Diversified Trend Trading Approach

It is definitely a symptom of the retail market. With limited capital to trade there is a natural tendency to bale on a few months of poor results which is just another reason for the high failure rate amongst retail traders. Trader retention in the retail world is a difficult exercise.

Institutions with a large capital buffer or fundies with significant FUM and patient investors (note the patient investor requirement) obviously have a significant advantage here in having the luxury of being able to hold out for significant losing periods without having to compromise their trading plan or alternatively if the investor is impatient, can adjust their risk adjusted return accordingly to improve yield but marginally sacrifice pure investment return.

It is one of the key reasons why it helps to be realistic in your capital requirements if you want to stay in the game a long time.

Weekly Update

In general a week of consolidation on most instruments with limited trend trading opportunities aside from perhaps ASX and GBPSGD. The key to trend trading this week was to avoid over-trading and preserve trade capital. While a lot of attention is placed on trade execution and management, something often overlooked with trend trading strategies in general is how to avoid the tendency to over-trade during periods of consolidation or market uncertainty.

Portfolio Update
Below is a summarised account of portfolio performance.



February to-date has been a difficult trading month. We are about half way through the month but we may find the poor result continues if no significant trending periods occur in the immediate to short term.

Given the significant increase in trading activity associated with trading a broader range of timeframes, a breakdown of performance for different timeframes is also being undertaken and is detailed below.



While it is too early to draw definitive conclusions, it is likely that we will ony be trading shorter timeframes (H4, H1 and M30) in the direction of the primary trend. The results so far conclude that counter-trend trades significantly impede performance of the approach on these shorter timeframes. For example, if we only include "in Trend' trades for the month, February's result would be a positive one.

Current Open Trades Yet to Take to Account
Below are current active trades and their valuation yet to include in performance results.




Regards C

Weekly Outlook

....and some music from Paul Schwartz while you review the charts.



ASX


AUDCAD


AUDJPY

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AUDUSD

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CADJPY

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DAX

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....more to come.

C

Weekly Outlook continued......

DJI


EURAUD


EURCAD


EURJPY


EURUSD


FTSE

Attached Image (click to enlarge)

....more to come.

C

Weekly Outlook continued...


GBPSGD


GBPUSD


Nikkei


NZDCAD


NZDJPY


NZDUSD

Attached Image (click to enlarge)

...more to come.

C

Weekly Outlook continued....

USDCAD


USDCHF


USDJPY


USDSGD


XAGUSD (Spot Silver)

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XAUUSD (Spot Gold)

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That's it for the week ahead. Let's hope volatility picks up and we have some great breakout opportunities. All the best for the week ahead.

Kind regards

C

Guys just a quick note regarding the regular weekly outlook. I will be away on holidays over the next 2 weeks so will not be in a position to provide a weekly update. On my return I will resume regular weekly activities.

Sorry for the inconvenience.

Regards

C

Have a nice vacation and once more thank you for the hard work .

Thanks Bass :-)

Hey C... I hope you and yours have a great holiday..

Thanks Ja

Looking forward to it. A bit of rollicking at the beach never did anyone any harm. :-)

Greetings all

It's great to be back after a relaxing break away in a remote coastal area of Northern NSW in Australia. The break gave me a chance to catchup on some much needed reading and time out with some good friends.

Paper trading was kept alive over the period but February as it turns out was not a profitable month for the DTT and EDTT approaches and the results were in line with average trading results for the large CTA trend trading firms.

Fortunately the trends have picked up some significant steam in March and I am currently sitting on a number of profitable trades which will result in great trading results for the month of March to offset the result for February.

One of the reasons for the poor performance in February can also be attributed to the fact that the EDTT officially commenced using all timeframes at the tail end of January. Remember also that the entire portfolio was closed down at the end of January and we effectively started from scratch at this point in time. Refer to current open trades yet to be included in results below and note that a number of trades were entered in the month of February and are yet to be taken to account. For those commencing a trend trading strategy, expect losses to build up early and delay your expectations for profits as some of the trend trades undertaken may extend for many months, paricularly if you are trading the longer term timeframes. You will only derive the profit benefit from those long lived trends when the trend ends which may be postponed for a future month. Typically when trading trends, trades of short term duration are more frequently losses as oposed to wins. Don't let this feature of trend trading put you off as it is just part of playing this game. Make sure your expectations are for the long term. It is the long term trend that is the breadwinner in this game so be patient.

