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Diversified Trend Trading Approach

  • #3,421
  • May 7, 2018 11:09am May 7, 2018 11:09am
Quoting Ramadas
{quote} Now that's a lot of value material. How did you find it?
Wading through Covel's blog linked me to AHL. It's a great site. Right down our alley.
  • #3,422
  • May 7, 2018 11:11am May 7, 2018 11:11am
Quoting alphadude
Backtests are more important than having a profitable idea. here is why: - any strategy that failed in backtest will fail in live trading for sure - any strategy that is profitable in backtesting; have a good chance of being profitable in live trading. backtest improves your trading career by milestones in time, effort and capital. good luck trading without a backtedt. also good like finding a job as a trader if you insist that backtedt is not important . you will be a laughable stock.
Totally agree Adude :-)
  • #3,423
  • Edited 11:56am May 7, 2018 11:27am | Edited 11:56am
Quoting alphadude
Backtests are more important than having a profitable idea. here is why: - any strategy that failed in backtest will fail in live trading for sure - any strategy that is profitable in backtesting; have a good chance of being profitable in live trading. backtest improves your trading career by milestones in time, effort and capital. good luck trading without a backtedt. also good like finding a job as a trader if you insist that backtedt is not important . you will be a laughable stock.
Backtesting is important to test the inner workings of the strategy for sure. My comment was tied to the fact the backtest performance and forward test in demo and forward test in live will always yield different outcome however minor that might be. Good luck finding a job as a trader with backtesting results. Give me a bank or hedge fund who would look at back testing results. I would quit my job tomorrow and run over for an interview with a fancy PowerPoint showing my equity curve for past 20 yrs and forward testing for past 4 months :-)

Edit: And just to justify my comment...I don't say shit unless I know and have my facts. My post earlier on 450K possible combinations affecting diversification abd price of next tick on any given country's currency is quantified as part of my research. Apart from Price and Time specific. Variables, backtest will always result in different results 100 percent of the time in a live market environment. I will also say this...

- any strategy that is purely based on Price will not survive for more than 3 yrs
- any strategy that is purely based on one timeframe will not survive for more than 3 yrs
- any strategy that is purely based on one time series of price over time on a single chart will not survive for more than 3 yrs

Either the performance will deteriorate or you must trade tick charts like CP. My research tells me even trading tick charts is not possible unless you introduce high frequency and use the law of large numbers and law of averages to your benefit.

No need to even listen to me as I would only cause distraction to your journey... something that everyone must avoid at all costs! Let that be the outcome of your own respective journey. What I am sharing is simply a necessary function of the market to throw in as many unknown conditions as often as possible with no regard to any strategy or fancy mathematical formula.

C - Why did you use the term "Outcome" in "Profits are just an outcome. You don't have to worry about the whens? In a market that is only sometimes inefficient " bro? I can write a ten page thesis on this one word. It will open a thousand doors to out-of-the-box thinking but I will stop here. I have already cluttered the flow of your thread. My sincere apologies. Just say the word (or PM) and I will delete my posts.
Staying in my lane...
  • #3,424
  • May 7, 2018 12:54pm May 7, 2018 12:54pm
Quoting VEEFX
{quote} any strategy that is purely based on Price will not survive for more than 3 yrs - any strategy that is purely based on one timeframe will not survive for more than 3 yrs.
wrong, but everyone has his own opinions or maybe facts in your case (because you approached market the right way doing some simulations and backtesting) and in the same time, a small european trend following fund has one strategy based only on price (trend following concept with momentum and some sort of breakout concept from "fakeouts") and only one timeframe. the fund was profitable for more than 10 years.

yes, the fund is approaching the market with more than one system/strategy applied to different timeframes, but each system if profitable in isolation.
Price itself it's an indicator
  • #3,425
  • May 7, 2018 1:16pm May 7, 2018 1:16pm
Quoting m3rlin
{quote} wrong, but everyone has his own opinions or maybe facts in your case (because you approached market the right way doing some simulations and backtesting) and in the same time, a small european trend following fund has one strategy based only on price (trend following concept with momentum and some sort of breakout concept from "fakeouts") and only one timeframe. the fund was profitable for more than 10 years. yes, the fund is approaching the market with more than one system/strategy applied to different timeframes, but each system if profitable...
Can you please name or PM me the link to this small european TF fund? I would really like to study whatever is available. I am very familiar with fakeouts, breakouts, bull/bear traps etc. They all come with 50:50 probability in the long run so very excited to see someone do this for 10 yrs.

