Diversified Trend Trading Approach

Trend Following Performance Report - August 2016




Overall performance - Trend Following (TF) Index


Damn that S&P500 TR Index. It is making a mockery of us trend followers. Since Jan 2016 we have seen the index rise 14.29%. Compounding the problem is the viscious mean reverting markets spurred on by central bank intervention and those nasty little HFT's. If you are sufferring the trend following blues.....then just think of the potential chaos ahead as interest rates rise......bwahahahahahah.

Fund Performance Table
The following table says it all. Look at collumn P which is the results for the month of August 2016. A sea of red. Only 1 of the 47 funds tracked produced a positive return for the month (and that return was paltry). It doesn't get much worse than this. Let there be blood.



Not many changes this month regarding various performance metrics of the CTA's.

Best CAGR - Jan 2002 - Aug 2016


Worst Drawdown - Jan 2002 - Aug 2016


Lowest Drawdown - Jan 2002 - Aug 2016



Best Performer (Adjusted CAGR) - Scaled to Drawdown Exposure - Jan 2002 - Aug 2016



Best Performer - Annualized Sharpe - Jan 2002 - Aug 2016



Best Performer for the Month of Aug 2016




Best Performer for the Last 12 Rolling Months to July 2016






Cheers guys

C

Wonderful posting!!
Started with good music..... and had a lot to say.. thanks for your insight.. I feel more than entertained
Guido

Cheers Guido

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

It's a nasty time for the trend followers out there and symptomatic of what happens immediately after a crisis event (eg. Brexit). This is when central bank intervention steps in and trend followers start entering protracted drawdown periods. It is a sea of red for trend followers for the month of August and early September.

Ok lads, steady. Keep the powder dry and only pull that trigger when you see the white's of their eyes.


We now apologise for this short intermission and will return to the trend following channel shortly.




Overview
Following the Brexit glory in June for trend followers (the crisis), the markets have become far more subdued with mean reversion once again becoming the flavour of the month as central bank intervention kicks in. This is typical of periods following crisis events as discussed in previous posts. July was a flat performance month and August/September are now seeing building drawdowns. During these more difficult periods overtrading becomes your enemy. As discussed last week, to be safe as opposed to sorry, I am now taking proactive steps given the discretionary nature of this strategy to protect capital by extending the range of pending orders to keep clear of current volatility. What we should therefore see in our trade frequency statistics is a significant drop in the number of trades taken.

Trade Statistics - Closed Trades
August/September is experiencing a low Pwin rate of 29.5% and 24.1% respectively.....my eyes are bleeding.....this is a hostile market for trend followers and also supported by the performance reults of the CTA's. Look at the current Pwin levels compared to the long term average of 39.1%, and the average $win of $306 and $184 against the long term average of $504 which indicates the current mean reverting nature of this market and relative lack of trend trading opportunities. As a discretionary trader, we can therefore take proactive measures to minimise drawdowns during these unfavourable periods. While we never know when volatility will resume, we are prepared to take some future profit off the table with delayed entries to preserve our capital at all costs. You never know how long these unfavourable conditions will last....so it's defend the castle at all costs.




Equity Performance & System Health
The equity curve is now starting to retrace as the drawdown is building to 2.6%. Now is the time to closely monitor trade frequency to ensure that you are not tempted to overtrade. Avoid the noise ladies and gentleman at all costs. Note how trade frequency has significantly dropped below the historical average. Our strategy of protecting capital is working. At this rate we can keep the powder dry for a considerable period of time without encountering significant drawdowns.

The Win% and Average Win $ chart highlights the underperformance of August and September with respect to the historical cumulative average. Obviously when both these metrics sit above the cumulative average, things are rosy........ so at the moment you can see that market conditions are currently less than optimal for trend trading in general. You will also clearly see how our capital protection trade management decision is taking effect with significantly reduced trade frequency compared to the historical average. This is one of the tools we have up our sleeve as a discretionary trader that many automated strategies don't have at their disposal.



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
You know that times are tough when the best trade for the month of September so far delivers only 0.57R in profit. Crumbs.....this is an embarrassment. Spare a talon for an old ex-leper will ya' guv.




Current Open Positions
It's not all bad. At least unrealised profit sitting in the portfolio is edging up this week to $5.7K or 6.59R. Still too low to get aggressive, but if push comes to shove, we have a little war chest to dip into if needed. Given my experience in trend following, this period is obviously a very troublesome time for trend followers and a time when we start noticing that most trend following programs quickly go into max drawdown territory. This is where some discretionary trend following systems have the ability to outshine their fully automated brothers.





What's Trending According to this Technique
Not much on the radar at the moment. Throw us a bone will ya'

EURJPY



USDJPY



Below is the analytic spreadsheet for those that want to get into the detail.


Cheers

C

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




Overview
This portfolio crawls along when compared to the multi-timeframe discretionary breakout strategies however it is fast becoming my preferred strategy. The very selective trade entries combined with the restriction to the D1 timeframe results in few and far between trades, but what a breath of fresh air.

