Welcome to my online repository of research and insights on automated trading system development
One of the (many) decisions during the design of trading system is whether the system will be two-phased or three-phased. A two-phase system, also called reversal system, simply has two modes: Long Short It is always in the market, most likely in the direction of the trend. This is fairly simple: it closes the previous [...]
Entries Tagged as 'Strategies'
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
Trend Following returns breakdown
July 1st, 2010 · 4 Comments · Strategies, Trend Following
Following the previous post on backwardation, contango and crude oil, let’s look at how several factors can play a part in the overall trend following trading system performance. I have previously referenced the study by EDHEC Risk, which shows the different sources of return of a Trend Following strategy. The authors build the Mt. Lucas [...]
Tags: backwardation·contango·Futures·research paper·rollover
A trick to reduce Drawdowns
April 28th, 2010 · 16 Comments · Backtest, Strategies, Trend Following
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 [...]
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 [...]
Intricacies of Market and Trend Following Changes
March 10th, 2010 · 13 Comments · Strategies
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 [...]
Tags: autocorrelation·distribution·kurtosis·michael covel·niederhoffer·Turtle·walk-forward
