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State of Trend Following in May

June 4th, 2012 · 5 Comments · the State of Trend Following, Trend Following

State of TF
 
May has seen strong moves in several markets and this has been reflected in the performance of the State of Trend Following index, which is up by over 10%.

Detailed Results

The figures for the month are:
May return: +14.73%
YTD return: +11.89%

The chart of the individual system results throughout May shows that the stronger performance came from the shorter-term systems that managed to catch these strong moves last month:
 
StateTF May
 
And in tabular format:
 

System May Return YTD Return
BBO-20 22.62% 18.92%
Donchian-20 37.36% 34.08%
MA-10-20 12.63% 17.68%
TMA-10-20-50 21.38% 26.53%
BBO-50 17.97% 16.51%
Donchian-50 23.3% 19.69%
MA-20-50 18% 19.02%
TMA-20-50-200 12.14% 6.81%
BBO-200 1.97% -5.18%
Donchian-200 3.1% -4.29%
MA-50-200 5.68% -9.52%
TMA-50-200-800 0.57% 2.43%
COMPOSITE 14.73% 11.89%

 

Composite Index for 2012

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

After spending most of the year in negative territory, the index has surged to a strong +10% peak year-to-date.

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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