This strategy reminds me of some of my favourite long term wealth building techniques like DIBS and the Equity Millipede. We could be holding some of these positions for years providing that market structure is maintained.

While trend trading in general has been difficult over the past month or so, unrealised profit in the portfolio is growing to heady levels. Bugatti Veyron here we come. 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 over-trading 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, this system complements the discretionary break-out strategies of the prior post. The retracement entry versus the breakout is sufficient to create a distinctive equity curve that allows for additional returns to be generated with a reduced risk. When trend breakouts are few and far between, this strategy will shine attributed to mean reversion activity.

Trade Statistics - Closed Trades
There is not sufficient data to make any informed decision relating to trade statistics. The low Pwin% of 34.5% 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. A single good trade that closed in September was sufficient to remove any associated drawdowns with this strategy.




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
We were able to jump on board a short trade with high momentum (when the proverbial hit the fan with equities last week) and within 3 days were able to close 1/2 the position at 3R. The remaining position has retraced, however that is the way the cookie crumbles and it is not over till the fat lady sings.



Current Open Positions
Unrealised profit going up......next floor is luxury cars...thank you for shopping at Trendies.

I just love this wealth builder. We could be in store for some magic profits with this strategy over time. Chicka boom, chicka boom.don't you just luv it.





What's Trending According to this Technique

GBPUSD



CADJPY



NZDUSD



AUDJPY

Attached Image (click to enlarge)

A detailed spreadsheet of analytics is attached.


Cheers

C

An interesting podcast from a seasoned veteran Michael Halls-Moore. Chat with traders is proving to be a most reliable source for trading ideas that just might take you to new heights.

It's so good to hear from a voice of reason who lets the stats do the talking.

Enjoy

C

Hey C, thanks for the link, sorry I haven't been around much lately it's been a bit manic my end. I still try and follow your threads as much as possible, so thanks for keeping the gold flowing...it looks like Autmun has hinted it may be approaching over here so I may have a bit more time when the cold sets in..

keep up the great work

Cheers - Ja

Hi Ja

I miss you buddy. I hope things are all ok your end mate. It sounds like you don't have time to scratch at the moment. Take care mate and I hope you can put your feet up and relax soon.

C

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

No change from last week. It's still a nasty time for the trend followers out there....blah blah blah. No point talking. Nothing different to last week....Refer back to prior post 1124 for commentary.



Trade Statistics - Closed Trades



Equity Performance & System Health




Current Open Positions



What's Trending According to this Technique
Not much on the radar at the moment.

EURJPY



USDJPY



Cheers

C

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



Trade Statistics - Closed Trades



Equity Performance & System Health





Trade Highlight



Current Open Positions




What's Trending According to this Technique

SPI200 (ASX200)



GBPUSD



NZDUSD



CADJPY



A detailed spreadsheet of analytics is attached.


Cheers

C

Little Jack Horner sitting on the corner
With no shoes and clothes
This ain't funny, but he took his money
And sniffed it up his nose

iiiiiiiiiiiit's Saturday night peoples. Time to blow away the cobwebs:-)

Guys

I am sorry to say goodbye but inevitably something has got to give. I thought that I might have some spare time to get back into the forum....but unfortunately there are more pressing matters to attend to.

If the situation changes down the track, I might be back but in a far less involving manner.

Thanks for all the friendships gained along the way.

All the best with your trading endeavours.

Cheers

C

PS Guys, please don't be offended with the unsubcriptions. I just need to free myself from email notifications.

keep up the good work!

Hi C

I am very sorry that you are having to leave. I will certainly miss your work on the forum, in particular your detailed posts on trend trading and the use of Excel to develop systems. They are outstanding, no question, and will remain a valuable resource and inspiration for me.

I hope things work out well for you, and of course if you are able, would look forward to any future involvement in the forum.

K

All the Best and the Best of luck with every project or endeavor that u do in life.

bassramy.

All the best C

I have learned a lot from you!

Thomas

All the best Copernicus... I am going to miss you threads.

for you mr copernicus, one of the few gentlemen here in FF a big thank you for your help and teachings. Wish all the best for you

... really sorry to see you go...
Wish you all the best ...
You re always welcome ...
I really enjoyed many of your postings...
.. Let me know when you re back ... it really was a pleasure
.. ciao
...Guido..

Morning all. It's great to be back. Things are still pretty chaotic, but I thought that I could still remain invoklved in FF provided that my contributions were measured and not all encompassing.

I will be taking this thread in a slightly different direction by posting my thoughts on various topics related to trading. This way the thread takes a more freeform and discussion based style where everyone can contribute as and when they see fit. I hope you all don't mind.

In regards to the 'Excel Projects' thread.......well that will have to stay on the back-burner for the while as the scope of work required is simply too big a bullet to bite.

Of course the music additions from everyone will be mandatory :-)

....anyway, thanks guys for your patience.

Cheers

C