Diversified Trend Trading Approach

Weekly Outlook continued....

GBPSGD

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GBPUSD

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Nikkei

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NZDCAD

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NZDJPY

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NZDUSD

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.....more to come.

C

Weekly Outlook...the Finale

USDCAD

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USDCHF

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USDJPY

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USDSGD

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XAGUSD

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XAUUSD

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Well that's it for the week ahead.

I will periodically pop in to post results but you should now be all well armed if you want to trade this approach.

Best of luck and many pips to all.

Regards

C

March 2015 Performance Results DTT, EDTT and EDTTI

I was waiting for performance results from the Allegris 40 Index for last month before I posted March 2015 results but it has been delayed for some reason. Anyway, below are the results for March 2015 for the various approaches being monitored in this thread.

As can be seen, March 2015 results were generally good for trend trading systems in general, however what started out as a spectacular month was quickly subdued principally associated with the FOMC announcement in mid March. It is interesting to note that despite the fact that the instruments selected in the portfolio were relatively un-correlated, the trend deterioration was not simply restricted to USD related instruments, but a wider trend deterioration across asset classes in mid March 2015. Finding un-correlated instruments from a trend folowing perspective is actually quite a difficult task given the global correlations that actually do exist in today's modern markets.

From the results below we can conclude that in the last 3 months, the EDTTI is outperforming both the DTT and EDTT approaches and notable trend following approaches adopted by the Commodity Trading Advisors (CTA industry) that include the Top CTA's and managed Futures Funds, the Eckhardt Trading Company and the Allegris 40 index. Just note that we are yet to receive March results for the Allegris 40 Index so, the proof is still in the pudding.

The EDTTI is yet to experience an unprofitable month and the associated drawdowns are yet to exceed 1.8% from peak to trough. However it is still early days and I am fairly confident that these trends auger well for the future. Maximum drawdowns for both the DTT and EDTT approaches over the last 3 months have been 3.07% and 4.19% respectively. What is evident is that the EDTTI approach so far is demonstrating higher returns with lower risk than its counterparts.

Average monthly returns for the DTT, EDTT and EDTTI approach for the past 3 months have been 1.4%, 2.3% and 3.7% respectively. The TOP CTA's, Echardt Trading Company and Allegris 40 Index have been approximately 1.4%, 1.4% and approximately 1.6% per month respectively.

A word of note relates to the poor performance results for both the DTT, EDTT and EDTTI approaches in February 2015. As mentioned previously in this thread the portfolio was closed down in late January with some great trend trades still in action being wound up in late January that may have continued on into February and hence contributed to a more profitable February result. In re-starting the portfolio, there are many short term losses incurred before we start seeing profitable trends emerging which possibly continue for many months. The result therefore sees an accumulation of losses in the month of startup with some drawdowns building.



The graphs below visually display comparative monthly performance returns and cumulative returns associated with each technique and against industry averages. Note again that the March 2015 result is yet to be included for the Allegris 40 Index. So far the EDTTI approach is outperforming the rest and despite being early days, is anticipated to offer the best risk/return profile of the alternatives.



I will keep you posted of future performance results hopefully at monthly intervals.

Regards

C

Thanks C.

No probs aud :-)

An Interesting Research Paper on why behavioural bias influences price fluctuation.

Why Do Markets Crash ? Bitcoin Data Offers Unprecedented Insights by Jonathan Donier and Jean-Philippe Bouchaud

"Why do market prices move? This simple question has fuelled fifty years of academic debate, reaching a climax with the 2013 Nobel prize in economics, split between Fama and Shiller who promote radically different views on the question. Whereas Fama argues that markets are efficient and prices faithfully reflect fundamental values, Shiller has shown that prices fluctuate much more than what efficient market theory would suggest, and has insisted on the role of behavioural biases as a source of excess volatility and price anomalies. Of particular importance is the origin of the largest changes in prices, aka market crashes, that may have dire consequences not only for market participants but also for the society as a whole"

Over a month and no new posts.
Seems your thread has lost its way.
Pity really, as i was just getting into the concept.

