Diversified Trend Trading Approach | Page 29 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

Is Grid Trading (combined trend following and counter trend) Profitable? 3 replies

Making a good diversified portfolio 10 replies

Diversified EA Money Management Code 10 replies

HAMA PAD - A Simple Trading Approach 7 replies

Trading a (semi) automatic approach...but want more 11 replies

Attachments: Diversified Trend Trading Approach
Exit Attachments

Diversified Trend Trading Approach

  • #561
  • Jan 4, 2016 6:46pm Jan 4, 2016 6:46pm
Stop/Exit Study that Challenges Some tired Assumptions

Here is an excellent podcast dealing with various stop/exit techniques from Cesar Alvarez's research using a simple time-based trend/momentum based system as a baseline strategy. The results are very intriguing and just demonstrate why you need to test every assumption that is bandied about the trading world as they may/may not be applicable to your system.

It is worthwhile also downloading the supporting excel files on the Blog to review in conjunction with the discussion.

I hope everyone is having a great New Year.

All the best.

C
  • #562
  • Jan 9, 2016 6:19am Jan 9, 2016 6:19am
Quoting Copernicus
Stop/Exit Study that Challenges Some tired Assumptions Here is an excellent podcast dealing with various stop/exit techniques from Cesar Alvarez's research using a simple time-based trend/momentum based system as a baseline strategy. The results are very intriguing and just demonstrate why you need to test every assumption that is bandied about the trading world as they may/may not be applicable to your system. It is worthwhile...
Thanks C. This is a great find. Wishing you a happy new year as well.
  • #563
  • Jan 9, 2016 6:59am Jan 9, 2016 6:59am
Quoting greenfields
{quote} Thanks C. This is a great find. Wishing you a happy new year as well.
Thanks G. Looking forward to a more volatile year ahead. Jan has been a great start so far with the discretionary approaches. Patience does pay dividends. Let's hope it continues so we can rack up some good results.

All the best

C
  • #564
  • Jan 16, 2016 2:28am Jan 16, 2016 2:28am
A Brief Update on the Status of the Discretionary Approaches

January so far has had some great trend trading opportunities.

The first week of January saw great volatility allowing for significant swing trading opportunities on the shorter time frames. Early Jan also provided an opportunity to jump onto some new trends on the longer term time-frames which will hopefully feed us trend traders for the next few months.

Most of the shorter timeframe swing trading trends were exited with short-term retracements occurring following the first week, but following this short retracement period, prices across most instruments reverted back into trend allowing for some great profits to be built up on some of the longer term time frames which were entered in either December 2015 or early Jan 2015.

If market conditions continue like this, it is going to be a bumper year for the trend followers which will be good to see as last year was slow and painful.

Below is the current status of open trades on the discretionary approaches across the portfolio. Substantial unrealised profit has been built up with the portfolio which hopefully will greatly assist this year's results. Excellent profits have built up on AUDJPY on the H1 timeframe, CADJPY on the H4 timeframe and USDCAD on the H4 timeframe. Good trending opportunities have also been experienced with GBPUSD and the Nikkei.

Attached File(s)
File Type: xlsx Open Positions.xlsx   14 KB | 254 downloads


Have a great trading week ahead.

C
  • #565
  • Edited 7:44am Jan 19, 2016 3:21am | Edited 7:44am
Monthly Performance Metrics of 47 Established Managed Funds that use Trend Following Systems - December 2015

The following performance metrics (shown in the next few posts) reflect the performance of 47 large fund managers who have been operating at least since 1 Jan 2000. Details about performance metrics used can be found here.

.....plus the mandatory musical background while you review results :-)

Inserted Video


Note that a couple of funds (Hamer Trading & Conquest Capital) have not yet released results for December but I wasn't going to just sit around waiting so I have used proxy results for these funds and will amend when results are released for January reporting.

Overall December 2015 rounded off a poor calendar year with the TF Index posting a -4.45% return. It must be noted however that 2014 produced a 20.83% return for the index, however 2015 produced a similar meager result as 2011, 2012 and 2013 which was a period of drawdown for most of the major trend following funds. The graph and performance results of the TF Index provides an excellent representation of what most of the large fund managers in the trend following space have experienced since 2000.

