Diversified Trend Trading Approach

The storm is over. Time to chill.......Down the hatch....Cheers.....*glug, glug, glug* :-)

Performance Summary - Discretionary Systems - Breakout Techniques (DTT, EDTT, EDTT1)

Has the long awaited volatility turned the corner following last night's NFP? Well I b***dy hope so as it has been a painful couple of months.

It has been a struggle just keeping the head above water with the discretionary systems and a very frustrating period in general for trend followers (unless of course you were riding the soft commodity trends of Soybeans and Sugar.) Unfortunately these markets were not sitting in my discretionary portfolio so I could only drool on the charts presented from my colleagues....however I should capture these trends in the automated systems I am currently trialing...so there!!!....shove that down your trend following pipe and smoke it/ tic

Now if the cracks that have emerged last night following the NFP are suggesting that we are in for a nice volatile session next week, then it's obviously time to get upbeat and funky to get this party started .....so it goes a little something like this.....hit it!!!



Overview
May proved to be a difficult month on the trend front with frequent whipsaws and mean reversion. The difficult market regime has continued into early June however some good momentum bursts were experienced last night with the NFP result which has seen some much needed volatility surges and some overnight gains to the unrealised profits sitting in the portfolio.

At the moment however there is still insufficient unrealised profit in the portfolio to maintain an aggressive stance. A minor drawdown is beginning to build and to prevent over trading, risk management tactics are now being deployed such as deliberately reducing trade frequency by making price have to stretch further prior to an entry through more distal pending order placement.

Note that we could also reduce our position size without attempting to reduce trade frequency (as suggested by Peter Brandt). At the moment however, drawdowns are not sufficiently material to warrant position size adjustment. The limited measures currently deployed to reduce trade frequency still allow you to participate in directional price movement when it occurs, however it reduces the propensity to trade when the market is clearly in a mean reversion regime.

As previously mentioned, in my opinion, it is these difficult periods that define your ultimate trading success using discretionary methods, as capital protection is probably the only element of trading that we can directly control.


Trade Statistics
May total trades (101) indicate potential over-trading when compared to monthly averages. This increased trade frequency associated with losing patches is symptomatic of difficult trading periods where frequent whipsaws from a ranging market result in higher trade frequencies as breakout failures lure trend traders into over-trading tendencies. If conditions progress in the same manner more aggressive capital preservation measures may need to be adopted.



Equity Performance & System Health
Despite the difficult trot, current drawdowns are fortunately not materially eating into trade capital. We have experienced the doldrums over the blast couple of months where things have just not progressed anywhere......*thinks Coleridge*.... "Water water everywhere and all the boards did shrink, water water everywhere but not a drop to drink".

The System Health Check graph is a measure of how the system is currently performing against historical standards. The Pwin% of 34.7% is marginally below the cumulative average, and the average win of $387 is below the historical cumulative average. This result is symptomatic of ranging market conditions and is not suggestive at the moment that performance is materially disintegrating compared to long term averages or that symptoms of over-trading associated with trading psychology is rearing it's ugly head . This needs to be closely monitored however going forward as increased trade frequency during May needs to be investigated further. Interestingly the Pwin and Avg Win$ for May this year is almost identical to market conditions in May last year. Overall May ended with a small building drawdown of 0.8% of trade capital which, considering the difficult trading conditions is a good result. Furthermore, the current return for the calendar year is 8.8% which is a good result, all things considered.

The Trade Profit Frequency chart highlights the positive skew of the current strategy which is what we are after with this technique, namely lot's of small losses that are more than compensated by a few large wins which is symptomatic of trend following strategies in general.




Trade Highlight
Well here is at least one good trade nailed during the period, namely an orderly trend in AUDUSD which allowed for a nice profit take after reaching 2.5xR levels. Thanks god for small mercies.



Current Open Positions
Unfortunately we do not have the luxury to fall back on significant unrealised profits in the portfolio to assist in releasing cashflow during these difficult trading times......however it has significantly improved since last weeks position notably attributed to last nights NFP activity.




What's Trending According to this Technique






Below is the analytics surrounding this technique. I have adopted a different format to that previously used to provide a bit more info that is handy to tracking system performance.

My next post will feature the performance results of the new addition (DTTR) to the discretionary suite of systems where we have a better story to tell.