It's ageing as every good wine should :-)

Speaking of wine.

Monthly Summary - April 2015 Results

Here is the state of the trend for the various approaches used by this thread.

Rather than just wax lyrical, the following graphs and analysis speak for themselves. Note that the graphs are a new inclusion to the monthly summary to simply highlight with a yellow window the D1 trend activity for the month.

Enjoy....with a bit of music to keep you company. :-)

C

Hi C,
it took me more than 3 weeks of my daily commutes time to read the thread. Never had that before.
Since I'm trend trading also (just forward testing with my demo account) I was and am very interested in your approach.
I used Ichimoku so far but switched to Sdc since I got the idea. Now I'm still trying to feel the moves in order to get that discrete parts under control.
I combined the Ichimoku trend indication in bigger timeframes (monthly and weekly) and use the SDC once a trade is opened to get the SL level.
By the time beeing it works well for me, but I decided to switch to the EDDTi approach completely, after I finished reading. Now I see that you stopped posting.
I hope that you keep the discussion alive.
I'd love to contribute but unfortunately have not been that much successful with my own strategies and EAs up to now. Just like you I have a technical/logical mind and therefore struggling with the unforeseeable and unlogical moves of the markets. Although I know the market is always right. You helped me a lot. Really appreceate your sorrow work here and wanted to thank you.
In case there is something I could contribute, let me know.
Best wishes and millions of pips to you.
Neme

Hi Neme

Thanks for the post. I only just came across it so sorry for the delay in response. While this thread is stale, as a discretionary technique, the principles surrounding the EDTT are valid as a trend following technique.

Trend following in the last few months has been a challenge for the best trend followers out there and this is symptomatic of the game. You have some great periods (such as 2014 and 2015 calendar years) interdispersed with periods of paltry returns or drawdowns that may last for years. Trend following is a game of wealth creation as opposed to a reliable cashflow generator and I have been very busy in the last few months looking at ways to generate more reliable cashflows while holding onto the principles of wealth generation aired in this thread regarding trading in the direction of positive bias.

Most of the ideas I have been dabbling with lately relate to using techniques to accelerate performance returns when trading with positive bias but it is still very early days in testing and development.

I have attached a couple of interesting papers that should give you confidence in following the trend...as there are a number of proven techniques in doing so. The SDC approach I use is just one way to look at trends but is certainly has it's strong points and I encourage those interested in the technique to consider it's use as it is a very robust and sustainable trading method. It provides a way for those sick of dealing with the vagaries of the market to at least get into the business of protecting capital and slowly but confidently going forwards instead of backwards with wealth creation.

Take care

C :-)

Monthly Summary - June 2015 Results

For those that are using this technique, attached are current results to give you a feel of where things are at. It has been a torrid few months for the trend followers but things are starting to heat up for July....so cross your fingers and toes.

Enjoy....with a late sunset mix to keep you company. :-)

C

Hi, Copernicus,
Although it's quite long thread, I like the idea of 'diversification' on trading across multiple pairs as it kinda mitigates the risk of the trading. And, my method is also trend following. Thanks for your hard work, Copernicus.

just two examples for trend trading.
gbpaud trades show how important to take profits or you may end up giving most of them
usdzar show how important to stick to the winning trade let it run

Nice Tash :-)

Monthly Summary - July 2015 Results

July for the trend folllowers amongst us saw a general improvement in performance signalling that volatility was returning to the market.

Below are the July results of the various approaches used in this thread. I am looking forward to posting results for August as it has been a cracker so far.

Enjoy.... :-)

C

Great news to those that trend trade with IG Markets.

They now offer continuously traded commodities with no underlying expiry on a broad range of commodity markets including softs with continuous charting. It has been a long time coming but now offers the ability to expand diversification on a single platform without having the complications of trading futures with a defined expiry.

Still in the process of reading through this thread... good to hear about your experiences with IG Markets I'm looking into various brokers for long-term strategies; due to the length of the holding period, swaps become important. What are swaps like at IG Markets, eg if you went short AUDUSD?

