Lots of ideas ~ where to start???

I've been successfully actively managing my retirement account for a few years now using a long-term trend following strategy I developed myself. I gauge my success by both religiously keeping to my plan and returning acceptable results - although it is a very basic strategy since it's tax-free status means that:
- no leverage
-can't short
-position sizing is very difficult
-limited markets

It only takes a couple of minutes per day but returns are slightly better than a standard asset-allocation model over the medium-long term (3-5 years). Based on the current size of my retirement account, this moderate out-performance is perhaps not worth the extra effort – but you have to start somewhere…

I've been exploring other forms of trading using spreadbets for some years although I've yet to go beyond a demo account. I’ve tested numerous ideas reasonably extensively using basic software (MS excel & ProRealTime). I also have quite a bit of experience with poker and am well aware of various concepts such as position sizing, trade management, edge ratio, various cognitive biases, expectancy, psychological management, drawdowns & equity curves etc… I've found several options:

Long-term trend following (weeks/months):
I've tested various strategies (they all return very similar results) but the costs kill most of the profit (mostly spreadbet financing - although it's low at the moment).

Short-term counter-trend (days/weeks):
Requires entry during market hours (but exits usually with market orders), so I wouldn’t always be able to take every trade due to other commitments. I live in Asia though, so trading after the open in Europe is early evening for me so usually not a problem. Psychologically this is perhaps the easiest strategy for me for various reasons.

Day trading (1 round-daytrade per market per year (sometimes a couple more):
I don’t really like the idea of staring at a screen for hours, and the proportionately higher costs (spread & data etc) suck away my edge. My strategy trades very rarely in each market so even with a large portfolio of markets, there wouldn’t be a set-up occurring every day. This is a good thing for me.

All my strategies have an edge (albeit small, IMO) but since they all trade relatively infrequently (even the daytrading strategy) the equity curves look pretty ugly. Combining all 3 in a strategy portfolio would no doubt clean up that curve, and it would be possible for one person manage all 3 strategies alone (provided they were trading full-time). The problem is I don’t have the account size, time or confidence for that at this point.

I’ve gone some way to writing a trading plan for the short-term strategy, although I’m still stuck picking over the finer details of the others.

I have lots more to waffle on about but at this point does anyone have any suggestions on where to start? This thing seems to be becoming a behemoth.

Thanks

Hi hellokimchi,
The trick, IMO, is to work backwards, or 'reverse engineer' to use the popular jargon. So, where would you like to be this time next year on the trading front? Then check that your assets in terms of money and time match your trading goals. From your OP, it sounds as if you're leaning towards swing trading or position trading. This Sticky: Essentials Of 'Trading Journals' explores some of the questions you might want to ask yourself, as does the Trading Plan Template which can be found by clicking the link in my signature.
Tim.

cant short selling? i guess you are only trading stock?

hellokimchi,

Sounds like you have thought very carefully about this (more than many newcomers to trading, not that you sound exactly like a newcomer).

Can you actually spread-bet in Seoul?

Well anyway, I'm just a bit puzzled by this:

Long-term trend following (weeks/months):
I've tested various strategies (they all return very similar results) but the costs kill most of the profit (mostly spreadbet financing - although it's low at the moment).

Click to expand...

My experience would say that long-term trend-following spread-betting is the cheapest, most stress-free and potentially the most profitable form of spread-betting there is. Assuming you are of course lucky and/or talented enough to spot the right trending instruments and keep an eye on them. You'd be using the futures rather than the spot or rolling daily versions of the instruments, and e.g. trade off weekly or monthly charts, checking them once a week when the market is closed, and maybe during the week whenever there is any relevant news or whatever.

Trend-following can work extremely well, but it is not without its problems. For one thing it can breed a sense of complacency. After a while you can get to think that the trend will go on forever and of course it never does.


Sounds like you are very much a person who likes to do his homework, and brownie points for that. On the other hand, there is always a danger of over-complicating things ... as people sometimes say, trading is simple, but it's not easy.

If you can find somewhere where you can trade for real money but with very small stakes (in UK terms, pennies per pip), then it might be worth putting a toe in the water and letting it get wet, just to get the feel, and take it from there. There is a difference between real trading and demo trading, even when the stakes are small. That would be my next step.


Good trading,

Thanks for the suggestions. I'm working through the essentials of trading journals. i suppose I have quite a few loose ends to fix.

One problem I have is with equity curves. My tested curves look awful. Lots of big drawdowns and years of treading water followed by a few spectacular years. The thing is, both the trend-following and swing trading strategies' equity curves seem to be correlated and so don't add much system diversification. Maybe they both just work in trending markets? i should look for a system which works in ranging markets I suppose.

cant short selling? i guess you are only trading stock?

Click to expand...

This is only in my tax-free retirement a/c

montmorencyt2w said:

hellokimchi,

You'd be using the futures rather than the spot or rolling daily versions of the instruments, and e.g. trade off weekly or monthly charts, checking them once a week when the market is closed, and maybe during the week whenever there is any relevant news or whatever.

Click to expand...

Why the futures and not rolling/spot? Is it because of expensive financing for the rolling bets?

I tested around 15 years of data trend following with rolling spreadbets and found the financing charges were about the same as my system's profits (this was before the low LIBOR rates of the past year or so). The spreads are much wider for futures compared with the rolling bets but I'm unsure how the differences in dealing costs for LTTF would be between the 2 instruments when the spread & rollover are taken into account.

Anybody have any ideas?

Also, why are you suggesting trading off the weeklies? That would be very LTTF I suppose?

hellokimchi said:

Why the futures and not rolling/spot? Is it because of expensive financing for the rolling bets?

Click to expand...

as said above for medium term spread betting (2 to 6 months) the Futures are by far the cheapest, typically for a FTSE350 stock for example the total spread is under 1% and that covers you for the given Quarter (3 months), and you should be targetting a 10-20%+ profit, so fairly good.

Use rolling daily for trades up to about a month, anything longer and the rolling finance starts to exceed the quarterly futures cost.