Welcome to my online repository of research and insights on automated trading system development
The headline figure for November (-3.66%) does not sound as dramatic as what happened during November for Trend Following. After a quick spike upwards at the beginning of the month, following the best month of the year so far, a sharp reversal took place taking all systems into the red (and most stayed in the red until the end of the month).
Once again, it seems that most of the systems/timeframes/instruments moved in concert last month.
This still leaves the composite index at +22.92% for the year.
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):
And in tabular format, showing the normalized returns for each strategy and the composite index:
| System | November Return |
|---|---|
| BBO-20 | -1.1% |
| Donchian-20 | -12.18% |
| MA-10-20 | 5.02% |
| TMA-10-20-50 | -0.58% |
| BBO-50 | 0.74% |
| Donchian-50 | -0.94% |
| MA-20-50 | -1.28% |
| TMA-20-50-200 | -5.28% |
| BBO-200 | -6.85% |
| Donchian-200 | -5.39% |
| MA-50-200 | -13.19% |
| TMA-50-200-800 | -2.82% |
| COMPOSITE | -3.66% |
2010, through the Composite Index
Below is the composite index’s performance through 2010:
As you can see above, November saw the index go from over +55% to nearly +15% in a short amount of time. Pretty sharp (and global) reversal. A more sophisticated approach with Money/Risk Management would have probably helped “soften the blow” (but this is not the goal of this index/report).
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.
Thanks for the update. I find the comparison very interesting.
Just a couple of questions to clarify your methodology:
1. How do you manage your FX risk of non-USD contracts? Simplying using the FX spot at trade date and then not rebalancing any positions during the trade for movements in FX?
2. For your 1% position size per trade, I assume you are using the Fixed Fractional system, and thus the number of contracts traded would increase pro-rata with the P&L of the portfolio?
3. On trading mechanics, do you trade on close based on closing prices (and use closing prices to calculate your time series)?
4. After setting your ATR stops, do you subsequently adjust them for changes in the ATR value?
5. Is there any reason you dropped the following contracts that were present in the original post?
Ethanol (Floor Trading Only)-CME
Gasoline-RBOB-ICE(IPE)
Silk-Raw-YCE
Korean Won-CME
Aluminum-London-COMEX
Zinc-London-COMEX
Mexican Bond 10 yr
New Zealand Govt Stock(3 Yr)-SFE(NZFE)
Japanese Govt Bond-Full-size 10Yr-SGX(SIMEX)
Thank you.
@Blackbox
1- no logic to rebalance position based on FX risk
2- correct
3- it depends on the systems. For the Donchian system for example, a stop order is entered for the next day based on the level of the Donchian channel at the close. For MA systems, the system enters on open (the next day) based on close prices (no order on close)
4- no, SLs are simply set once the trade is entered and stay there until they get hit or the system exits the position
5- I removed some instruments, based on Pumpernickel (a reader here) comment that some of them might not make sense, have been demised or have very low volumes
Note that the systems are not supposed to be tailored for best performance, they are mostly standard systems shipped with Trading Blox, used in this report to get a “feel” for how Trend Following are doing from a general point of view.