All setups come with "Some win and Some Lose" signature. They will inevitably fail in the long run unless there is a 3rd component involved external to price and time on a single chart (like trading near news releases for momentum, insider information, order book etc as examples). Think about it. If there exists such an edge on a single chart, this fund would be the biggest fund in the industry by now :-)
Staying in my lane...
  • #3,426
  • May 7, 2018 1:31pm May 7, 2018 1:31pm
Quoting Copernicus
{quote} Good idea R. It makes perfect sense especially when applied to sectors :-)
Maybe let's call them sub-sectors, because sectors, as you know, are usually: currencies, interest rates, commodities, equities.

There are also other variants of managing heat without losing crisis alpha possibilites, which are less conservative:

Instead of condition that whole sub-sector must have no heat, we can also consider:

1. whenever both positions in one market are at breakeven we treat it as non-existent
2. whenever sum of both positions profit in one market is above zero we treat it as non-existent

and we can open next market in sub-sector.

Unless another CHF 2015 devaluation event happens, we should be fine.
Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
  • #3,427
  • May 7, 2018 1:38pm May 7, 2018 1:38pm
Quoting VEEFX
{quote} Can you please name or PM me the link to this small european TF fund? I would really like to study whatever is available. I am very familiar with fakeouts, breakouts, bull/bear traps etc. They all come with 50:50 probability in the long run so very excited to see someone do this for 10 yrs. All setups come with "Some win and Some Lose" signature. They will inevitably fail in the long run unless there is a 3rd component involved external to price and time on a single chart (like trading near news releases for momentum, insider information,...
i will not name that fund and i will not explain why, but other fund similar in appoach is tulip trend also european, rubico or something from us and i think one fund managed by ESL, i don't remember the name.
Price itself it's an indicator
  • #3,428
  • Edited 6:43pm May 7, 2018 2:44pm | Edited 6:43pm
Quoting VEEFX
{quote} Backtesting is important to test the inner workings of the strategy for sure. My comment was tied to the fact the backtest performance and forward test in demo and forward test in live will always yield different outcome however minor that might be. Good luck finding a job as a trader with backtesting results. Give me a bank or hedge fund who would look at back testing results. I would quit my job tomorrow and run over for an interview with a fancy PowerPoint showing my equity curve for past 20 yrs and forward testing for past 4 months :-)...
V....In the space we inhabit which is non-predictive price following there is a subset in the professional funds management industry which almost 100% rely on backtesting. Just have a read of Andreas Clenow's book on diversified trend following. There are chapters devoted to the subject and he demonstrates the power of backtesting in being able to reverse engineer the supposed 'black boxes' that different CTA's use. Not to boast but these guys have a verified track record that leaves almost all other fund managers in their wake. Namely those that follow serial correlation namely the diversified systematic trend following CTA's. I just posted Man AHL links who are one of these type of FM's. Almost every fund manager in that space demand backtests for their portfolios and use them in conjunction with their live trading as a method to provide ongoing validation of their processes.


Quoting VEEFX
{quote} Edit: And just to justify my comment...I don't say shit unless I know and have my facts. My post earlier on 450K possible combinations affecting diversification abd price of next tick on any given country's currency is quantified as part of my research. Apart from Price and Time specific. Variables, backtest will always result in different results 100 percent of the time in a live market environment. I will also say this... - any strategy that is purely based on Price will not survive for more than 3 yrs - any strategy that is purely based...
...and you are right in much of this mate....however the real purpose of the backtest is not to demonstrate profitability....but to demonstrate the robustness of assumptions built into the models we trade with. This is all about validating theoretical models against the reality mate and in this space we like to get a bit scientific in testing our assumptions about our models. We are trading in a complex system and as such we need a long range backtest to test our built in assumptions regarding serial correlation in the market and we continue to use these models while they last. Without a backtest or roadmap to do this with you don't have a benchmark to test model efficacy or a basis to verify any improvements made. When we start to veer off track we don't need to start afresh....we just revise the portfolio mix to fill the gaps between our backtest models and the reality.


Quoting VEEFX
{quote} C - Why did you use the term "Outcome" in "Profits are just an outcome. You don't have to worry about the whens? In a market that is only sometimes inefficient " bro? I can write a ten page thesis on this one word. It will open a thousand doors to out-of-the-box thinking but I will stop here.
Hehehehe. Because it is all about process mate. Profits or losses are just the symptom of the processes we undertake. Methinks you already understand this V :-)

Regarding the when's........When you cut losses short and let profits run which is another way of saying that your system that you apply to the market is asymmetrically constrained (welcome back DIBs and millipede thread) you are deliberately positioning your strategy towards positive skew. You are turning the black swans into potential white swans and provided you can manage your capital account....lying in wait with a strategy that can pounce on the big moves when they come. There is a bit of Nassim Taleb in here mate as we simply don't know when that will occur....but it will provided the market is non-gaussian and not perfectly efficient. By being diversified we are like surfers sitting on our boards waiting for the big swells to arrive.

