Welcome to my online repository of research and insights on automated trading system development
Drawdowns represent the scary part of trading system statistics. The drawdown number emphasises the level of loss you might suffer while trading that system. It is risk to your trading capital. Now, for a quick disclaimer: I do not have a magic trick to simply reduce drawdowns… but with this cheeky title, I wanted to [...]
Entries from April 28th, 2010
Geometric Information Ratio
April 26th, 2010 · 20 Comments · Fund Review
Following the previous post where we ranked CTA performance using the Geometric Information Ratio, a couple of readers have requested clarification/more information on it. So I thought a reference post dedicated to the Geometric Information Ratio might be a good idea. This post contains a spreadsheet used to calculate the Geometric Information Ratio, and expanded [...]
Which CTAs REALLY provide alpha (and HOW do you calculate it)?
April 22nd, 2010 · 13 Comments · Fund Review, Trend Following Wizards
The idea of having a true benchmark for Trend Following (a.k.a. Managed Futures/CTAs), independent from the performance of the existing funds, could shake up the industry and have serious implications (increased competition and fees reduction resulting from commoditization of Trend Following). The Beta of Managed Futures paper (PDF) by Conquest Group and their claim to [...]
Tags: alpha·beta·Conquest Capital Group·geometric return·information ratio
How to apply Leverage?
April 20th, 2010 · 13 Comments · Money Management
Several CTAs or fund managers offer a standard version of their fund, along with a leveraged version (called enhanced risk, 2x or 3x fund, etc.). However a simple performance comparison of the leveraged option against the standard option usually makes it obvious that the former does not offer a simple performance multiplier of latter. I [...]
Trading Regimes as Strategy Filters
April 12th, 2010 · 5 Comments · Strategies
Non-stationarity of the markets… That old chestnut! Everything would be so much easier (boring?) if markets were not changing all the time… Non-Stationarity, is defined as a quality of a process in which the statistical parameters (probability distributions) of the process change with time. One of the consequences is that it might not make [...]
