Welcome to my online repository of research and insights on automated trading system development
October has not been kind to Trend Followers. If the debacle at MF Global was not enough, it also seems that the markets handed a “double whammy” with a strong down month from a performance point of view. The index is now clearly back in the red for 2011.
Please check below for more details:
Detailed Results
The figures for the month are:
October return: -24.06%
YTD return: -19.57%
| System | October Return | YTD Return |
|---|---|---|
| BBO-20 | -20.86% | -40.91% |
| Donchian-20 | -23.32% | -18.31% |
| MA-10-20 | -16.15% | -10.7% |
| TMA-10-20-50 | -27.68% | -23.79% |
| BBO-50 | -25.81% | -17.55% |
| Donchian-50 | -29.18% | -24.59% |
| MA-20-50 | -35.58% | -31.85% |
| TMA-20-50-200 | -33.68% | -30.07% |
| BBO-200 | -22.33% | -7.63% |
| Donchian-200 | -18.53% | -18.97% |
| MA-50-200 | -31.08% | -15.3% |
| TMA-50-200-800 | -4.57% | 4.85% |
| COMPOSITE | -24.06% | -19.57% |
Composite Index for 2011
Below is the performance of the average of all system/timeframe combinations used in the report for the year 2011:
Back at the bottom of the chart.
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.
The use of trend breakouts confirmed by the pivots of dow theory when trading an equity curve can be most useful.
How about a compound system? A trend system with another that trades its equity curve?
How about instead of switching the capital off during a drawdown, you reverse the buy / sell signals?
:D
This is a concept that hes been discussed by some readers and myself in the comments here – but never written a blog testing the concept… Maybe at some point in the future!
Ive just come across your blog after trying to find out more information on trend following systems specifically for the FX market. You’ve got an amazing amount of information here, really appreciate you making it public.
Im very new to programming and was wondering if the Vortex Indicator code is applicable to MetaTrader4 trading platform?
In Tharp’s latest book this concept is discussed. It takes equity curve trading to the point of switching between several systems depending on market behavior.
A simpler way is to paper trade all them at the same time and give equity to the leader. Think drag race shift points, tuned on a chassis dyno. Shift at the rpm where the rear wheel hp curves cross for each gear…
:D
The inverse of a trend system is a range system (market makers).
Thanks aman. I have not developed a version of the Vortex code for MetaTrader but I believe it could be done quite easily by looking at the source code of the Blox version.