Also, what kind of commodities products are they offering, CFD's? If so, are they transparent in terms of how the underlying assets/futures are used in price calculations? I've looked into Oanda's commodities products (CFDs) which are horribly opaque!

Hi Ash

It's a long read mate and I don't envy you. What started as a concept just kept on growing. :-)

IG has it's pluses and minuses and things are a bit different dependent on the type of market you are trading. It takes a bit of a trawl through their website to get details about the charges. This is probably deliberate as per your comments regarding the opaque descriptions used by Oanda. In regards to funding costs, like a SWAP they use a margin built on top of the interbank rates to fund positions held overnight and refer to it as TOM as opposed to SWAP but they are much of a muchness.

More details explained here. I haven't compared these costs against SWAP rates of other brokers but suspect they are competetive given the market share of IG

If you are after low fees then IG is not your place....but it is the other benefits that make them my preferred broker:
1. In Australia they fall under ASIC regulation...a big plus for me.
2. They have a very robust BS which can handle significant black swan events (like the recent Swissy event) and trading capital is segregated by regulation.
3. They offer ProRealTime as a platform which is fantastic for discretionary trading. I am yet to test the automated features of the platform.
4. They offer MT4 for those familiar with the platform and for those that like to code their own EA's but haven't used it yet. I use Axitrader when I trade MT4.
5. Their product range is glorious for diversification.
6 They have a significantly growing market share which forces them to be competetive.

Regarding the latest commodity offerring of continuous commodities contracts (which as you guess are CFD's) below is a screen shot of some of the instruments on offer. There are also a vast swag of ETF's which are not detailed below if you are after treasury exposure (bonds).







They also have a wide range of futures but I avoid these products due to the inherent problems in stitching together contracts to get long range data for testing.

I hope this helps.

C

PS.... Ash if it is any consolation since working on this discretionary approach I am now working on medium to long range fully automated approaches with an EA developer with MT4 backtesting and we have closely looked at the impact of SWAP on trend following. While negative SWAP is an annoying frictional cost that get's large over the long term and seems to be a huge cost barrier to overcome, across a portfolio of 50 instruments (between 1 Jan 2000 to 31 Aug 2015) I have tested the notion of trading only positive SWAP trades versus a SWAP agnostic stance and the results conclusively tell me not to worry about it.

For example in restricting trend trades to only positive SWAP trades it significantly reduces the diversification scope of the portfolio when only trading the positive SWAP and believe it or not, most of the alpha delivered by the strategy tested was attributed to negative SWAP instruments. Diversification itself IMO is delivering the returns in most of the automated trend trading strategies we have comprehensively tested as opposed to the specific trend trading technique employed (provided you have a medium to long term viewpoint). Anyway.....food for thought.

PPS..... If you want to employ a strategy that gives you the edge with SWAP then use a broker to trade positive SWAP and hedge using the same instruments with a broker offerring 'Muslim accounts'......but I have heard of some traders (who are detected) coming undone with this technique or at least very unpopular with their brokers.

Hi C,
I'm a fast reader :nerd: Ok, so after about 5 pages, I skipped forward a bit to read the recap post

I'm trying to develop my own trend-trading approach, and my one big take-away from your approach is the use of the SDC. Amazingly, a 2 SDC works better with my approach, since I try to stay in longer.

Thanks so much for the deets on IG Markets. Oanda is Asic-regulated in Oz, and from my perspective comes out sparkling clean (-ish) from the CHF mess. I'll look into all that info about IG markets in a moment

PS: Yes, my quick and dirty analysis also shows that negative swap currencies (Eg shorting the Aussie) tend to do better, or at least that's how my biases via fundamentals work out. I do feel that swap is a minor effect, but I'm all about pinching those pennies wherever possible (of course, while sticking to "proven" brokers, ie no FXCM for me regardless of their savings)

PPS: yes, I've looked into Islamic accounts as well! Pepperstone does have them, but there are "admin fees" to contend with, and most often the good brokers won't make those accounts worth your while.