My Hedged Fund - Another "Trend-Following" Post

This is a discussion on My Hedged Fund - Another "Trend-Following" Post within the Trading Journals forums, part of the Reception category; Boston, have you traded a trend system for any length of time prior to this, on a consistent basis? The ...

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Old Mar 13, 2011, 9:09am   #136
Joined Jan 2009
Re: My Hedged Fund - Another "Trend-Following" Post

Boston, have you traded a trend system for any length of time prior to this, on a consistent basis?

The only reason I ask is that - ok, sure, you're following rules so less stress and all, but if you go back and look at your backtests, you might see drawdown periods of 9 months or more.

Now maybe in ten years time you'll be fine, but do you think you'll stick to one trading system only, with the large volatility it entails? I'm only guessing, but right now I reckon you're running 30%+ volatility, which could wear you down over time.
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Old Mar 20, 2011, 5:44pm   #137
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Re: My Hedged Fund - Another "Trend-Following" Post

myhedgedfund started this thread
Quote:
Originally Posted by meanreversion View Post
Boston, have you traded a trend system for any length of time prior to this, on a consistent basis?

The only reason I ask is that - ok, sure, you're following rules so less stress and all, but if you go back and look at your backtests, you might see drawdown periods of 9 months or more.

Now maybe in ten years time you'll be fine, but do you think you'll stick to one trading system only, with the large volatility it entails? I'm only guessing, but right now I reckon you're running 30%+ volatility, which could wear you down over time.
Meanreversion,

Sorry for the delay in responding to your question.

In short, I do not rely on one trending system only. I also use another more conservative system (not described here, maybe I'll create a separate blog on that one later this year) which combines covered call writing and trends. Basically I identify a trend, and "lock in" short-term profits (one month out) by selling covered calls slightly out of the money; performance is almost as good as with the main TF system, but with a lot less volatility.

Boston
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Old Mar 20, 2011, 5:49pm   #138
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Re: My Hedged Fund - Another "Trend-Following" Post

myhedgedfund started this thread
Week 11: Reducing Exposure...


Trends have for the most part dissapeared, and may at best be in transformation mode. The chart below is typical of previously trending investments which have seen deteriorating trends for ~2 weeks now.

Click the image to open in full size.


Transactions for the week

The deteriorating trends resulted in several sell signals early in the week:
- Sold positions in Agriculture (DBA), Russell 2000 (TNA), S&P 500 (UPRO), Aerospace (ITA), Midcaps (MWJ), Russia (RSX), DJIA (UDOW), Industrials (XLI), Media (PBS), Broker-Dealers (IAI), Real Estate (IYR), Water (PHO), Materials (XLB) and Consumer Discretionary (XLY).
- I added to my existing positions in Energy (ERX), Natural Gas Exploration (FCG) and Canada (EWC)
I am at this point heavily into cash, waiting for trends to develop.

Click the image to open in full size.

Performance for the year is sligthly positive (1.52%); charts with weekly performance and benchmarks follow:

Click the image to open in full size.

What Next Week May Bring:
The energy sector came back after a short pullback; I may find myself adding more blocks to the energy-related positions. Short opportunities may also materialize.

Questions as always welcomed...

Boston
Attached Thumbnails
week-11-1.jpg   week-11-2.jpg   week-11-3.jpg  

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Old Apr 28, 2011, 4:12pm   #139
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Re: My Hedged Fund - Another "Trend-Following" Post

what happened? did this discontinued?
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Old Apr 29, 2011, 5:59am   #140
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Re: My Hedged Fund - Another "Trend-Following" Post

The website says he's pretty much all in cash as of March 20th, waiting for trends to develop. I think there have been trends since then, so I'd be interested to see an update.
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Old May 2, 2011, 1:17am   #141
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Re: My Hedged Fund - Another "Trend-Following" Post

Quote:
Originally Posted by meanreversion View Post
The website says he's pretty much all in cash as of March 20th, waiting for trends to develop. I think there have been trends since then, so I'd be interested to see an update.
yea....its may already. Hope everything is going well....

Hows trading going on for you? I was thinking of starting a new account that just targeted towards the currency pairs. I am having trouble figuring out how to optimally select pairs that are lowly correlated as possible... After was thinking of applying a TF and a Short term system. Any advice?


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Old Dec 7, 2011, 6:21am   #142
 
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Re: My Hedged Fund - Another "Trend-Following" Post

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Originally Posted by adamscj View Post
And sorry I should have said (apologies if I'm stating the obvious) you can calculate the annualized vol by simply taking the standard deviation of daily returns multiplied by 260.
No, you can't annualize volatility "by simply taking the standard deviation of daily returns and multiplied by 260"

You multiply standard deviation by the square root of time. Thus, if you were looking at 20 day (4 week) volatility, you would multiply times the square root of (52/4) - I've used weeks, but you could use trading days divided by number of observed days. Most take trading days as 252. Thus a single day's volatility would be annualized as the standard deviation * sqrt(252).

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