Below is an analytical snapshot of both the DTT and EDTT approaches so far for this calendar year. I am also maintaining detailed stats on all timeframes traded and whether or not the trade is an intrend or countertrend trade wih respect to the primary trend. I won't be publishing these results for quite a few months as we need a significant sample size to make sense of them. It is certainly to early to make a call in these matters.



Summarised Year to Date Results show that the DTT has marginally outperformed the EDTT approach attributed to the negative February result. This is to be expected however as during non-trending periods, the EDTT approach is expected to underperform the DTT approach given the significant increase in trades undertaken. Of course the contrary is true during trending periods where it is expected that returns of the EDTT approach will be significantly magnified.

The closed trades for March already show a small profit for the EDTT approach when compared to the small loss for the DTT approach and the current open trades which are detailed below that are still to be added to March's performance clearly demonstrate that the EDTT approach is likely to be a very strong performer for March.

Obviously there is significantly more trade management for the EDTT approach given the far greater trade activity but so far so good. I am eagerly awaiting the final verdict for March and it's result particularly when compared to the industry CTA results for the month.



Some great trend trading opportunities are emerging from the following instruments and I am hoping that the trend traders amongst us are capitalising on them as we speak:

1. ASX;
2. DAX;
3. EURAUD;
4. EURCAD;
5. EURUSD;
6. GBPUSD;
7. NIK;
8. USDCHF;
9. USDJPY;
10. USDSGD;
11. XAUUSD; and
12. XAGUSD.

Shortly I will be posting the regular weekly outlook `to update everyone on the prospects for next week.

Kind regards

C

Weekly Outlook

As mentioned in the last post, March has seen a resurgence in price volatility and overall trend opportunities so hopefully we could be in for a very profitable week if this continues.

Before we commence the Outlook, some inspiring music for the week ahead and while you review the charts.




....and now ono the outlook.

ASX

Attached Image (click to enlarge)

AUDCAD

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AUDJPY

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AUDUSD

Attached Image (click to enlarge)

CADJPY

Attached Image (click to enlarge)

DAX

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....more to come.

C

Weekly Outlook continued.....

DJI


EURAUD

Attached Image (click to enlarge)

EURCAD

Attached Image (click to enlarge)

EURJPY

Attached Image (click to enlarge)

EURUSD

Attached Image (click to enlarge)

FTSE

Attached Image (click to enlarge)

....more to come.

C

Weekly Outlook continued.....


GBPSGD


GBPUSD


Nikkei

Attached Image (click to enlarge)

NZDCAD

Attached Image (click to enlarge)

NZDJPY

Attached Image (click to enlarge)

NZDUSD



.....more to come.

C

Weekly Outlook continued....


USDCAD

Attached Image (click to enlarge)

USDCHF

Attached Image (click to enlarge)

USDJPY

Attached Image (click to enlarge)

USDSGD

Attached Image (click to enlarge)

XAGUSD (Spot Silver)

Attached Image (click to enlarge)

XAUUSD (Spot Gold)

Attached Image (click to enlarge)

That's it for next week guys. Have a great trading week.

All the best.

C

Hey! Welcome back, i hope your holiday was great.

Thanks sainthun. The only problem with a holiday is that it has to end. Back to the daily grind. :-)

Morning all (well morning at least here in Aus) :-)

As you may be aware by now, I tend to post at weekly intervals to provide an update on trade activities for the prior week and also an outlook on what to expect for the following week.

What I will be doing however going forward is to provide an update on performance results on a monthly basis only but will still continue to provide the regular weekly outlook forecast.

The reason for this change is that I will be comparing the performance results of the different methodologies described in this thread with that of the successful technical only trend following fund managers.

Below is a snapshot of what to expect in coming months.




The monthly performance snapshot above highlights the results of 3 different approaches under scrutiny in this thread.

Method 1 are the results of the Diversified Trend Trading Strategy (DTT) which has been described in detail since the commencement of this thread. This approach simply trades on a single timeframe by using the D1 timeframe to determine whether a trend exists and to establish the extent of the trend and from there you then drill down into he H1 timeframe to execute. Performance results of the DTT for the 2013 and 2014 calendar years has been detailed exhaustively in prior posts but now I am interested in comparative performance of the DTT against alternate methodolgies that have been under forward test conditions since the end of January 2015.

