See below for details about the strategy and symbol definitions. Please read the disclaimer. Access to this page is currently free. There will be an effort to update this page daily but there may be gaps.
Announcement: We are working on the potential implementation of dynamic stops. In the meantime, the dynamic stop-loss levels are included in the report starting today.
Open positions as of close of May 16, 2024
Comments
- New signals: None
- The equity volatility remains high due to large cocoa swings.
- The current drawdown of the strategy is 10.6%.
- All 15 open positions are profitable. YTD +36.8% (backtest.)
Column definitions: symbol is the market, trade is the type of open position (long or short), date is the entry date, price is the (adjusted) entry price, ex. price is the settlement price, %chg is the percent change in price, # bars is the number of bars in trade, ROC(N) is the rate-of-change of each market (N = 1, for the day, and N = 5, for the week), stop-loss is the position stop-loss in points based on the entry price, and Dyn Stop is the position stop-loss in points based on the settlement price.
Trend-Following Subscription
Access to premium articles on trend-following and the rules of a strategy similar to the one that generates the daily signals above is possible with a Trend-Following subscription. The strategy trades the same markets with the same risk and lookback period parameters.
Details of the strategy used in these daily reports
Timeframe: Daily
Data: We use continuous, back-adjusted futures contracts. We do not announce contract rollovers here.
Markets: 23 futures contracts: Brent Crude oil (BRN), Crude oil (CL), Cocoa (CC), E-Mini S&P 500 (ES), Euro-BTP Long-term (FBTP), Dax (FDAX), Euro STOXX 50 (FESX), Euro-Bund (FBBL), Gold (GC), Feeder Cattle (GF), Lean Hogs (HE), Copper (HG), Coffee (KC), Live Cattle (LE), Frozen Concentrated Orange Juice Grade A (OJ), Palladium (PA), Platinum (PL), Silver (SI), Corn (ZC), 10-Year U.S. T-Note (ZN), Chicago SWR Wheat (ZW), Euro-Buxl (FGBX), US Dollar Index (DX).
Strategy Type: Trend-following based on PSI5 algo in divergent mode, exit and reverse with stop-loss.
Maximum positions: 23, long/short.
Position size: Based on stop-loss and maximum risk per position.
Trade entry: All trades are executed at the opening of the next bar.
Stop-losses: All stop-losses are executed intraday.
Backtest results are updated weekly after the close of the market. Backtest range: 01/3/2000 –05/10/2024
The Risks of Trend-Following Strategies
Trend-following strategies attempt to capture long-term market trends, also known as outlier trades. The implementation of stop-losses results in a low win rate, as the strategies exit with a loss until the onset of a trend. This style of trading is hard and could lead to a loss of discipline.
Trends and trend-following are not the same thing, and many confuse the two. A trend-following strategy will not identify trends where there are none. From 2004 to 2016, or 13 years, the annualized return of the top 20 CTAs was 2.4%. However, the dispersion in CTA returns is high, and it is not reflected in the averages. There is a high specific risk in choosing a CTA or a trend-following strategy.
Furthermore, proper execution of trend-following strategies with many futures contracts requires sufficient capitalization. For about 20 contracts, the approximate initial capital is probably around a million dollars. Otherwise, due to insufficient capital, a strategy could miss a few profitable trends, negatively impacting the Sharpe and MAR ratios.
Trend-Following Subscription
Access to premium articles on trend-following and the rules of a strategy similar to the one generating the daily signals above is possible with a Trend-Following subscription. The strategy trades the same markets with the same risk and lookback period parameters.
Disclaimer: No part of the analysis in this blog constitutes a trade recommendation. The past performance of any trading system or methodology is not necessarily indicative of future results. Read the full disclaimer here.
Charting and backtesting program: Amibroker. Data provider: Norgate Data
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