Cheers

C

Performance Summary - Discretionary Systems - Trend Following Retracement Entry Technique (DTTR)

Let's dig to more DJ Simsa :-)




Overview
After an excellent early start on Late April and Early May with some solid mean reversion entries back into the primary trend, the balance of May saw price action treading water with no significant trending and lot's of whipsaw action. Closed trades so far have resulted in a slight drawdown but fortunately a significant unrealised profit sits in current open trades of the portfolio which augers well if trend activity remains in the doldrums. Some significant price action associated with NFP on 3 June 2016 has strengthened some positions and here's hoping that trend activity picks up in the near term.

Given the mean reversion nature of this strategy back into the primary trend, it is likely that this system will prove a useful addition to the discretionary system portfolio arsenal which so far is focused on trend breakout strategies. When trend breakouts are few and far between, this strategy is anticipated to shine attributed to mean reversion activity. If over time, this technique proves successful, it is likely that we will open it up to other timeframes as well......but it is still early days in testing the DTTR.

Trade Statistics
There is not sufficient data to make any informed decision relating to trade statistics. The low Pwin% of 28% YTD is deceptive as the strategy only commenced in late April and as a result, the statistics associated with closed trades only relate predominantly to losing trades as the majority of profitable trades currently are still open and not currently reflected in the results.




Equity Performance & System Health
Currently with the limited trade history, not many conclusions can currently be drawn regarding equity performance or system health. Needless to say, things appear to be tracking Ok.




Trade Highlight
GBPSGD has experienced a nice momentum burst as a new bull phase emerged after a protracted bear run. Significant opportunities are provided at these trend turning points and if you can nail a retracement entry at these particular times, these trend entries can potentially offer excellent R:R ratio's. We have already taken half profit off the table using this technique.

Generally I like to let profits run, but given the long term nature of this particular strategy and the low trade frequency attributed to the very selective trade entry conditions, a half profit take at 3xR assists in generating necessary cashflow to stem the losses incurred from the short term failed trades. The balance of the trade however is left to run till price hits the trailing stop to partially compensate for this unfortunate cashflow (capital preservation) necessity.



Current Open Positions
Unrealised profit in the portfolio has not moved much in the last 2 weeks but late last night with the NFP, there are signs that some increased momentum activity may benefit the portfolio such as AUDJPY ad CADJPY. Unfortunately it appears that AUDCAD is starting to run out of puff and we may be realising profit on this trade shortly.




What's Trending According to this Technique







That wraps things up for the discretionary systems for the week.

Have a great weekend all and may the trend gods look down upon us next week.

Cheers

C

Smooooooth :-)

Free Webinar with Andrea Unger - "How to Analyze a Trading System and Determine the Best Position Sizing Method
to Boost Your Trading System Performance"

Guys, late notice but this is probably worthwhile attending. To register, click on this link .


Cheers

C

Thx , C .. would be great to record it.. can´t be online at time ..

Guido

I'll keep you posted G if anything interesting pops up. :-)

Dust off those skates......it's Friday people's.....but watch out for road kill.

Have a GREAT WEEKEND.

You too mate. Things are starting to look rosy. Bombs away!!!!!

ROFL ..........A fairly normal trading night at my place. If the cat survives that's a good night.

The tunes are going down well guys...

As I live in a remote (ish) village my internet can sometimes play havoc, lately I haven't had much luck getting on-line... it should be sorted by Wednesday but if its not I'm going to have to change to satellite broadband.. Might be missing for a little while if its the Satellite verdict..


Blinded by the Light (Lenny Ibizarre's Chill mix)

Lovely mix Ja. I've been missing you

I hope you and yours are having a great time mate.

Stay chilled. C

Hey G

Well that webinar caught me off guard. Here I was thinking it was scheduled for 2pm Saturday afternoon my time.....well was I wrong. I was pulled out of bed at 2pm this morning with a notification that the webinar was about to start....Christ I hate working out international times.

......anyway, not a bad session. Of course the intent was to create interest for two training courses on offer but given the track record of Andrea and his no-nonsense mind and logic, I think they would be well worth it so I will be taking the plunge shortly to participate in the courses.

For the webinar, he specifically focused on money management and various approaches which was the main factor that allowed him to determine the optimal sizing that led to him winning the World Cup 4 times (almost in a row).....a stunning achievement.

He starts off by discussing the two broad forms of money management that can either be classified as Martingale or Anti-Martingale in nature and then he demonstrates (and provides a spreadsheet [scroll the end of blog page and click excel file link]) the issues surrounding Martingale approaches from the perspective of long term sustainability. The demonstration he used was a particularly powerful way to showcase the issues of Martingale position sizing and if you haven't been sold yet of the problems with Martingale...this should put the final nail in the coffin.