Drawdowns for the TF Index (approximately 10%) are not as exacerbated as that experienced during 2013 which was the max drawdown year for the TF Index since 2000 of 18.11%, but still reflects the fact that as at December 2015, Trend following funds in general are in drawdown with a lot of cranky investors giving headaches to the IM's. This must be put in context however as overall CAGR since 2000 for the TF Index is at 9.37% which is a healthy investment return that far outperforms classic alternatives such as buy and hold diversified portfolio models.

Attached Image (click to enlarge)
Click to Enlarge Name: TF Index Performance.JPG Size: 76 KB


Individual performance results for monitored funds are detailed below.

Attached Image (click to enlarge)
Click to Enlarge Name: Fund Performance Dec 2015.JPG Size: 523 KB


Things of general interest to note are as follows:

  1. The funds selected for the TF Index are uncorrelated with equities in general with almost a 0 correlation to the S&P Total Return Index. This is attributed to their cross asset exposure particularly within commodities and extensive diversified nature both in terms of instruments (markets) traded and systems employed;
  2. Those funds with a very high correlation to the TF Index represent the 'classic' medium to long term systematic trend followers such as Rabar Market Research, EMC, Mark J Walsh and Dunn Capital Management. In general the strong correlation exhibited with all funds in this table give substance to the notion that the secret sauce to strong long term performance returns is "Trend following + Diversification";
  3. Systematic trend following is unusual when compared to other trading methods in that it reflects positive skew (lot's of small losers, with some great large winners) and is a divergent market trading method as opposed to a convergent method which typically offers a negative skew profile of returns; and
  4. Approximately 44 of the funds listed in the table have outperformed the S&P 500 TR Index since 1 Jan 2000 demonstrating the power of systematic trend following in general.




.......more to come :-)

C

  • #566
  • Jan 19, 2016 3:45am Jan 19, 2016 3:45am
Monthly Performance Metrics of 47 Established Managed Funds that use Trend Following Systems - December 2015

Best/ Worst Performers for the Monitoring Period

Dreiss is pulling in the best CAGR, if you can handle the occassional 50% drawdown.

Attached Image (click to enlarge)
Click to Enlarge Name: 1.JPG Size: 70 KB



I am not sure how the fund below is going to fare....is it lights out or does it meet a new definition of max drawdown? It might shortly be a statistic of survivorship bias.

Attached Image (click to enlarge)
Click to Enlarge Name: 2.JPG Size: 68 KB


Now here is a good fund for the low risk tolerant types....like me :-)

Attached Image (click to enlarge)
Click to Enlarge Name: 3.JPG Size: 67 KB


Below is what I would rate as the most solid performer so far.

Attached Image (click to enlarge)
Click to Enlarge Name: 4.JPG Size: 72 KB


Not a bad sharpe ratio as far as things go.

Attached Image (click to enlarge)
Click to Enlarge Name: 5.JPG Size: 71 KB


Best performer for the month. There might be free drinks on in the boardroom.

Attached Image (click to enlarge)
Click to Enlarge Name: 6.JPG Size: 70 KB



Best performance for the last 12 months. This is rocketing at the moment.

Attached Image (click to enlarge)
Click to Enlarge Name: 7.JPG Size: 74 KB



.....and now for the discretionary approaches.

More to follow. :-)

C
  • #567
  • Jan 19, 2016 4:01am Jan 19, 2016 4:01am
Monthly Performance Metrics of the Discretionary Approaches in this Thread - December 2015

Despite the poor performance of the Funds for December, the discretionary approaches nailed it attributed to the short term swing trading components of the systems. Fortunately this capped off an otherwise very dull trading year with these approaches which flat-lined between Jan to Aug with the TF Index in general and also the S&P500 TR. Things weren't looking good until some sun shone through the clouds for increased volatility in December. The volatility has continued on into January and the approaches are doing very well so far this month (but this will be dealt with in next months report).

DTT
Attached Image (click to enlarge)
Click to Enlarge Name: DTT.JPG Size: 57 KB



EDTT
Attached Image (click to enlarge)
Click to Enlarge Name: EDTT.JPG Size: 61 KB



EDTT1
Attached Image (click to enlarge)
Click to Enlarge Name: EDTT1.JPG Size: 62 KB



Performance Comparison Between Approaches (Not adjusted)
There is a similar raw performance profile currently between all three approaches and it is only when you compare relative performance in association with return and volatility of returns via drawdown exposure (or sharpe ratio) that you can see which method has reigned supreme for the calendar year 2015.........and the winner is......

