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; MHF Thanks for replying to all our points, believe me I and I think the others aren't trying to goad ...

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Old Jan 9, 2011, 9:54am   #50
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Re: My Hedged Fund - Another "Trend-Following" Post

MHF

Thanks for replying to all our points, believe me I and I think the others aren't trying to goad you.

Back to your hedging part, you say you will trade some shorts against longs, I understand that but where are your shorts? Or are some of those ETFs short ones (although they're bought)?
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Old Jan 9, 2011, 11:46am   #51
 
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Re: My Hedged Fund - Another "Trend-Following" Post

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Originally Posted by meanreversion View Post
You're long nat gas? It looks like a huge downtrend to me.. what is your criteria for determining trend?
He said he has $8K in FCG, which I just looked at and is First Trust ISE Revere Natural Gas (ETF). Is not a pure play on natural gas, but a fund index that is an equal-weighted index consisting of exchange-listed companies that derive a substantial portion of their revenues from the exploration and production of natural gas. Looks like it had a low of $8.60 in March 09 and is now at $19.65. So looks like he’s done pretty well out of it.
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Old Jan 9, 2011, 12:12pm   #52
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Re: My Hedged Fund - Another "Trend-Following" Post

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I agree with your opinion in its entirety... it was the logic behind the "Fundamentals" write-up. Which discretionary element are you referring to? I'd like to remove it as quickly as I can...
Sorry I mis-interpreted your fundamentals write up, I thought this was somehow being factored into your TF strategy. After re-reading I realise was something else entirely
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Old Jan 9, 2011, 12:40pm   #53
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Re: My Hedged Fund - Another "Trend-Following" Post

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Very good point. I bought into this rule thinking that under a "sharp loss" condition, one could be tempted to tinker with the system... question or interpret its signals. Rather than taking such a risk, it would be best to "temporarily withdraw." This is not a good rule, for a couple of reasons. It is discretionary as Adamscj stated (how sharp is sharp?), it does not outline when to get back in and it takes you out when experience tells us the turnaround is about to come.

I have never made use of the rule, meaning I have never gotten out because of sharp losses, and it makes no sense to keep it in. I'll remove it from the "Trading Rules."

On that topic, any "rules" you care to share?

Well, the only rule i have regarding this topic, is to keep taking my trades regardless of the number of losses i've experienced before. I deem the risk of not taking one of my method's trades to be infinitely larger than taking another small loss if it doesn't work out.
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Old Jan 9, 2011, 2:06pm   #54
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Re: My Hedged Fund - Another "Trend-Following" Post

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Well, the only rule i have regarding this topic, is to keep taking my trades regardless of the number of losses i've experienced before. I deem the risk of not taking one of my method's trades to be infinitely larger than taking another small loss if it doesn't work out.
We've obviously been on a similar path. I tried getting cute with some signals last year, and it ended up costing about 10% of my equity in P/L. There were two big bloopers - not taking an AUD long signal just before it rallied 10% in spot, and not taking a sugar long signal, shortly prior to a 20% rally.

There were a few occasions when I skipped signals and it saved money, but the overall effect was sharply negative.

What I would say is that I have no issue with modifying the strategy from time to time. You can't possibly know everything on day 1, so it's only natural that (subtle) alterations will be made along the way. As an extreme example, the Turtles changed their channel daycount when brokers cottoned on to the system and started jamming their stops. I've made a couple of modifications in the last six months, one of which is to include a drawdown limit. I also threw one market out (CAD) and brought in the 10yr T-note, to achieve (I believe) a better balance.

But by far and away the biggest issue is in not taking entry signals, it's imperative to take them all.
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Old Jan 9, 2011, 2:10pm   #55
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Re: My Hedged Fund - Another "Trend-Following" Post

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But by far and away the biggest issue is in not taking entry signals, it's imperative to take them all.
That's why I prefer a trading a continuous signal rather than defined entry/exit rules for a TF strategy - it prevents you being tempted to second guess your own rules!
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Old Jan 9, 2011, 2:22pm   #56
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Re: My Hedged Fund - Another "Trend-Following" Post

Does that entail (potentially) daily re-balancing of the portfolio?
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