Quoting VEEFX
{quote} I have already cluttered the flow of your thread. My sincere apologies. Just say the word (or PM) and I will delete my posts.
FFS don't go mate. This thread is now getting interesting. We thrive on bouncing ideas around mate. Everyone here is an equal and all points of view matter. You might notice that there are no subscribers here mate....all buddies. This is Arthur's court and we are the round table. Welcome to the thread of opinion and debate. The only mandatory part to attending this thread is that you enter with a brain (which you have demonstrated that you already possess and use) and have respect for all participants. We need to thrash things around mate...but we just leave the egos and our nasty mouths at the front door What we hate here are trading mantras unless they have been validated by empiricism and we like to test all our assumptions.
  • #3,429
  • May 7, 2018 3:06pm May 7, 2018 3:06pm
Quoting VEEFX
{quote} Can you please name or PM me the link to this small european TF fund? I would really like to study whatever is available. I am very familiar with fakeouts, breakouts, bull/bear traps etc. They all come with 50:50 probability in the long run so very excited to see someone do this for 10 yrs. All setups come with "Some win and Some Lose" signature. They will inevitably fail in the long run unless there is a 3rd component involved external to price and time on a single chart (like trading near news releases for momentum, insider information,...
Mate one of my favorites...Bill Dreiss of Dreiss Research has had a 30 year track record with very little change to the strategies deployed.
  • #3,430
  • May 7, 2018 3:10pm May 7, 2018 3:10pm
Quoting Ramadas
{quote} Maybe let's call them sub-sectors, because sectors, as you know, are usually: currencies, interest rates, commodities, equities. There are also other variants of managing heat without losing crisis alpha possibilites, which are less conservative: Instead of condition that whole sub-sector must have no heat, we can also consider: 1. whenever both positions in one market are at breakeven we treat it as non-existent 2. whenever sum of both positions profit in one market is above zero we treat it as non-existent and we can open next market in...
You are spot on R. I have been guilty of using unrealised profits to spawn new trades which can happen when portfolio heat drops to 0 even though some live trades still have heat on them....but my instinct is that provided the portfolio as a whole is capable of bearing more risk....then the fear of missing out exceeds the fear of taking some profit off the table. :-)
  • #3,431
  • May 7, 2018 3:12pm May 7, 2018 3:12pm
Quoting m3rlin
{quote} i will not name that fund and i will not explain why, but other fund similar in appoach is tulip trend also european, rubico or something from us and i think one fund managed by ESL, i don't remember the name.
Great to have you participating in this thread M. A like minded soul mate
  • #3,432
  • Edited May 8, 2018 2:37am May 7, 2018 3:49pm | Edited May 8, 2018 2:37am
Quoting Copernicus
{quote} V....In the space we inhabit which is non-predictive price following there is a subset in the professional funds management industry which almost 100% rely on backtesting. Just have a read of Andreas Clenow's book on diversified trend following. There are chapters devoted to the subject and he demonstrates the power of backtesting in being able to reverse engineer the supposed 'black boxes' that different CTA's use. Not to boast but these guys have a verified track record that leaves almost all other fund managers in their wake. Those that...
Thanks for the invitation to stay... I am sure you will regret this decision LOL
My quantified fact-based research is 100% based on retail spot FX trading environment i.e. the feed that comes to MT4 from spot FX retail broker. I have no data to support or dispute any performance claim outside of this spectrum so please keep that in mind. Pro traders from investment banks, hedge funds, prop trading firms are a completely different ball game as they trade with the quality of data and infrastructure not available to us retail traders. Regardless, I have $0 invested with them nor have I researched any of these brand name firms outside of my IRA and 401K retirement savings. Without a doubt, these funds are profitable or they won't last in the business for decades to trade OPM. Who am I to refute their performance although I am absolutely convinced they have the means and avenues outside of a simple chart with price over time to base their strategies on. It a fact that cannot be disputed.

