Diversified Trend Trading Approach

Exciting mate. Let me know how it goes. You may have to tone down it's aggressive nature but you may be pleasantly surprised....at least I am hoping so. :-)

I think it's in my personality and it reflects in my trading style too. I can manually stack 200+ positions within an hour during news time. Even at work, because of my aggressiveness, I am pulled into high visible troubled projects from time to time. I just thrive in connecting the dots during chaos. Simple shit just bores me to death.

As I shared earlier, the first phase of my account is very crucial to my drawdown management framework. I must have growth explosion first (at account opening) in order to trigger a smooth sailing of controlling ROMAD. It fits well as my strategy will work only on a hedged and non-FIFO forcing me towards high leverage and small capital. I need a minimum of 40+ positions at any given time to maintain my internal diversification of adding/removing exposure smartly and systematically.

Since this thread is all about risk management/diversification, sharing one of my techniques to reduce exposure during session lunch hour. No point in running positions open when bank traders are having lunch in their fancy restaurants.

Slowing close profitable positions and those that are not, close them out when they approach breakeven freeing up "Available Margin" for the next bout of liquidity. I manage my Margin. I am a Margin Manager first and foremost... trading, profits, losses, drawdowns etc all falls in place if I am managing my margin.

Please don't quote as I have to delete this post. This is the only way I can share without exposing too much of what I do (Sorry C)


EDIT: If I may also add for the benefit of your readers. I have been harping on unintended consequence or indirect impact or indirect correlations. Guess which market comes online during Lunch hour of London? Time is everything. Timing is everything in a 24 hour clock. Just knowing "who does what to whom" is simply enough to squeeze a little bit here and a little big there.

EDIT2: There is a reason why UTC has a "coordinated" time in it. It's all part of the infinite design of markets

EDIT3: Screenshot deleted. Leaving this post to honor Mr. C's request to maintain the flow of this thread.

Classic example of 1h/4h karma on Ethereum with local lows entry:

Karma + EDTT working together on Bunds

Karma view:


EDTT view:

Very nice mate. I am liking the way you visualise this :-)

UK and US have holidays, so some markets are in limbo:

Cheers! I hope it will interest somebody, so they can try it themselves.

I needed to separate Karma and EDTT.

I check Karma every 2 hours and EDTT every 6 hours.

So what is the last resort SL in terms of ATR, which produces positive skew?

At the moment it is simply a $2K fixed dollar loss with Risk position sizing of $500....just to keep it simple while testing to demonstrate what we are after with the principle. So probably a general rule for this particular strategy of a 4x whatever multiple we apply to our separate position sizing.

So much to crunch mate.....I am getting cross-eyed despite the EA humming away with the back-test as I am trying to closely look at impacts as I go.

I am eager to step out to longer timeframes but am stuck in M5 land at the moment. Rome wasn't built in a day I s'pose.

PS..... The positive skew is already inherently built into the raw baseline given it's divergent nature of the Donch plus KAMA I am working on....so the elimination of extreme outliers doesn't do much better in terms of positive skew. A little.....but not much.....anyway we have gotta be happy with positive skew anyway...but M5 on Donch is not much chop for divergence....or should I say too much chop for divergence...*pun intended*

M5 however is great for autocorrelation which I posted earlier for the KAMA cross with KAMA filter. Not surprising really. The Donchian itself forces the equation towards divergence which the good ol' CTA's from Richard Donchian already knew.

To break the boredom :-)

This little duck is burnt out. Time to chill with Mrs C....... Cheers R :-)

hi copernicus
in terms of diversified trend trading, a hard Q for u. ready ?
eg... long trade
why do u enter w upper border break out but not w lower border bounce where it gives way better RR ratio?

Edit : or if have already tested, what was d results compared w break out entry

thanks in advance

it matters, but not to much.
if for eg your account is in CHF and you don;t have any open possitions you are still long in a way CHF or if your account was in argentinian pesos and now the pesos is whortless???
what if you'r acc is in usd and you go long usdtry, usdjpy and so on?
if i remember correctly soros wanted to go long usdjpy or usd and other currency and he was like: "my fund are in usd ...so i will be long even more usd"

Was about entries, now about exits:

H1 Kaufmann's MA will be crossing down, so we exit with modest profit.

Mr Brown. You are right... but not on "better RR" as you are entering at a pivotal point when a pullback can be a pullback or reversal. My solution (as with every entry... book profits while you can and live another day because another entry is just around the corner. It could be applied to any strategy or setup hence 'universal' :-

Morning Mr B :-)

This market throws cryptic puzzles at you mate....and to crack them you need to use cryptic logic. That's why I like CP's style in posing cryptic crosswords at his audience as it requires you to mentally stretch. There is no right or wrong....but you need to dig a bit to possibly see what is more right than right or more wrong than wrong. That way your right and wrong has an edge to another's right and wrong....*snigger*. Just watch out for those on this forum that according to Wolfgang Pauli....are Not Even Wrong.