Attached Image (click to enlarge)
Click to Enlarge Name: Comparative.JPG Size: 45 KB


Performance Comparison Between Approaches (Relatively Scaled)

You got it....good old DTT has outperformed both EDTT and EDTT1 for the year....however we can't speak to soon because as soon as things hot up with volatility, EDTT and EDTT1 come racing home. The results for Jan are going to be interesting as both EDTT and EDTT1 and reaching for the sky so far.

Attached Image (click to enlarge)
Click to Enlarge Name: Comparative2.JPG Size: 45 KB




....that's all guys. have a great remaining week of trading. :-)

C
  • #568
  • Jan 19, 2016 4:17am Jan 19, 2016 4:17am
Quoting Copernicus
Monthly Performance Metrics of the Discretionary Approaches in this Thread - December 2015 Despite the poor performance of the Funds for December, the discretionary approaches nailed it attributed to the short term swing trading components of the systems. Fortunately this capped off an otherwise very dull trading year with these approaches which flat-lined between Jan to Aug with the TF Index in general and also the S&P500 TR. Things weren't looking good until some sun shone through the clouds for increased volatility in December. The volatility...
I Will take any return with these Drawdowns.

Congrats, keep up the good work.
Master Your Setup, Master Your self. (NQoos)
  • #569
  • Jan 19, 2016 4:19am Jan 19, 2016 4:19am
Quoting bassramy
{quote} I Will take any return with these Drawdowns. Congrats, keep up the good work.
Cheers Bass. :-)

PS.....Note how Bill Dunn is performing his magic at the moment with regards to the last 12 months. A living legend at work.
  • #570
  • Jan 19, 2016 7:28am Jan 19, 2016 7:28am
HI C,
hope your doing well, Sir.
i think retail world exaggerate the power of hedge funds and the banks. they are just like any other retail trader with a difference of access to more money and more advanced toys.

i would not trust my money to anyone with drawdown of over 5%.
if drawdown is over over 15-20% it is not trading anymore. it is zero risk management and nothing but a pure gambling
As Above, So Below
  • #571
  • Jan 19, 2016 7:38am Jan 19, 2016 7:38am
I am going to start leading newbies to your thread and bassramy's thread. Two mentors, right here at the Factory, free of charge!
If you are good at something, never do it for free--Joker
  • #572
  • Jan 19, 2016 7:57am Jan 19, 2016 7:57am
Quoting tashkent
HI C, hope your doing well, Sir. i think retail world exaggerate the power of hedge funds and the banks. they are just like any other retail trader with a difference of access to more money and more advanced toys. i would not trust my money to anyone with drawdown of over 5%. if drawdown is over over 15-20% it is not trading anymore. it is zero risk management and nothing but a pure gambling
Hi Tash. I must admit, I do not have the cohonas to get into deep drawdown territory so I avoid leveraging up with position sizes like the plague. I actually think that the success of trend trading is not in trying to force a profitable outcome but rather in just ensuring through risk management that you can simply survive in the market for a long time....which is inferring that the performance will come by simply being there to participate when or if the market decides. You can directly control risk management whereas you have very little control over profitability. It just happens periodically and you simply need to be alive and there to participate. This mindset tends to run counter to what most traders are after.
  • #573
  • Jan 19, 2016 7:59am Jan 19, 2016 7:59am
Quoting jmn5611
I am going to start leading newbies to your thread and bassramy's thread. Two mentors, right here at the Factory, free of charge!
Cheers J.....but I am not a mentor mate....just a 'naughty boy'.
  • #574
  • Jan 19, 2016 8:02am Jan 19, 2016 8:02am
Quoting Copernicus
{quote} Hi Tash. I must admit, I do not have the cohonas to get into deep drawdown territory so I avoid leveraging up with position sizes like the plague. I actually think that the success of trend trading is not in trying to force a profitable outcome but rather in just ensuring through risk management that you can simply survive in the market for a long time....which is inferring that the performance will come by simply being there to participate when or if the market decides. You can directly control risk management whereas you...
brilliant!
As Above, So Below
  • #575
  • Jan 29, 2016 6:44am Jan 29, 2016 6:44am
Bumping one of the only threads worth reading on FF.

