Systematic Trading research and development, with a flavour of Trend Following
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April: a flat month for Trend Following

May 6th, 2010 · No Comments · the State of Trend Following, Trend Following

State of TF

New month: new draft of the State of Trend Following report.

April has been a slightly up-and-down month for Trend Following, and ended nearly flat. Let’s wait and see if this benchmark will keep in line with the Trend Following Wizards, as has been the case so far.

Report Changes

Still in beta, this report is gradually enhanced/modified every month. This month, for its third incarnation, the main modification concerns the portfolio under test, which has been extended with the addition of several instruments from all around the world (with some classics such as the German Bund and some more exotic such as Azuki Beans and Silk from Japan or Arabica Coffee from Brazil). In total, 60 instruments covering 20 exchanges. See the full list here.

The systems tested are the same as for last month’s report:

  • Bollinger Band Breakout
  • Donchian System
  • Moving Average Crossover system with ATR-based stops
  • Triple Exponential Moving Average

Each system being tested over a short, medium and long timeframe. Details of the system rules and parameters used can be found at the end of the post.

April Result

Below is the chart of each strategy over the month of April 2010, with the composite average of all systems recording a +0.6% performance.

Trend Following systems performance (01-Apr-2010 to 30-Apr-2010, base 100)

Trend Following systems performance (01-Apr-2010 to 30-Apr-2010, base 100)

End of month values for each strategy below:

System Final Value
BBO-20 99.63
Donchian-20 96.53
MA-10-20 102.51
TMA-10-20-50 102.61
BBO-50 103.53
Donchian-50 101.97
MA-20-50 102.82
TMA-20-50-200 101.15
BBO-200 100.42
Donchian-200 98.64
MA-50-200 98.51
TMA-50-200-800 98.73

As in last month, best performance for the medium-term systems.

The Year so far, through the Composite Index

Below is how the composite index looks so far for 2010 (no rebalancing in the index):


Notice how the first 3 months performance for the Composite index is fairly parallel to that of last month despite the thorough change in portfolio composition. Fans of diversification will also notice that this version offers a slightly better performance so far (nothing significant statistically speaking though).

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 slippage was considered and a $15 RT commission applied.

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 are set at 5 x ATR.
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 are set at 5 x ATR.
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 are set at 5 x ATR.

Portfolio Instruments

Covering 60 instruments across Equities, Interest Rates, Currencies, Agriculturals, Metals and Energies, from around the world, the portfolio contains the following futures (CSI Symbols): AD, BP, CC, C, CD, CFC, CL, CT, CU, DJ, EBL, EBM, EBS, ED, EOX, ESM, ET, FC, FEI, FFI, GC, HG, ICL, IND, IRB, JK2, JP2, JP6, JR2, JRB, JSK, JTI, JY, KC, KPO, KTB, KWR, LAC, LC, LGO, LH, LZC, M10, MFX, MP, NG2, NGV, RA, RS, SB, S, SF, SI, SJG, STW, SXE, TRY, US, W, YTC.
Click here for a tabular view with description and exchange information.

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