Systematic Trading research and development, with a flavour of Trend Following
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State of Trend Following in September: Down (again)

October 3rd, 2013 · 4 Comments · the State of Trend Following, Trend Following

State of TF
 
Pretty much the same story as the last few months: fairly uniform and strong negative performance. The index closes below 0 for the first time this year (in a way correcting an anomaly compared to the rest of the trend following space, which has been down for a good part of the year). Questions such as “Is trend following dead?” are doing the rounds again… (as they were last year). Interesting times to say the least.

Please check below for more details.

Detailed Results

The figures for the month are:
September return: -4.47%
YTD return: -2.05%

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

System September Return YTD Return
BBO-20 -9.82% -4.7%
Donchian-20 -5.4% -8.84%
MA-10-20 -3.92% -2.99%
TMA-10-20-50 -7.02% -7.41%
BBO-50 -3.52% -5.77%
Donchian-50 -2.89% -11.57%
MA-20-50 -7.87% -11.1%
TMA-20-50-200 -4.58% 1.11%
BBO-200 -4.96% -4.21%
Donchian-200 -0.86% 5.51%
MA-50-200 -2.57% 19.6%
TMA-50-200-800 -0.17% 5.8%
COMPOSITE -4.47% -2.05%

 

Composite Index for 2013

Below is the performance of the average of all system/timeframe combinations used in the report for the year 2013:
 
StateTF YTD

The last few months of strong negative performance finally force the index actually to close the 0 line and enter negative territory for the first time.

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 ↓

  • StuntTrader

    Doesn’t matter if the results are positive or negative it’s all interesting information, thanks for all your work & for keeping us in the loop.

  • Stevo

    I’d bet on/expect Wizards had a slightly positive month overall. Thanks again for your work. I am expecting the result from the Wizards.

  • Llewelyn James

    Hi Jez,

    Just wanted to say I really enjoy your blog. I have 2 of my own simple trend following models on myfxbook.com…60 donchian breaks with 60ma 120ma filter and 2.3x ATR trailing stops. Risk 1.5% per trade.
    I’ve gotta tell ya I’m getting killed the first 10 days of October…I’m looking forward to seeing your October results to see how the rest of your systems did.
    Never forget that equities were dead in March 2009 too!
    I’ve recently added a counter trend model to my mix so it will be interesting to see how that does and whether it fulfills it’s job of smoothing the trend following volatility. The rules are same moving average trend filter but I buy/sell if price has moved 5.5 x ATR from high/low while 20 period stochastics is also oversold/overbought.
    Sorry for long post, wasn’t too sure if you’d be at all interested but we seem to be doing a similar thing with testing out trend following strategies..Although you’re doing it in a much more scientific manner. Anyhow, Keep up the great blog.

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