Systematic Trading research and development, with a flavour of Trend Following
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State of Trend Following in October (UP at last)

November 4th, 2013 · 1 Comment · the State of Trend Following, Trend Following

State of TF
A slight positive result in October to stop the “bleeding” since the “June High” posted by the index. This renders the Year-To-Date performance only very slightly in the red. Start of a bounce or a simple “breather” on the way down..?

Please check below for more details.

Detailed Results

The figures for the month are:
October return: 2.05%
YTD return: -0.14%

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

System October Return YTD Return
BBO-20 -1.58% -6.1%
Donchian-20 -0.59% -9.33%
MA-10-20 0.58% -2.46%
TMA-10-20-50 1.51% -6.22%
BBO-50 3.65% -2.54%
Donchian-50 7.11% -6.12%
MA-20-50 2.48% -9.2%
TMA-20-50-200 2.98% 4.15%
BBO-200 1.93% -2.41%
Donchian-200 2.22% 7.96%
MA-50-200 2.02% 22.27%
TMA-50-200-800 2.3% 8.36%
COMPOSITE 2.05% -0.14%


Composite Index for 2013

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

Slight breathing period before further losses or the beginning of a bounce back?

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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One Comment so far ↓

  • Bill Lussenheide

    In putting together a simply metric of “Buy and Hold” vs. the systems listed here on a composite basis, I came up with this “benchmark” thru 11.26.13 ….

    One third buy and hold equities, half of that being dedicated to the Vanguard Total International, and half to the Vanguard Total US.

    One Third to the Vanguard Total Bond Market Fund

    One Third to the CRB Index

    Combined, the return was 2.03%

    Obviously, this is not the same weighting as the results shown here, but a fair proxy for buy and hold nonetheless. The results for trend following were very close to that return.

    Trend following does not outperform in flat markets, and the results here confirm that trend following is not dead, just in markets that are not providing the movement necessary for large gains.

    Our trend following in our management uses primarily US Stocks , and it has had a banner year. Commodities and Bonds have had a very tough year for any trend follower.

    Your Friend,
    Bill Lussenheide- President
    Lussenheide Capital Management Inc.
    Registered Investment Advisor

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