Systematic Trading research and development, with a flavour of Trend Following
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Good start of the year for Trend Following

February 5th, 2013 · 2 Comments · the State of Trend Following, Trend Following

State of TF

The year 2012 needed just one more month to close in the black…

January was a strong month for the State to Trend Following report. Last month’s return takes us back above last year’s starting level. The index posted a performance of +6.27%, and you can see on the chart further below that it was enough to recoup the losses from 2012. It’s way too early to give a verdict as to whether this is the beginning of a new period or just more zags following even more zigs towards the way down. After all trend following has done a lot of this in the most recent past.

Some analysts were calling for a rebound and the start of a strong phase after a “typical” period of “is trend following dead?” making the rounds. Let’s wait and see if this performance at the beginning of 2013 is an auspicious sign…

Please check below for more details.

Detailed Results

The figures for the month are:
January return: +6.27%
YTD return (since Jan-12): +1.78%

Below is the chart displaying individual system results throughout January:

StateTF January

And in tabular format:

System January Return YTD Return
BBO-20 13.95% 6.87%
Donchian-20 7.69% 22.19%
MA-10-20 5.71% 5.9%
TMA-10-20-50 6.39% 7.97%
BBO-50 7.68% 3.98%
Donchian-50 6.54% 9.17%
MA-20-50 7.44% 7.5%
TMA-20-50-200 7.34% -6.23%
BBO-200 1.27% -8.77%
Donchian-200 3.17% -4.13%
MA-50-200 6.49% -18.77%
TMA-50-200-800 1.63% -4.27%
COMPOSITE 6.27% 1.78%

 

Composite Index for 2012-2013

Below is the performance of the average of all system/timeframe combinations used in the report since the beginning of 2012:
StateTF YTD

2012 needed just one more month to close in the black…

Appendix: System Details

System Rules and Parameters

All the systems were tested with the same simple position sizing rules of 1% per new trade. No other Money/Risk Management rules were used. No trade friction (slippage or commission) was applied. No return on margin is added to the system performance

The system rules are detailed on the Trading Blox online documentation.
The MA Crossover system was used with moving average pairs of 10-20, 20-50 and 50-200 days. The stops/position sizes are set at 2x, 3x and 5x ATR respectively.
The Bollinger Band system is the classic use of the Bollinger Bands with entries taking place at Breakouts. The parameters used were 20, 50 and 200 days with 2 standard deviations.
The Triple moving Average system was used with moving average triplets of 10-20-50, 20-50-200 and 50-200-800 days. The stops/position sizes are set at 2x, 3x and 5x ATR respectively.
The Donchian System is a simple version (with no Trade Direction filter) with channel lengths of 20, 50 and 200 days for entries (and 10, 25, 100 for exit). The stops/position sizes are set at 2x, 3x and 5x ATR respectively.

Portfolio Instruments

Covering over 50 instruments across Equities, Interest Rates, Currencies, Agriculturals, Metals and Energies, from around the world, the portfolio contains the following futures (CSI Symbols): AD, BP, C, CC, CD, CFC, CL2, CT, CU, EBL, EBM, EBS, ED, EOX, ESM, FC, FEI, FFI, GC, HG, ICL, IND, JK2, JP2, JP6, JR2, JRB, JTI, JY, KC, KPO, KTB, LC, LGO, LH, MFX, MP, NG2, RA, RS, S, SB, SF, SI, STW, SXE, TRY, US, W, YM, YTC .
Click here for a tabular view with description and exchange information.

Result Normalization

The system performances are adjusted for volatility to normalize the results. The normalization applied “baselines” the Max drawdown of the systems to a common value, and derive the resulting performance for each system.

A table showing each system performance numbers from 1990 to 2009 can be found on this page. Two extra columns have been added to show the “normalized return” and the multiplier coefficient to obtain this return (the multiplier coefficient is itself calculated by dividing an arbitrary Max Drawdown figure of 25% by the actual system Max DD).

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2 Comments so far ↓

  • Fred

    It will be interesting to see how the funds you track performed in January as the Newedge CTA index was up only 1.46% last month.

  • Henning

    Have you read ‘Follow the Trend’? Great book… maybe you could back-track the strategy it follows in the book! Missing new articles from you jez!

    Tnx

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