Systematic Trading research and development, with a flavour of Trend Following
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May: +35% for some Trend Followers!

June 2nd, 2010 · No Comments · the State of Trend Following, Trend Following

State of TF
May has been quite “exciting” in the financial markets…

And the results on the State of Trend Following and the Trend Following Wizards always promised to be interesting.

Let’s check the Trend Following results in this report.

No Report Changes

Still in beta, this report is subject to modifications. This month however, the report has not been changed.

The same portfolio of 60 global instruments covering 20 exchanges has been tested (full list here), with the same systems tested as for last month’s report:

  • Bollinger Band Breakout
  • Donchian System
  • Moving Average Crossover system with ATR-based stops
  • Triple Exponential Moving Average

Each system being tested over a short, medium and long timeframe. Details of the system rules and parameters used can be found at the end of the post.

May Result

Below is the chart of each strategy over the month of May 2010, with the composite average of all systems recording a nearly flat -0.12% performance. However, 2 strategies appear to break out of the pack by returning over 30% this month.

The scale of the chart had to be greatly expanded as much more volatility was present this past month.

The two short-term breakout systems (20-day Bollinger Bands and Donchian Channel) have outstanding performance whereas the rest of the strategies have flat to negative results: One system’s trend might be another one’s pullback…

End of month values for each strategy below:

System Final Value
BBO-20 135.66
Donchian-20 132.54
MA-10-20 103.05
TMA-10-20-50 99.53
BBO-50 101.82
Donchian-50 85.51
MA-20-50 91.84
TMA-20-50-200 87.68
BBO-200 94.15
Donchian-200 81.91
MA-50-200 85.60
TMA-50-200-800 99.26


The Year so far, through the Composite Index

Below is how the composite index looks so far for 2010 (no rebalancing in the index):

Still fairly flat for 2010. It will be interesting to compare this to the Trend Following Wizards performance and see if we can gain any insight on their trading style and timeframes.

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 slippage was considered and a $15 RT commission applied.

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 are set at 5 x ATR.
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 are set at 5 x ATR.
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 are set at 5 x ATR.

Portfolio Instruments

Covering 60 instruments across Equities, Interest Rates, Currencies, Agriculturals, Metals and Energies, from around the world, the portfolio contains the following futures (CSI Symbols): AD, BP, CC, C, CD, CFC, CL, CT, CU, DJ, EBL, EBM, EBS, ED, EOX, ESM, ET, FC, FEI, FFI, GC, HG, ICL, IND, IRB, JK2, JP2, JP6, JR2, JRB, JSK, JTI, JY, KC, KPO, KTB, KWR, LAC, LC, LGO, LH, LZC, M10, MFX, MP, NG2, NGV, RA, RS, SB, S, SF, SI, SJG, STW, SXE, TRY, US, W, YTC.
Click here for a tabular view with description and exchange information.

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