Diversified Trend Trading Approach

I do follow you posts and ideas about trading.. read everything you write ... the are few guys I love to read however have problem to follow and understand, am not smart enough yet. But music, if you like to hear somebody who really CAN sings listen to this please .... do not forget the glass of a good wine while listening .....

Hehehe. Another music addict like me. Very nice BN. What a voice!!!! Thanks for sharing

Oh YESSS... in fact, I am ...



but this time , instead of glass of wine, strongly suggest whisky ....

What is it about retro that I just love? :-)

May 2017 Update to Fully Automated Portfolio Blend - An update of performance metrics from post 1404

I thought I would post an update to a portfolio blend that I am currently working on. Still a work in progress as portfolio development is a never-ending continuous exercise but here is the recipe so far:

1. Trim down a mean reversion (retracement entry) strategy from the Bollinger Region in the direction of the prevailing trend;
2. Liberally garnish with simple momentum breakout systems from the Donchian region; and
3. Add non-correlated accoutrements such as the FUSEX 500 Index.

Voila.....a robust crowd pleaser with lot's of kick.

SYSTEM INGREDIENTS:

The following performance overview represents system results applied to 45 discreet instruments across a broad range of asset classes in the Forex and CFD universe that encompass forex, indices, soft commodities, energies, precious metals and interest rates.

System 1 - Short Term - Long Only - Retracement Entry Strategy:

Overview: A short term, long-only, momentum strategy that enters in the direction of the longer term trend following pull-backs (retracements).

Time frame: Daily bars

Strategy Description: We apply a 100 period simple moving average trade filter to trade in the direction of the longer term trend. We use a Bollinger Band (of 1SD and 5SMA) and define an oversold zone in the Bollinger Band that is located 20% from the lower band. We wait for price to extend into the oversold zone for at least 2 daily bars and go long on the open of the 3rd daily bar. We exit when price opens above the median line of the Bollinger band. We do not use initial stops but apply a 14 period ATR with 2x multiplier for position sizing risking 0.25% of trade capital per trade.

Equity Curve: Uncompounded

System 2 - Short term - Short/Long - Retracement Entry Strategy:

Overview: A short term, short/long, momentum strategy that enters in the direction of the longer term trend following pull-backs (retracements).

Time frame: Daily bars

Strategy Description: Refer to strategy 1 but note that we can trade in both the long and short direction. While under- performing the long only version, this system addition is a worthy candidate for inclusion given it's complementary anti-correlated nature to the portfolio.

Equity Curve: Uncompounded

Attached Image (click to enlarge)

System 3 - Medium Term - Short/Long - Momentum Breakout Strategy (Trend Trade):

Overview: A medium term momentum strategy that enters in the direction of the longer term trend with momentum breakouts.

Time frame: Daily bars

Strategy Description: A medium term trend following (momentum breakout) system that applies a 150 period Donchian breakout and a 75 period Donchian exit trailing stop. We adopt an initial stop and apply position sizing that uses a 75 period ATR with a 3x multiplier. We risk 0.25% of trade capital per trade.

Equity Curve: Uncompounded

Attached Image (click to enlarge)

System 4 - Medium Term - Short/Long - Momentum Breakout Strategy (Swing Trade):

Overview: A medium term momentum strategy that enters in the direction of the longer term trend with momentum breakouts but differs to System 3 by virtue of it's tighter exit designed to take advantage of swing trades under momentum.

Time frame: Daily bars

Strategy Description: A medium term trend following (momentum breakout) system that applies a 150 period Donchian breakout and a 30 period Donchian exit trailing stop. We adopt an initial stop and apply position sizing that uses a 75 period ATR with a 3x multiplier. We risk 0.25% of trade capital per trade.

Equity Curve: Uncompounded



System 5 - Medium/Long Term - Short/Long - Momentum Breakout Strategy (Swing Trade):

Overview: A longer term momentum strategy that enters in the direction of the longer term trend with momentum breakouts but differs to Systems 2 & 3 by virtue of it's longer term nature .

Time frame: Daily bars

Strategy Description: A longer term trend following (momentum breakout) system that applies a 200 period Donchian breakout and a 50 period Donchian exit trailing stop. We adopt an initial stop and apply position sizing that uses a 100 period ATR with a 4x multiplier. We risk 0.25% of trade capital per trade.

Equity Curve: Uncompounded

Attached Image (click to enlarge)

System 6 - Long Term - Buy and Hold - Passive investment in the S&P500 (eg. Fidelity Spartan 500 Index Fund - Fusex):

Overview: A classic buy and hold approach in the S&P500 Index utilising the FUSEX closely mimics the total returns of the Index. We apply this system to the portfolio given it's classic very low correlation to traditional trend following systems.

Equity Curve: Buy and Hold

Attached Image (click to enlarge)

SYSTEM PERFORMANCE METRICS: Compounded

The following system performance metrics apply to the period 1 January 2000 to 31 May 2017.



RETURN DISTRIBUTIONS: Compounded


THE BLEND:
Allocation Weightings:

1. System 1: 40%
2. System 2: 10%
3. System 3 - 10%
4. System 4 - 10%
5. System 5 - 10%
6. Fusex - 20%

SERVING SIZE:
Apply a multiplier of 3 x on allocation weightings.

SIGNATURE DISH - THE PORTFOLIO RESULT

A spicy blend with inspiration drawn from Sichuan.

Serve while hot.

Enjoy with a chilled Chablis :-)

Cheers C

just amazing (as usual) and interesting, Thank you mr C.

jusiur,

i don`t understand your euphoric comment - buy and hold shows the best performance since 2000 ?!

Sixer

Cheers J. I hope all is well your side of the fence mate :-)

Mmmmmm. That's questionable. Look at the risk adjusted return.

Buy and hold on S&P500TR gives a compound annual return of 5.1% with a 51% drawdown. The portfolio gives a 11% compound annual return with a 38.3% drawdown over the same period. In risk adjusted terms it gives 2.9 X more bang for buck. If you assumed a risk weighting that is identical to a passive buy and hold to give a drawdown of 51% you would be delivered a CAGR of around 16% (against 5.1% for the S&P500 including dividends).

Time to travel the world for the vibe. Have a great weekend :-) C

Must be planet earth.....or the 1980s

Lazy listening for a wet Sunday :-) C

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OMG I nearly forgot the music

Food for Thought

 

1. The empirical distribution is ... not empirical
2. Where is the Alpha
3. How do they get those non-correlated returns?
4. The 2 and 20 model is not dead: Its not the fees, its the fund managers
5. Flush With Cash, Top Quant Funds Stumble
6. Heres the Reason Active Funds Cant Beat Passive Fundsand It Worries Me a Lot
7. Just a One Trick Pony? An Analysis of CTA Risk and Return
8. Samsung just unveiled the widest computer monitor you can buy here's how it looks in person
9. Getting an Allocation, June 2017 Update
10. These are set to be the cities of the future
11. 129: Optimal bet sizing lessons from a biased coin flip experiment w/ Victor Haghani

Enjoy

C

Who said the clubs don't open on Sunday. Time to go back in time to when things just sounded better......Hold on tight :-)

Before we commence....I need to check your ID.

A Very Worthwhile Podcast to Listen to

Attached Image (click to enlarge)

While Brent Penfold's techniques are different, his principles of diversification and methods to avoid data mining and curve fitting are spot on IMHO.

This is a very worthwhile listen to if you have the time.

Cheers

C

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