Systematic Trading research and development, with a flavour of Trend Following
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New Year for the State of Trend Following report

February 1st, 2011 · No Comments · the State of Trend Following, Trend Following

State of TF
The state of Trend Following report is now starting a new year with 2011. The principles stay the same though, and hopefully the index will keep doing a good job of representing Trend Following performance, including the Trend Following Wizards.

The results for January have been mixed with a set of individual strategy returns ranging from -8% to +10%. The average return for the index calculated in this report is +3.17% (which is therefore the YTD performance as well).

Detailed Results

Please find below the detailed results for the strategies included in the report (strategy details can be found at the end of the post):
And in tabular format, showing the normalized returns for each strategy and the composite index:

System January Return
BBO-20 -1.57%
Donchian-20 -8.06%
MA-10-20 4.95%
TMA-10-20-50 7.14%
BBO-50 7.21%
Donchian-50 6.09%
MA-20-50 10.09%
TMA-20-50-200 1.97%
BBO-200 6.36%
Donchian-200 5.6%
MA-50-200 0.97%
TMA-50-200-800 -2.67%

Obviously the composite index chart is identical to the red curve above, but here is the graph, without the clutter of individual strategy curves:
After a quick drop at the beginning of the month/year, the index has been pointing up to end up the month above the 0% line.

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. See why and how here.

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