It is also a 100% fact that you and I will exceed our performance if we were to operate under a structured operating regime where professionals with centuries worth of collective experience are monitoring and controlling our every action. They have compliance and risk management and governance structures with thorough training programs and SOPs (standard operating procedures) for every little process they are required to follow. Compared all that with a poor little miserable retail trader relying only on himself or herself to run this as a business.

I will continue my contribution but know that I am one rigid SOB in my tone and attitude because I have gone thru a bottom up approach of trying all known strategies based on OHLC across single timeframe, multiple timeframe or any pair or any combination there of. I can quickly test any strategy on any ohlc 'static' data that backtestors use. Once a firm decision is made, I rarely allow others to affect my opinion as it is the basic building block for me. I do not proceed or build anything which does not have a proven strong foundation nor will I let others shake me up without "facts with supporting data and evidence". You will only find me asking questions here on forums on topics that I am still undergoing research. I find this way to be the best approach for me to protect myself from a minefield of trading-industry backed forums, educators, blogs, advertisements and mass manipulators giving us stupid advice with fake/translucent performance charts! Some may find my approach filled with arrogance and ego... so be it :-

Finally, a quick comment on the "Ignore" feature from FF. There is a lot of "ignorance" about using the ignore button on FF. It means shit to put someone on ignore. Folks who have ignored me can still read my posts so I see no value in putting anyone on the ignore list. If I could permanently ignore without the ability to read their posts, I would put 99% of forum members on my ignore list for sure. Only one feature is robust and the power lies only with the Thread Owner to block someone from posting trash in their threads so you my friend have this power :-) For those who don't know, I can also ignore all the fools who have put me on ignore via the screenshot below. I don't even know when I am being put on Ignore so save it for someone else. I have mastered the art of ignoring noise or bad advice on forums lol

And finally, I call everyone who post on FF a Fool or an Idiot which absolutely includes me also. There is no disrespect intended to anyone. We are all addicted to this stupid forum whether we admit it or not. I prey for some red flag idiot to revoke my membership. That would be a blessing :-)

P.S. I also reserve the right to delete my posts (within 24 hours) as and when I chose to do so. Some idiots have a problem with that as well.
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Staying in my lane...
  • #3,433
  • May 7, 2018 4:00pm May 7, 2018 4:00pm
Quoting VEEFX
{quote} Thanks for the invitation to stay... I am sure you will regret this decision LOL
Oh no!!!!!!!......what did I just do

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Hehehehe....all good mate :-)

I know what you are saying and I am probably a lot like you mate.....and this would be the same for many others who demand that their trading experience is self-taught. I will not sway off my path but discourse has a way of infiltrating the thought processes and sooner or later you come up with an idea....that you think was your own bright initiative....that helps you in your path.....but when you dig deep enough....it was an idea that came to you from another bright spark.

Give me a great system and I will avoid it....as it is essential that I build that great system from my own efforts and understanding.
  • #3,434
  • Edited 4:47pm May 7, 2018 4:36pm | Edited 4:47pm
Quoting VEEFX
{quote}

- any strategy that is purely based on Price will not survive for more than 3 yrs
- any strategy that is purely based on one timeframe will not survive for more than 3 yrs
- any strategy that is purely based on one time series of price over time on a single chart will not survive for more than 3 yrs
in any interview; you will 100% be asked a question like "did you backtest your strategy?", and 100% they will ask you to show them the backtest results.

regarding your points above; they are correct points; but I would really re-phrase all of them as:

- any strategy will not survive for more than 3 years; regardless of what is it based upon

strategies usually need to be improved from time to time; almost on weekly or monthly basis.

I have been trading strategies that are based on the same concept for more than 5 years; however due to the improvements I make every now and then; none of the strategies remain the same for more than a year. I keep track of all versions; and sometimes I run a backtest on them to see how did they go if I didn't change them. sometimes they do continue to profit nicely; and sometimes they degrade in performance.

Whether you are discretionary or systematic trader; you will always need to adapt, adjust, do research as you go.

More screen time; gives you more expertise and techniques; which will push you to change things all the time. check CP posts for example; the strategies he talked about in 2010; are not the same as the recent ones. He too improve over time.

trading is a process; or for better word; a journey; not a routine.

Let me ask you one specific question; since you trade MT4; do you record tick data from your VPS server?
I personally do record every tick in live trading; and I replay them at the end of the day; backtest my strategies and compare the live performance with backtest.
  • #3,435
  • May 7, 2018 4:47pm May 7, 2018 4:47pm
Go on. I dare you. Put those crack pipes down. See if you can read more than five sentences of this article without digital distractions.

