Welcome to my online repository of research and insights on automated trading system development
A decade ago, Cass Business School Professor Harry M. Kat wrote a paper entitled Managed Futures and Hedge Funds: A Match Made in Heaven. In the paper Kat studied the impact of adding managed futures to traditional bond/stock portfolio allocations. In comparison to hedge funds, Kat found that: Apart from their lower expected returns, managed [...]
Entries Tagged as 'Futures'
Managed Futures: still the Better Diversifier?
October 7th, 2012 · 4 Comments · Equities, Futures, Trend Following
Monthly vs. Daily Trading – updated
March 13th, 2012 · 5 Comments · Backtest, Equities, Futures, Strategies
2011 offered challenging market conditions for trend followers (as illustrated by both the State of Trend Following and the Trend Following Wizards reports). The second half of the year in particular threw a few “curve balls”, in the form of wild volatile moves with inter-market correlations spiking up. With this backdrop, I wanted to revisit [...]
Tags: monthly
S&P make the news… with a Trend Following Index
August 10th, 2011 · 34 Comments · Equities, Fund Review, Futures, Trend Following
They say any publicity is good publicity… If that’s the case, Standard and Poor’s might have achieved the “marketing coup” of the year/decade/century (time will tell) with their downgrade of US credit rating last Friday (possibly thanks to a $2 Trillion Mistake). SGMI: a new Trend Following Index But this is not the piece of [...]
Tags:
Futures Trading and Small Account
July 12th, 2011 · 17 Comments · Futures, Money Management, Strategies
I recently spent more time doing “reading research” rather than “testing research”. As result, this post resembles a collection of links on ideas seen on the web of how to trade futures with a small account – one of the topics I have been interested in. The Issue: Diversification with Small Account A small account [...]
Tags: diversification
ETF v. Futures: a Quantification
February 9th, 2011 · No Comments · Code, Data, Equities, Futures
I have already covered the idea of using ETFs in place of Futures. Today, I wanted to run a quantitative comparison between the two instrument types The ETF sector has been growing at an impressive rate, with new offerings popping up every month and providing a wider choice in selecting a portfolio to trade. One [...]
Tags: correlation·etf
Futures vs ETFs
September 21st, 2010 · 2 Comments · Futures, Instruments
Futures have been the main focus on the Au.Tra.Sy blog (in terms of instruments) but the ETF side of things has grown quickly very over the last decade and they do offer an alternative worth looking into. Smaller Trading Size = Greater Diversification I am a great believer in diversification. I think it is an [...]
Tags: etf
VIX, Peso… Sometimes you just cannot trade it!
August 9th, 2010 · 5 Comments · Futures
Or a case for going short VIX despite high bullish consensus? I have been going on about roll yield and term structure for a few posts, and through two very concrete examples we’ll see how it can affect your trading and system development A reader recently mentioned a paper (pdf by Sloyer and Tolkin) presenting [...]
Tags: peso·roll yield·VIX
Better Trend Following via improved Roll Yield
July 26th, 2010 · 28 Comments · Futures, Strategies, Trend Following
To round off a series on backwardation, contango and roll yield (posts 1, 2 and 3), let’s put all this info together and use it in an innovative trading strategy to show how it can improve the performance of a Trend Following system by optimising its roll yield component (note: this could also be applied [...]
Tags: DB·roll yield
Roll Yield and Commodity Yield Curve
July 19th, 2010 · 3 Comments · Data, Futures
We have seen previously that backwardation and/or contango can induce a fairly large drift between the performance of an instrument’s spot market and its corresponding futures market. This phenomenon can be described as roll yield of futures trading and I suggested it was one of the four components in Trend Following returns. As per that [...]
Tags: roll yield·yield curve
Crude Oil, Contango and Roll Yield for Commodity Trading
June 8th, 2010 · 2 Comments · Futures
We have already discussed how roll yield can negatively affect the overall return of a commodity holding The impact of contango or backwardation can be relatively large compared to the overall return. Petroleum has unfortunately been in the news lately. Nevertheless, Crude Oil performance last year gave us a good illustration of the impact that [...]
