pm May 3, 2018 6:42pm
Quoting mr.brown
{quote} may be u should work w swap free account. thinking loud out
It's cool Mr B.

This strategy is very short term with an average hold of about 3-4 days. The SWAPS on this strategy are not a biggie for me. This is good old mean reversion coming out to play that is chipping away at the results. The volatility we had been experiencing earlier in the week across markets was turned off last night....and C is suffering from the symptoms. R maybe a bit safer because of his use of a dynamic portfolio that has it's pluses and minuses....and in this instance probably a plus.

It's all part of the strategy....you just can't win them all mate. The worst that can occur with the current portfolio heat is a 0.28% loss on all active trades if they immediately turn south now.....so I just suck it in and see what is delivered. Perhaps I should start a rumour on twitter like...."Milky Way about to be attacked by Rogue Galaxy" to lift market volatility.
  • #3,351
  • May 3, 2018 6:52pm May 3, 2018 6:52pm
Quoting Copernicus
{quote} It's cool Mr B. This strategy is very short term with an average hold of about 3-4 days. The SWAPS on this strategy are not a biggie for me. This is good old mean reversion coming out to play that is chipping away at the results. The volatility we had been experiencing earlier in the week across markets was turned off last night....and C is suffering from the symptoms. R maybe a bit safer because of his use of a dynamic portfolio that has it's pluses and minuses....and in this instance probably a plus. It's all part of the strategy....you...
one personal q
do u write poems
I would bet probably do
WaBaS Where are Buyers and Sellers
  • #3,352
  • May 3, 2018 6:56pm May 3, 2018 6:56pm
Quoting Copernicus
{quote} It's cool Mr B. This strategy is very short term with an average hold of about 3-4 days. The SWAPS on this strategy are not a biggie for me. This is good old mean reversion coming out to play that is chipping away at the results. The volatility we had been experiencing earlier in the week across markets was turned off last night....and C is suffering from the symptoms. R maybe a bit safer because of his use of a dynamic portfolio that has it's pluses and minuses....and in this instance probably a plus. It's all part of the strategy....you...
Oh noes! What are the minuses of dynamic portfolio? Actually I am using static portfolio also : All markets I have access to But what I can trade is limited by sector heat and overall portfolio heat.
Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
  • #3,353
  • May 3, 2018 7:05pm May 3, 2018 7:05pm
Quoting mr.brown
{quote} one personal q do u write poems I would bet probably do
I don't write poems
I never have
They seldom rhyme
Or march in time

I trade my system
That's it for me
I have no life
But it beats herbalife :-)
  • #3,354
  • May 3, 2018 7:06pm May 3, 2018 7:06pm
Quoting Copernicus
{quote} I don't write poems I never have They seldom rhyme Or march in time I trade my system That's it for me I have no life But it beats herbalife :-)
super
WaBaS Where are Buyers and Sellers
  • #3,355
  • May 3, 2018 7:07pm May 3, 2018 7:07pm
Quoting Ramadas
{quote} Oh noes! What are the minuses of dynamic portfolio? Actually I am using static portfolio also : All markets I have access to But what I can trade is limited by sector heat and overall portfolio heat.
The major downside to a dynamic portfolio when trading with a degree of discretion is the inability to run your parallel tests in tandem with your live portfolio. It is a bit like trading without a rudder...... Ok with a fully automated portfolio...but under discretion it muddies the water and makes it difficult to track errors.....but there are also many advantages.
  • #3,356
  • Edited 7:52pm May 3, 2018 7:29pm | Edited 7:52pm
Quoting Copernicus
{quote} The major downside to a dynamic portfolio when trading with a degree of discretion is the inability to run your parallel tests in tandem with your live portfolio. It is a bit like trading without a rudder...... Ok with a fully automated portfolio...but under discretion it muddies the water and makes it difficult to track errors.....but there are also many advantages.
Well, I am grateful to you for all the hard work with backtesting which created strong conviction in efficiency of the method. I know I make errors, but the strategy is making money. Understanding that worst flaw in this philosophy is missing the opportunities, I must use all market accessible to me. Any other errors will be corrected by strategy.
Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
  • #3,357
  • May 3, 2018 7:44pm May 3, 2018 7:44pm
Towers are not worth it....

I did some backtesting and also live example on USD NOK:

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Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
  • #3,358
  • Edited 8:11pm May 3, 2018 7:58pm | Edited 8:11pm
Quoting Ramadas
{quote} Well, I am grateful to you for all the hard work with backtesting which created strong conviction in its efficiency. I know I make errors, but the strategy is making money. Understanding that worst flaw in this philosophy is missing the opportunities, I must use all market accessible to me. Any other errors will be corrected by strategy.
Yep mate. I hear you. The benefits of a dynamic portfolio in terms of attacking market inefficiencies is the way to go.....provided that we place our attention and effort in managing portfolio heat.....which can also mean that we may occasionally miss some great periods of momentum on those instruments we avoid due to heat. There are so many swings and roundabouts in this game.

I would prefer to bundle up our instruments into asset classes and make some rules for dynamic selection within each asset class. That way...it may help in preventing us from being to over-exposed to a single asset class. We probably need to create a few rules for this.

The bottom line however is that we will get more joy from diversification through system diversification than through asset selection....given that we at least can control the correlations by system design as opposed to leaving things to chance by asset selection.....that are very fickle in their correlations. If we dig into what Jerry Parker is doing...we will find that their is a bit of nuance being applied by Chesapeake in their methods of diversification. He makes it sound easy in his tweets....but me thinks there is a bit more going on in his research house. I wish Clenow attempted to replicate Chesapeake in his book in chapter 7. That would have given us a bit of insight into their asset selection. He certainly appears balanced in his asset class composition (below)....which makes me think that applying rules per asset class might be a worthwhile exercise.

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  • #3,359
  • May 3, 2018 7:59pm May 3, 2018 7:59pm
Quoting Ramadas
Towers are not worth it.... I did some backtesting and also live example on USD NOK: {image}
Cheers mate. :-)
  • #3,360
  • May 3, 2018 8:18pm May 3, 2018 8:18pm
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