Method 2 relates to the Enhanced Diversified Trend Trading Strategy (EDTT) which is described from Post 231 onward and represents a super-charged variant of the DTT and trades on a large number of timeframes that include MN, W1, D1, H4, H1 and M30 timeframes. Unlike more traditional techniques such as trend pyramiding of positions, we avoid this technique applied to a single timeframe and replace this method of magnifying profits by simply trading on a range of different timeframes. One of the reasons we do this is to reduce our expectations of return on a single timeframe and simply utilise all the fundamental reasons for being in a trend trade in the first place to varying timeframes. This technique therefore avoids being whip-sawed out of a single timeframe despite the fact that a trend may still have some distance to go before it's official 'turn'. This approach also recognises that trends ultimately must end sometime and it is best to be riding the trend as early as practically possible as opposed to pyramiding positions along the length of a trend that can compromise profit results if due care is not taken.

Method 3 represents a mofification to the EDTT and is referred to as the Enhanced Diversified Trend Trading Strategy with No Counter-Trend trades (what a mouthful). The acronym I use for this method is EDTTNC. The basis of this methodology simply restricts all trades undertaken to be in the direction of the Primary Trend defined by the trend on the MN timeframe. There is one caveat however is that if no trend exists on the MN timeframe, the strategy simply then deploys the EDTT technique.

These are the 3 approaches that I am interested in evaluating over the next 12 months or so.

Against the performance results of these aproaches, I also compare the results against he performance of some notable trend following fund managers who have had a long (audited) track record of delivering significant returns to their investors. More information about these fund managers can be found by investigating the following links.

1. Top CTA's and Managed Future Funds - These trend following wizards are described here . At the moment the performance results of approximately 30 trend following wizards are consolidated into an index result and their varying approaches are also consolidated into groups with group results also monitored monthly. Varying techniques applied to trend trading include the use of Bollonger Bands, Donchian techniques, Moving Average and Tema crossovers etc. Despite the different techniques applied to trend trading, historical results confirm a very strong correlation between these techniques and basically allows for a variety of different techniques to be applied to trend trading. You will see this result on this forum as well known trend traders such as Bassramy, Fartist, Graviton, Stevepatt and this thread's approach regularly are trading the same instruments at the same time. The only difference being the technique applied to manage risk, position sizing and how to let profits run.

2. Echardt Trading Company - Standard Program described here. Good old Bill Eckhardt in my opinion is one of those rare breeds that I strongly admire and his mechanical trend trading track record has been exemplary since 1991.

3. Altegris 40 Index - This index has been tracking the performance of the 40 leading Managed Futures programs since 1990 and it's composition of the top 40, has been drawn from a databse of over 500 Commodity Advisor Trading (CTA) programs. The performance results are found here. Of these 500 tracked programs, trend following is the primary driver of managed futures returns. This comprehensive article of May 2013 is worth a read.

Now remember that the performance returns of the professionals are the net reurns after fees that comprise administration expenses, trustee fees, custodian fees and investment management fees and performance bonuses. Having come from the fund management industry, these fees can rack up but generally are in the board order of the following:

Trustee/ Custodian Fees - Approximately of the order of 0.4% of Funds Under Management (FUM)
Administration Mgt Fees - Approximately 0.8% of FUM;
Fund Expenses - Approximately 0.3% of FUM;
Investment Manager Base Fee - 0.5% of FUM' and
Investment Manager Performance Fee - Can be up to 25% of returns exceeding a stated benchmark but usually around 10% of above watermark returns.

This means as a better comparative measure, you need to uplift the Professional Managers overall returns in the order of say 10%-15% to get a better comparative representation against the techniques employed in this thread. Even so, the compararive meaasures against the best of the industry assists in determing the power of your approach.

Also in the Monthly Snapshot I will be graphically illustrating comparative performance (refer below) so you can eyeball the performance of each approach. Given that all comparative measures relate to trend trading approaches, we would expect a correlation between the monthly performance results. What will differ however is the quantum amounts of returns to distil the most effective technique under current trading conditions that offers the greatest return and corresponding minimum risk profile. Obviously the charts below don't make much sense at the moment, but over time the validity of each technique will emerge graphically.



Well that's it for the moment. I am looking foward to this new method of updating results and we will see what results it brings.

Kind regards

C

Good stuff, Copernicus. Am following with interest!!

AG

EDIT: Sorry for that! The dogs started to bark, and I guess I had an "old timers" attack. I really do like your stuff and have been looking on with Graviton and Stevepatt for a while as well.