He discusses the Kelly criterion and Ralph Vince's Optimal f and the issues of using these theoretical measures with his recommendation that these measures should be simply maximum limits (or extreme risk levels) that you should not exceed as any benefit deteriorates beyond these thresholds. He suggests that once you determine these maximum thresholds, you should then divide them by 10 to determine a practical level to position sizing.

.....anyway, click on the link (using Google Hangouts) if you are interested in knowing more as there are a few good gems in it from the mindset of a pro trader.

Cheers

C

Performance Summary - Discretionary Systems - Breakout Techniques (DTT, EDTT, EDTT1)

Finally......the Trend God's have woken from their slumber. All the human sacrifices have finally paid off. . We're baaaaaaaaackkkk!!!!!!




Overview
Despite the slow start to June, we have seen volatility return to the markets since the NFP last Friday. This has allowed us to harvest some much needed profits which has assisted in recovering some of the losses during the doldrums over the past few months and has also eliminated any residual drawdown.

Clearly the indices are taking a pummeling with the current uncertainty regarding the state of the global economy and the impending Brexit. We may finally be experiencing the commencement of a long overdue and necessary market re-equilibration in the equity sector which hopefully will flow through to other asset classes in the shorter term.

Despite the profit taking from some short momentum bursts particularly in USDSGD, GBPSGD, NZDUSD & USDCAD, unrealised profit retained in the portfolio is still insufficient to allow for a very aggressive stance that lifts trade frequency. We will continue to push our trade entries distally from the mean of price to deliberately reduce trade frequency and wait until we can confirm that the market regime has changed from it's mean reverting subdued volatility nature before getting too happy and more aggressive. Obviously as we draw closer to Brexit, conditions are likely to become more favorable for our technique, but we won't count our chickens at this point in time.

Trade Statistics
June stats are showing a good Pwin of 45.2% which is well above the long term average of 39.8%. The $ Average Win ($520) is sitting around the historical average of $510. We are nailing the trends this month.



Equity Performance & System Health
Well it's amazing how the fortunes can change overnight. It was only last week we were complaining about the doldrums and a growing drawdown. But now.....the equity curve is reaching new blue sky and all signs of drawdown have now evaporated and we can start putting our feet up and relaxing. It just shows you how persistence in applying the strategy (rinse and repeat) works and that you can never assume what is just around the corner. It is essential that you do not let your psychology over-ride the system and you constantly need to re-remind yourself of the tendency to second guess the system.

What is important to note is how a significant 'event' can disrupt global markets and market regimes. In this case, the event was clearly the NFP last week and the impending Brexit which has shaken up the markets and their distinctive character over the past couple of months (mean reverting and subdued volatility) and have opened up some good trending opportunities which increased volatility. It is likely that these conditions will continue as we approach Brexit, but we don't attempt to predict anything. Just follow the trend with full diversification and let the system do it's thing.

The Trade Profit Frequency chart highlights the positive skew of the current strategy which is what we are after with this technique, namely lot's of small losses that are more than compensated by a few large wins which is symptomatic of trend following strategies in general.




Trade Highlights

Thank you USDSGD. The Singapore dollar pairs (both USD and GBP) have delivered some excellent profits for the portfolio this week.





Also a good contribution from the lands of the Long White Cloud and Stars and Stripes.




Current Open Positions
Unfortunately we do not have the luxury to fall back on significant unrealised profits in the portfolio to assist in releasing cashflow during these difficult trading times......however it has significantly improved since last weeks position. Stay tuned as if volatility continues, we are going to grow the war chest.






What's Trending According to this Technique

DAX

Attached Image (click to enlarge)

EURJPY

Attached Image (click to enlarge)

FTSE



My next post will feature the performance results of the new addition (DTTR) to the discretionary suite of systems where the good story continues.

Cheers

C

Performance Summary - Discretionary Systems - Trend Following Retracement Entry Technique (DTTR)

Some LTB to keep you company :-)





Overview

Following the NFP last week, we have had some profit taking associated with increased volatility. Unfortunately we were snicked out of a great trend trade with AUDCAD which realised some good profit, but as it happens, price resumed back into trend and has necessitated a second bite at the cherry. Anyway, profit is profit......who is complaining.....well me actually....but you get my drift.

