Welcome to Jez Liberty's home for sharing research and insights on automated trading systems development. Read more...
nebulous intricacies
In the last post we looked at the Turtle Trading system and saw that its performance went from outstanding for a long period of time to flat for 20 years. This opens a can of worms:
Does Trend Following work, is it dead, do markets change, does trend following rules need to adapt to these changes?
Let’s look at the different points of view. [Read more →]
→ 2 CommentsTags: autocorrelation·distribution·kurtosis·michael covel·niederhoffer·Turtle·walk-forward
Most people will have heard of the mythical Turle Traders, a group of novice traders set up and mentored by legendary “Prince of the Pit” Richard Dennis.
Dennis did so to set up an old argument with fellow trader Bill Eckhardt on whether trading could be taught or not (not unlike the story in classic movie Trading Places).
The Turtles were nicknamed as such because [Read more →]
→ 12 CommentsTags: eckhardt·optimisation·Richard Dennis·Trend Following·Turtle
It’s been four months since the last book review. I wanted to make book reviews a more frequent feature of the blog. Problem is I often start few books at once but struggle to finish them.
The book for today’s review is A Practical Guide to ETF Trading Systems by Anthony Garner, who is a Trend Follower and fund manager (and user of Trading Blox). The book is aimed at investors wanting to investigate rule-based trading and explains, with numerous examples, the path to designing, building and testing mechanical trading systems, with an emphasis on how this can be applied to the ETF instruments.
The book is a quick read (170 pages) with lots of charts to illustrate the testing.
The author starts by presenting [Read more →]
→ 3 CommentsTags: Anthony Garner·Bollinger·Buy and Hold·etf·Momentum
I just have to get something out on this 1st beginning of March. I could keep polishing this report until Christmas… But instead here is a first draft. The State of Trend Following report will be published at the beginning of each month (expect it to be evolving for the first few months).
The principle was inspired to me by Michael Stokes from MarketSci with his very smart State of the Market report describing how the markets are behaving.
The idea is to track several classic Trend Following systems over a wide range of instruments and different timeframes. This should, in theory be a good complement to tracking the Trend Following Wizards to get an idea of how well Trend Following is doing as a strategy.
For this first report, I picked (arbitrarily) 3 standard Trend Following systems that ship with Trading Blox:
Each system is tested over [Read more →]
some Autocorrelation representation by kylemcdonald@flickr (CC)
In an earlier post, I discussed how fat-tails are a reason for Trend Following success (or in technical terms: the excess kurtosis of price distributions).
However, there is something unsatisfying in that explanation: if the kurtosis was the sole source of Trend Following success: [Read more →]
→ 5 CommentsTags: autocorrelation·distribution·kurtosis·options·Stats
Mount Everest Sunrise - picture from phobus@flickr (CC)
Being a small trader and “taking on” the big funds such as Winton Capital or Renaissance Technologies can seem as arduous as climbing the Everest. You might think: “What chance do I have to even come close to these guys and their army of PhDs? I might just send them a cheque to manage my money”.
Well, maybe it does not require rocket science to experience some success, as some simple mechanical strategies illustrate. Let’s examine the opportunities for the “small fish” trader. [Read more →]
→ No CommentsTags: diversification·etc·etf·fees·lumber·oanda·spread-betting
CC picture by almccon@flickr
As mentioned in the original Vortex indicator post, I thought there were some flaws that needed to be corrected in the original version published by the authors (Etienne Botes & Douglas Siepman). I have since heard from them .
They gave me a detailed explanation regarding the logic of their design. The most important consideration is that they are using their indicator on Forex – which is a 24-hour market and therefore exhibits virtually no gap. Moreover, I believe they favoured a simple moving average (to Wilder’s exponential one) to add extra lag / beneficial noise filtering.
Anyhow, I still thought that the indicator could be improved for non-Forex markets. I also thought that the process could be taken further by creating the AVX: the Average Vortex Index (similarly to Welles Wilder’s ADX, based on the DMI). Well, I coded that up as well. [Read more →]
I recently came across the Vortex Indicator, which aims to leverage the chaotic science of fluid mechanics (vortices) into a new indicator. I decided to code up this interesting concept in Trading Blox.
Vortex is present in chaotic movements such as fluid mechanics - picture courtesy of NASA
The indicator logic is described in the January issue of TASC (Technical Analysis of Stocks and Commodities) and sounds intriguing (link to PDF article). Without rehashing the details of the indicator calculation, it is very similar to Welles Wilder’s Directional Movement Index Calculation (DMI) except that Wilder’s Directional Movement (largest part of today’s range outside of yesterday’s range) is replaced by calculating the differences between today’s High and yesterday’s Low (positive Vortex Movement) and today’s Low and yesterday’s High (negative Vortex Movement).
→ 6 CommentsTags: ADX·DMI·IPV·Trading Blox·vortex·Welles Wilder
Ladies and Gentlemen, this is post number 50!
And I think it is a good occasion for an update on the projects in the pipeline.
The Big 50 picture - courtsey of maxshirley@flickr
But first a big thank you to all of you, my readers. it is quite some work, but I am having fun keeping this blog and interacting with some of you.
In January, we crossed another significant threshold: 5,000 readers over one month (and growing). It is definitely rewarding to see that you seem to be interested in what I am writing. And if you want to keep updated, please make sure to subscribe to the blog.
I’d also love to [Read more →]
→ 7 CommentsTags:
- - - Note: Starting this month, I have created a dedicated feed solely for the Trend Following Wizards monthly updates. You can either access it via RSS or by subscribing by email. - - -
Not a good start of the year for Trend Followers – starting 2010 in the same way as 2009 closed: by very negative performances.
Well, Trend Following is not about winning every month. I guess if we experience some “shaky” markets in a remake of 2008 (which seem to start materialising – think about Greece, the Equities markets crumpling again), we might see most of these funds rise and shine. Time to get working on this Trend Following strategy! [Read more →]
→ 3 CommentsTags: Abraham Trading·AHL·Aspect Capital·Bill Dunn·Chesapeake·Christian Baha·Clarke Capital·dave harding·Drury Capital·eckhardt·EMC Capital·Hawksbill·Howard Seidler·Hyman Beck·John W Henry·Larry Hite·Liz Cheval·Man·Millburn Ridgefield·Paul Rabar·Saxon Investment·Superfund·Tom Shanks·Transtrend·winton capital
 RSS |
 By Email:
|
 On Twitter |
