Systematic Trading research and development, with a flavour of Trend Following
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State of Trend Following: a March Down

April 5th, 2011 · 7 Comments · the State of Trend Following, Trend Following

State of TF
March has, unfortunately, been dramatic from a world news point of view. It seems that the negativity has rubbed off on the financial markets, and affected Trend Following: March has more than erased all the gains posted so far for the year. The State of Trend Following index now stands at -2.55% for 2011 with a drop of more than -10% for March alone.

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).
Note that I have also slightly amended the template for this report by adding the YTD performance for each individual system.

And in tabular format, showing the normalized returns for each strategy and the composite index, as well as the YTD figures:

System March Return YTD Return
BBO-20 -25.16% -26.04%
Donchian-20 -25.17% -30.09%
MA-10-20 -3.77% -2.6%
TMA-10-20-50 -9.65% -1.05%
BBO-50 -19.48% -13.53%
Donchian-50 -17.63% -14.39%
MA-20-50 -17.19% -7.32%
TMA-20-50-200 -5.62% 5.75%
BBO-200 0.26% 21.14%
Donchian-200 -2.34% 12.47%
MA-50-200 -0.24% 14.93%
TMA-50-200-800 1.63% 10.12%
COMPOSITE -10.36% -2.55%


Composite Index for 2011

Below is the performance of an average of all system/timeframe combinations used in the report for the year 2011:

A sharp reversal started just after the beginning of the month, taking the index in a near-straight line below the 100 mark, to end the month and year-to-date in the red.

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.

Related Posts with Thumbnails


7 Comments so far ↓

  • Jens

    Wow, brutal! The Swedish CTA fund I am following , LynxHedge also had a tough month -5.77% estimated.

  • Jez Liberty

    Hey Jens,
    Yes I was quite surprised to see some of the monthly numbers for systems in the report being down 17%, 19% or 25% when the results have been normalized to have a MaxDD of 50% over the last 20 years. I am assuming quite afew CTAs might be feeling some pain in March. I have not checked the numbers yet, but it’ll be interesting to see what the Trend Following Wizards do in March!..

  • Fred

    The IASG Trend Following Strategy Index is currently showing a decline of 2.01% in March. I fared a little better with a decline of 0.7%

  • LMT

    Shorter signal breakout strategies are getting eaten up with the rise in volatily.

  • RiskCog

    Interesting, I would have expected March to be a strong month because the approach I use seems to correlate more or less with this state of trend following and the wizards.

  • LMT603

    RiskCog, there are many variables, the primary issues being the number of and types of markets traded, actual signal triggers, and bet sizing.

    There was a wide monthly return based on the systems used, and the funds will be in alot more markets than you are positioned in.

    Sugar, Cocoa and Cotton have had some big declines recently.

  • Fred

    Abraham Trading was down 6.95% last month and Dunn Capital was down 4.32%.

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