Those that inhabit this style of NON PREDICTIVE DIVERSIFIED TREND following philosophy that we do in this thread recognise that within trends themselves....there are trends of magnitude and trends of non-material substance. Trends are not all the same...but working out which is which is only ever a hind site measure. When you are riding them....you just never ever know which is which.

The trends of magnitude have real substance in them....but we don't necessarily know what that substance may be. It could be a fundamental or behavioral reason or a sequential series of news events......but who the hell really knows.....and importantly who cares. The other style of trend is less enduring and may simply be a trend compiled of random content. It still is a trend that may work out for us by chance alone....but once again....who knows....or cares?

From the complexity....bring it back to simplicity. Do we really care about what the reason is for a trend which maybe from a range of eleventy-billion different variables which all change on a dice? Isn't it best just to keep it simple and leave this to our hubris and like a surfer just ride them all?

Convergent styles of strategy with higher win rate are very appealing as it makes us feel right more often than wrong...but they still don't win in the long game of market uncertainty. THey apply as long as conditions persist....and then they crash you down to humble earth with a bang.

Divergent strategies on the other hand do and we have 100's of years of objective data to prove it....but here is another rub....you need to endure the pain of whipsaws and drawdown to find this pearler. Divergent strategies are more volatile...but in the long term...what is required to survive as they are so much more robust. You just gotta 'catch em' all. Take the Abba song :"Winner takes them all" and replace the winner with the Catcher Takes 'em all.

It is the enduring nature of a trend of magnitude which are non-predictive and exceedingly rare in the scheme of trends that make the bread and butter for our edge....and not necessarily 'any old trend'. These other types of less enduring trend just help to balance the books and pay for most of the small losses from noise or convergent principles.

Given the rarity of trends of sufficient magnitude and given our technique is non-predictive as we just need to follow everything with a trend signature....our death knell as a trend following species does not occur with our losses as we keep 'em small....but like the old fisherman's statement we die from 'the ones that got away'. We can control the former "losses" to keep them small...but we have no control over the latter "big fishes" in that we are in the hands of the market if we are lucky enough to receive that. But you gotta to be in it to win it.



This is the logic also of the CTA's and the logic of Richard Dennis and the turtles etc....and why they prefer methods such as the Donchian break to 'catch them all' as opposed to prevailing logic from others of the need to pick the trends with the accuracy of a sniper using retracements before entry.

As you and I know, trying to anticipate trends is a predictive measure, as you are predicting that the bounce means that it is going back into trend where in fact its current counter-trend trajectory may be a sign that the trend is about to end. The applied logic of a breakout entry however from say a Donchian with a buy or sell stop is non-predictive and will catch em' all.....well at least the meat of all trends....but may miss some of the trimmings. You need to sacrifice the trimmings of hindsite for the greater glory of the edge through not predicting price.

The same reason that the slogan 'need to catch 'em all is embedded in our entry stops. It is why we prefer buy/sell stops as opposed to buy/sell limits on entry....as the former type catches them all (maybe at a slight cost) whereas the other 'while outwardly more efficient' could miss these golden nuggets.

The signature equity curve and histogram of the divergent trader below sums it up elegantly and where this cryptic crossword lies....... and also in Ed Seykota's 'whipsaw ballad'. You gotta catch 'em all to be in this game but in doing so....you will get a whip and I get a saw ...but just keep 'em small honey :-)



If I missed any of that 10% from the biggies in the histogram above..............the entire story about any edge in this technique would have had a different flavour and most likely a very sad story. I cannot afford therefore to miss any of them......and I need to sacrifice a bit of R:R efficacy on ALL THE TRENDS to ensure this doesn''t happen. The more I diversify and enforce those rules to catch the magnificent white swan...(or positive outlier)...the more I will rake in. The rest of the game is just like a convergent story of break even, loss or account blow up....despite the high but illusory win rate.

Ramadas and I frequently have jokes on this thread where I might catch one of the biggies such as the DJI30 a while back while R doesn't and then he catches one of the biggies such as the Lira...and I don't. These fun competitive barbs just demonstrate that while we are diversified...we could be more diversified.....plus we both really like fishing for the biggies.

But then again if I have one system that achieves this (aka 'catch em all') ...perhaps there is enough juice in it for me to adopt another system in the portfolio that applies what Mr Brown said and take advantage of the sniper precision? Yes that is possible....but only after you have a solution to catch 'em all.

Just remember Mr B that there usually is a hidden twist in most of the prevailing logic we apply about what we see in this market.....as the market is devilishly cunning.

Sure....... you can be more accurate in honing in on the R:R relationship....but just make sure that it does not cut off other opportunities that may be the main game changer (aka the one good trend that pays for 'em all). You need to continuously challenge your own ideas again and again from different angles to see if your logic holds up.

Well that's how I see it at least and also how the guys see it in the CTA space......and there is method in their madness which you can see in their long standing track records.

I have once again included the ballad of the "Divergent Trader" that I never get sick of from a freakin' genius that has all the needed clues of the mystery embedded within. As Ed says....when you get Marketitis as a recovering tradaholic...chill out and tap to this ditty :-)

Cheers mate

Beautiful mate. :-)

Spot on V :-)