Traders' Roundtable

As Tim says, test what you trade and trade what you test. Why use Trading Blox if you are not going to take the signals. If you feel you are adding value by not taking signals "already long in tooth", why not program your criteria for such a condition into your system. Otherwise, Trading B...

favorite quote from Winton presentation: High sharpe strategies are hard to come by and have a limited shelf life. Low sharpe strategies tend to be far more abundant. Therefore, the goal is to find as many uncorrelated, low sharpe strategies as possible and blend them together. Of course, all this i...

Thanks Anthony,

I appreciate the feedback.

Hi Anthony, Good feedback. It is interesting to hear relative strength is adding value for you. I do have a question in applying relative strength to furtures markets: I trade a portfolio of 60 global futures markets. Right now, for example, I am short the long Gilt and long the US 10 yr. Under a ro...

Thanks for sharing. If the ranking doesn't add value, why not use just the trend filter? I would venture to guess if you were to apply a realistic slippage number to your monthly rotations, you might even find the ranking/rotation costs you money. I always say there is nothing wrong with market retu...

In all of the research I have done in futures markets, I have found no benefit to constructing a portfolio by anything other than organic methods. By organic, I mean the process of entering and exiting positions based soley on a first come basis. If my risk budget has been consumed, all subsequent s...

I agree with Chris. There is no other option. If you scale up proportionally, everyone has the same return moving forward. Besides, I did a bit of research on a related topic when launching my strategy, 19 out of 20 times, it is best to assume the existing theoretical positions rather than wait for ...

trade models which have horrible equity curve, and detract from performance, most of the time

I employ 3 counter trend models in my strategy. 2 have contributed positively this year, while the 3rd was a loser. All 3 models have poor risk/reward metrics, yet when combined together, are acceptable. Even better, when they are combined with my other models, returns are enhanced (slightly), and v...

Hi Trackstar, It is important to note that those are not my feelings, but observable facts which can be discovered by anyone willing to invest a few hours perusing CTA databases. I do know traders who use non-scalable, short term strategies that achieve high MAR & sharpe ratios, but the strategi...

I should clarify, in actual trading, over a decent number of years, in a scalable program, after 2 & 20, acheiving a MAR of 1 would place you among elite traders. In backtesting, I think it is fairly easy to come up with a MAR of 2 or 3, depending on how good you are at fooling yourself.

after fees, generating a MAR of 1 would have you breathing very rarified air.

I had the good fortune of testing my systems on a 100 year synthetic portfolio. I believe it was a 20 market portfolio. There was a direct relationship between holding period and how quickly the equity was depleted. My longest term systems enured the entire 100 year test with a max drawdown of 55% a...

Commodity ETFs underperform the spot price because the spot price does not reflect the cost of owning commodities either physically, or through the conrtol and rolling of a futures contract. In this regard, they do a good job. The question to ask is: Why has someone come up with an "actively ma...

Yes, I am talking about back adjusted continuous contracts. With an equity constrained system, the position size varies at each roll with the degree of contango or backwardation present, and this cannot be captured in a back adjusted series. Now I am trying to figure out how to do rolls inside a blo...

I am working on a fully collateralized commodity program. Working within the constraints of equity is a different frame of mind. In backtesting this, I realize a continuous contract focuses on maintaining a specific position size, but in a fully collaterlized program, it needs to focus on maintainin...

I have disabled volume and margin. The Kelly formula shows the optimal bet size for the system to be 26%, for each individual market that would be a certain death strategy. However, I do find optimal total portfolio risk to be in that general area. I assume the reason is when you cross the optimal t...

Does that explain the entire difference? Has anyone checked into this?

Anyway, in my example, I was using futures and simply multiplying my initial bet size * 2. The relationship is not linear, and the incremental return is less than 2x. I have earn interest turned off.

I have noticed that there are diminishing returns when increasing leverage. Conceptually, if you employ 100% of equity, and then 200%, it would stand to reason all performance metrics would double, but that is not the case. Before I go on a solitary, multi-day excursion searching for the relationshi...

Correlations are only valid on stationary values. Inputs like price series are non-stationary, outputs like daily returns are stationary and are not sensitive to things like starting value.