Thanks for posting this stuff Coper.
Quoting tashkent
i would not trust my money to anyone with drawdown of over 5%. if drawdown is over over 15-20% it is not trading anymore. it is zero risk management and nothing but a pure gambling
- Create system that produces 5% annual compounding growth with 5% max drawdown.
- Scale up bet size for more aggressive clients to produce 20% growth with 20% max drawdown. Suddenly its gambling with zero risk management.

=\
  • #576
  • Jan 29, 2016 7:30am Jan 29, 2016 7:30am
Quoting Atokys
Scale up bet size for more aggressive clients to produce 20% growth with 20% max drawdown. Suddenly its gambling with zero risk management. =\
Where did you see me saying "Scale up bet size for more aggressive clients to produce 20% growth with 20% max drawdown" is gambling with zero risk management"? I accept, in this sentence there are 2 words that are mine: "20%" and "drawdown", everything else is yours. what is the purpose of twisting things so much?
And more importantly I am talking about drawdowns over 20%. which I guess in english that means, up to 20% is more or less acceptable.
basically, you are just having discussion with yourself. on the top that was just my personal opinion
anyway, good luck to you.
As Above, So Below
  • #577
  • Edited 8:20am Jan 29, 2016 7:40am | Edited 8:20am
Quoting Atokys
Bumping one of the only threads worth reading on FF. Thanks for posting this stuff Coper. {quote}
Cheers A. Sorry for the slow thread but should have something shortly for everyone interested in diversified systematic trading to chew on. I and another trading pal have been burning the midnight oil and working on a fully automated system outside MT4 in the MSExcel environment which is drawing to a successful completion. It is really exciting as it fast tracks diversified long range portfolio testing and turns what previously was a 5 day crunching exercise for a single test across a diversified portfolio of 40+ instruments into a 3-5 hour solution. It also enables us to extract information that is useful for our purposes such as the total commissions, SWAP and other key statistics which otherwise is not readily extractable from most back-testing solutions out there.

The intent of doing this was to progress with our ability to merge long range diversified system portfolio equity curves so we could put the pedal to the metal and come up with some pretty powerful system blends without curve fitting. We would then be comparing their performance on a monthly basis against the funds I am currently following to see how they stack up and give some possible clues on how to reverse engineer the results of the big boys to get a feel for their nuances.

Still have a bit to do, but hopefully soon will be posting some examples for discussion, so stay posted mate. Looking forward to your thoughts and input. I hope all is well.

Best C

PS. The You-tube vid below gives an idea of some pretty nifty capabilities of MSExcel with a bit of VB coding and dll interfaces with brokers (in particular exchanges for commodities etc.) as a live trading platform. While the example is a commercial product and tailored to forex.....it gives ideas for even better home grown solutions that can span across asset classes. Integrate this idea with a comprehensive back-testing system to also generate trade signals and you are cooking with gas.

Inserted Video
  • #578
  • Jan 29, 2016 8:05am Jan 29, 2016 8:05am
Quoting tashkent
{quote} Where did you see me saying "Scale up bet size for more aggressive clients to produce 20% growth with 20% max drawdown" is gambling with zero risk management"? I accept, in this sentence there are 2 words that are mine: "20%" and "drawdown", everything else is yours. what is the purpose of twisting things so much? And more importantly I am talking about drawdowns over 20%. which I guess in english that means, up to 20% is more or less acceptable. basically, you are just having discussion with yourself. on the top that was just...
There there. No need for such furious backpedaling. I'll let you off this time.
  • #579
  • Jan 29, 2016 8:15am Jan 29, 2016 8:15am
I think i owe you an apology C, for hijacking your thread. i promise, no more responses from me, i just saw someone putting words in my mouth which i never said or meant and i had to correct it.
Have a great weekend!
As Above, So Below
  • #580
  • Jan 29, 2016 8:27am Jan 29, 2016 8:27am
Quoting tashkent
I think i owe you an apology C, for hijacking your thread. i promise, no more responses from me, i just saw someone putting words in my mouth which i never said or meant and i had to correct it. Have a great weekend!
No need Tash. It's all good. Have a great weekend as well mate. I have been licking my wounds a bit this week from some inevitable retracements and need a chill pill. :-)
3 traders viewing now