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  • #3,436
  • May 7, 2018 5:55pm May 7, 2018 5:55pm
Quoting Copernicus
Go on. I dare you. Put those crack pipes down. See if you can read more than five sentences of this article without digital distractions. {image}
Great article Copernicus. Applied to trading I think it often happens to us to keep checking and checking how the market is doing every five minutes. Patience is very important in my opinion to become succesful. We need to be able to dominate our ‘lower’ mind, the one that resembles an animal.

What has really helped me is SILENCE, following this meditation. Being able to keep my mind silent is key not just to trading but to everything.

Retire to a quiet room where you will not be disturbed and sit in a chair and close your eyes. Your chair should support your back properly, allowing your feet to rest comfortably on the ground with your hands in your lap, or resting on the arms of the chair if it has any. Or you may lie down on a bed or couch. The important thing is to close your eyes and relax your body completely by breathing normally and naturally through your nose, not your mouth. The reason for this is that the mouth is filled with bacteria whereas the nose filters out these harmful organisms.

Mentally count up to 6 or 10, whichever is most comfortable for you as you breath in. Hold the breath (without straining in any way) for another count of 6 or 10. Then let the breath out slowly for a final count of 6 or 10. The whole operation should take either 18 or 30 seconds. Do this no more than ten times. Everybody should be able to breathe in this simple way, but if for some reason you feel dizzy or are suffering from any medical condition that affects your breathing, omit this part of the exercise. After your three or five minutes of natural breathing you should find it much easier to relax and your thoughts will not wander so much. You may also feel calmer, stronger and more positive.

If there is ANY tension in any part of your body you are not relaxed. Your body should feel like a dead weight, or a sack of potatoes, if the simile does not offend you. If it does offend you, you are not relaxed either! Your mind should be a complete blank. Whenever any thoughts arise gently dismiss them and lead your mind back into silence. This is where concentration is needed. But it should not be the sort of concentration in which we grit our teeth and say to ourselves "I will relax if it kills me!" as we have known some students do. Once you ARE completely relaxed, you may proceed to the next step—the actual meditation itself.

What you choose to meditate on is entirely up to you. But it is best to start off with something simple, such as a single symbol or word. You may, for instance select a white triangle or golden circle, or words such as or 'Inner Peace'. Visualise your chosen word or symbol clearly as if it were suspended before your closed eyes. Gently push aside any thoughts that try to intrude. Just sit, peacefully, fully relaxed in mind and body, and wait; watch and wait. Don't switch from symbol to symbol or word to word, but stick to ONE thing only for that meditation. In later sessions you can vary the subject you choose to meditate upon.

Do not try to anticipate anything that might happen, for anticipation sets up mental currents which effectively prevent any phenomena that may arise, and will arise, if you follow these simple instructions. This is very difficult and can take many months of constant practise before you experience any objective results., but it can be done and is done by countless numbers of people every day throughout the world. All it takes is practice, patience, concentration and persistence.

Do not be surprised if you fall asleep during this exercise. It does not matter if you do, but it may prevent you from consciously being aware of anything that might happen. The point of this exercise is to still your mind, body and physical senses so that your Higher senses begin to function. Ten to fifteen minutes at a time, once or twice a week, is sufficient at first. Once you have acquired the technique and can relax at will, you can extend the number of meditations and use the exercise to obtain enlightenment on any subject that interests you.
  • #3,437
  • May 7, 2018 6:02pm May 7, 2018 6:02pm
Quoting Nenuser
{quote} Patience is very important in my opinion to become succesful. We need to be able to dominate our ‘lower’ mind, the one that resembles an animal. What has really helped me is SILENCE, following this meditation.
Great stuff N. Thanks very much for sharing. I am already much more relaxed just in reading your method....now I have just got to put the words into action
  • #3,438
  • Edited 9:57pm May 7, 2018 6:35pm | Edited 9:57pm
How to pick up chicks and win at the track. The asymmetric returns offered by trend following are not restricted to trading :-)

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....and the story of Bill Benter on Bloomberg
  • #3,439
  • May 7, 2018 10:10pm May 7, 2018 10:10pm
Quoting Copernicus
Go on. I dare you. Put those crack pipes down. See if you can read more than five sentences of this article without digital distractions. {image}
I tried to read the article too many words, no pictures it gave me a headache going to take a nap...
  • #3,440
  • May 7, 2018 10:13pm May 7, 2018 10:13pm
Quoting dogdays713
{quote} I tried to read the article too many words, no pictures it gave me a headache going to take a nap...
LOL :-) Nice one. I succumbed as well.

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