Systematic Trading research and development, with a flavour of Trend Following
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State of Trend Following in November

December 3rd, 2012 · 4 Comments · the State of Trend Following, Trend Following

State of TF
 

The downwards slide keeps going, with the index being now near the lowest levels of the year at nearly -5%. Only Two and a half months ago, the index was hitting +15%…

Please check below for more details.

Detailed Results

The figures for the month are:
November return: -2.98%
YTD return: -4.16%

Below is the chart displaying individual system results throughout November:
 
StateTF November
 
And in tabular format:
 

System November Return YTD Return
BBO-20 -8.47% -2.15%
Donchian-20 -8.91% 11.36%
MA-10-20 -3.74% -1.76%
TMA-10-20-50 -6.15% -1.25%
BBO-50 -5.42% -4.47%
Donchian-50 -3.96% 1.01%
MA-20-50 -3.08% -2.35%
TMA-20-50-200 0.47% -11.65%
BBO-200 -0.74% -8.57%
Donchian-200 0.57% -5.87%
MA-50-200 3.72% -20.38%
TMA-50-200-800 -0.1% -3.87%
COMPOSITE -2.98% -4.16%

 

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 the last 6 months in the black, the index has gone back to red territory.

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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4 Comments so far ↓

  • Nitin Gupta

    Hi Jez, one question i had regarding the returns is how is the position of each of the instruments done …. is it 1/n…..i.e. in case u have 100 dollar…. 2 dollar for each product ( considering that you have mentioned that it trades 50 instruments) or how is it ?

  • Jez Liberty

    Hi Nitin: “position sizing rules of 1% per new trade”. The above is actually not so clear. Basically, the systems take positions that equate to a risk of 1% of total equity. Typically, this would mean calculating the difference between entry price and stop price, and sizing the position so that the loss resulting from hitting the stop price equals 1% of total equity (taking into account big point values of each futures contracts). For non-stop systems like dual MA, an approximation is made to get to the same level of leverage.

  • Basha

    “For non-stop systems like dual MA, an approximation is made to get to the same level of leverage.”

    Sounds like a gross approximation that can distort results significantly in favor or against those specific systems.

  • Jez Liberty

    I don’t think it is (“a gross approximation that can distort results significantly”) when done objectively using volatility and drawdown figures to obtain similar levels to those “non-stop systems”.
    It really is a similar process to what a trader would use to drive the position size in actual trading of these systems…

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