Welcome to my online repository of research and insights on automated trading system development
Happy New Year to all readers!
The first post of the year looks back at the performance of the State of Trend Following index in 2014… And it’s been a great year! Trend Following really started to shine in the second half of the year and closed the year with a gain over 50%. Clearly the best performance since the great 2008 results – and there was no big crash (yet?) to trigger it. Conditions might well be turning for trend following.
December was no exception, with the index posting another very strong month.
Wishing all of you continued or new success in 2015, in your trading and other endeavours.
Please check below for more details.
Detailed Results
The figures for the month are:
December return: 5.4%
YTD return: 55.59%
Below is the chart displaying individual system results throughout December:
And in tabular format:
| System | December Return | YTD Return |
|---|---|---|
| BBO-20 | 2.8% | 54.6% |
| Donchian-20 | 7.16% | 63.02% |
| MA-10-20 | 1.34% | 34.37% |
| TMA-10-20-50 | 3.5% | 62.27% |
| BBO-50 | 10.63% | 96.82% |
| Donchian-50 | 7.95% | 76.12% |
| MA-20-50 | 4.11% | 50.46% |
| TMA-20-50-200 | 6.45% | 72.36% |
| BBO-200 | 4.2% | 39.21% |
| Donchian-200 | 4.5% | 27.77% |
| MA-50-200 | 7.26% | 59.27% |
| TMA-50-200-800 | 4.88% | 30.74% |
| COMPOSITE | 5.4% | 55.59% |
Composite Index for 2014
Below is the performance of the average of all system/timeframe combinations used in the report for the year 2014:
The index took off and accelerated very well during the second half of the year
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).
Jez,
Nice work on the blog. A lot of interesting info I have not seen elsewhere.
Do you have an updated table showing trend following system performance through 2014?
Rob
Hi there
Great blog. I had a few questions.
You have a suite of systems which all look very similar – essentially, breakout based systems. Combining systems make sense if they are dis-similar. What advantage do you see in combining similar systems?
Are you trading these systems on stocks?
Are you trading all systems on the same portfolio or are you trading these systems on different portfolios?
Finally, I see that you have large drawdown numbers as expected from any breakout based system. I was curious why you are not using any short system to blunt the drawdown numbers and improve the MAR number in the process?
Thanks!