Tags: backwardation·contango·rollover
MMDI Portfolio Filter in Trading Blox
February 2nd, 2010 · 4 Comments · Backtest, Futures, Software, Strategies
David Varadi, from the very good CSS Analytics blog, pointed me to his interesting findings on a Mean Median Divergence Indicator (MMDI) he devised as a replacement to the standard MACD. I wanted to test the MMDI as a follow-up to Moving Median: a better indicator than Moving Average?. This also provided a good opportunity [...]
Mammoth Hedge Fund moves into Trend Following
January 28th, 2010 · 5 Comments · Futures, Trend Following
AQR is a top hedge fund, managing around $24B in Assets. Lately, they have been making noise about their moving into the Managed Futures space (a.k.a. Trend Following). They seem to be working at institutional investor’s acceptance of trend following as an “investment” concept. They might just be trying to catch up with another mammoth [...]
Tags: AQR·research paper
Moving Median: a better indicator than Moving Average?
January 14th, 2010 · 15 Comments · Futures, Strategies
While searching for robustness, you might come across the term of robust statistical estimator: the median, for instance, is a robust measure of central tendency, while the mean (average) is not (the latter is much more sensitive to outliers). Robustness in trading is a tough beast to tame and understand. The more “robust” the research [...]
Tags: average·comparison·crossover·median·performance·robust·Trend Following
Anatomy of a Futures transaction
November 19th, 2009 · No Comments · Futures, Software
When looking around for automated trading platforms, you soon realise that the offerings are numerous and all seem to take a different form or approach (i.e. TradeStation vs. Interactive Brokers vs. NinjaTrader vs. Zen-Fire vs. eSignal vs. TradersStudio, etc. – the list is very long!). To understand what they all offer, it is important to [...]
Tags: broker·ccp·clearing·counterparty·exchange·FCM·Futures·introducing broker
Unfair Advantage API Code (C#): Extract Futures Continuous data
October 4th, 2009 · 2 Comments · Backtest, Code, Data, Futures, Software
As mentioned in the previous post on retrieving Back-Adjusted Contracts using the RetrieveBackAdjustedContract2 function of the Unfair Advantage API, I have coded up this very simple project to read a list of Futures underlying instruments, retrieve a proportionally back-adjusted contract for each of the instruments and oputput it to a file. Getting started with the [...]
Tags: API·C#·CSI·Futures·rollover·screenshots·Unfair Advantage
Unfair Advantage API: Retrieve Back-Adjusted Contracts function
October 2nd, 2009 · No Comments · Backtest, Development, Futures, Software
Let’s have fun with the CSI UA API! CSI main API document (word doc) is accessible publicly online from their document page along with other docs including the full 300 page manual (great for getting a feel of the app). Pivotal API function This post will focus on is the API function to retrieve Back-Adjusted [...]
Balsara: Money Management Strategies for Futures Traders
September 29th, 2009 · No Comments · Books, Futures, Money Management
Over the weekend I finished this pleasant and instructive book… Over time I am aiming to build a library reference on this blog with a summary of all the books I have found useful. The idea is to be able to recall quickly the main points of the book. Hopefully you will find it useful [...]
Tags: Balsara·Futures·Money Management
Continuous Contract options
September 27th, 2009 · 2 Comments · Backtest, Data, Futures, Software
As mentioned previously in What everybody ought to know about continuous Futures contracts, there are multiple ways to concatenate Futures contracts. Unfair Advantage offers a rich choice of concatenation algorithms – I will use UA as the base for this post. Please also refer to the Unfair Advantage online manual. Let’s look at the different [...]
Tags: Continuous contract·CSI·Futures·screenshots·Unfair Advantage
What Everybody Ought to Know About Continous Futures Contracts
September 22nd, 2009 · 26 Comments · Backtest, Data, Futures
And how to avoid easy common mistakes when choosing which data to use to back-test a trading strategy on Futures… This is a “long-ish” post but I believe essential for good-practice back-testing. No long-term continuity Futures are specific in the way they trade in series of short-lived contracts that are only active for a few [...]
Tags: rollover·screenshots