Unlike the Breakout techniques, this is a fairly slow grind with little trade activity given it's long term nature. Despite the low trade frequency however, it is interesting how profitability favorably compares with the breakout systems. This just goes to demonstrate that we really don't need to trade lower timeframes. A far more peaceful and profitable trading life can be enjoyed out in the longer term timeframes. This is also evident when looking at the most successful CTA's in the industry (eg. Dreiss and DUNN) who trade the weekly timeframes. Once again, it demonstrates that overtrading is the greatest enemy for the trader. It unnecessarily introduces drawdowns into the system and also significantly increases the trading cost base associated with trade frictional costs (spread, SWAP and slippage).

Given the mean reversion nature of this strategy back into the primary trend, it is likely that this system will prove a useful addition to the discretionary system portfolio arsenal which so far is focused on trend breakout strategies. When trend breakouts are few and far between, this strategy is anticipated to shine attributed to mean reversion activity. If over time, this technique proves successful, it is likely that we will open it up to other timeframes as well......but it is still early days in testing the DTTR.

Trade Statistics
There is not sufficient data to make any informed decision relating to trade statistics. The low Pwin% of 14.3% YTD is very deceptive as the strategy only commenced in late April and as a result, the statistics associated with closed trades only relate predominantly to losing trades as the majority of profitable trades currently are still open and not currently reflected in the results.





Equity Performance & System Health
Currently with the limited trade history, not many conclusions can currently be drawn regarding equity performance or system health. Needless to say, things appear to be tracking Ok.





Trade Highlight
AUDCAD has had a pretty good run. We previously took 1/2 our profit when price reached 3XR from entry and the balance of the trade was exited with a snick to the trailing stop. You win some and you lose some. While unfortunately we exited with a touch to the trailing stop, price has subsequently resumed back into trend and we re-entered the position yesterday.





Current Open Positions
Good unrealised profit is currently sitting in the portfolio allowing us to maintain an active aggressive stance in the market. If volatility continues, we are in a good position to benefit from some good performance results over the next few months. Let's keep our fingers crossed.





What's Trending According to this Technique

AUDCAD

Attached Image (click to enlarge)

AUDJPY

Attached Image (click to enlarge)

CADJPY

Attached Image (click to enlarge)

GBPSGD

Attached Image (click to enlarge)

NZDUSD

Attached Image (click to enlarge)

That's it for the week.

Best of trading for next week.


Cheers

C

Suggestion - Creating a Comprehensive Portfolio Backtesting Solution in MS Excel

I am wondering whether there would be much demand on this forum in learning how to develop your own comprehensive Portfolio Backtesting solution in MS Excel.

We all recognise the shortfalls in using MT4 as a backtesting solution for a Diversified Portfolio, but perhaps we would rather develop our own system from scratch as opposed to picking another system off the shelf like Ami-Broker, TradeStation, NinjaTrader etc. etc.

If there is interest expressed here, I am thinking of starting a new thread so we can all learn the skills from scratch to make us all masters of our own destiny as opposed to be reliant on 3rd party software out there. The only software we will need for this exercise is MSExcel and perhaps at a later date MSAccess once we want to ramp things up a bit and store our test results for future use.

Now the prime purpose of such a thread would be for trend traders who wanted to trade a diversified portfolio, so for the purposes of this training exercise, I would be requesting that during the learning phase at least, posters stuck to the training model to learn the ropes. Thereafter after picking up the skills you would all be free to pursue your own preferred trading techniques.

Hopefully in the future after we all pick up the relevant skills we could unite as a community of Excel programmers so that going forward we could test new systems and collaborate on mutual projects together.

If this appeals to any of you then let me know your thoughts. Just recognise that if we get started there is a bit of a commitment from any interested to put some effort in to learn the ropes and keep up to speed but I will ensure we go at a pace that is not to demanding on your time. We will not be after those who need to be spoon fed or after a quick and nasty solution.....but are after those folk who are interested in picking up some pretty heavy duty skills that will benefit them throughout their trading career.

Anyway....let me know your thoughts. If there is enough interest I will get things cracking and restrict the sessions to weekend timeframes so it does not interfere with live trading activity.

Regards

C

Hi

IS in your sheet draw is only booked losses or also included floating loss as well

Thanks

Hi MK :-)

The Trade Statistics of my discretionary methods only incorporate closed trades (booked profits and losses) as I treat the open positions (floating profits/losses) as future potential only. That way my results tend to be reflective of the most conservative outcome.

For the automated systems I test, I determine the net asset value of the portfolio which is marked to market each day at GMT+1 for all open positions.

C