[DugDug]

Hi Tom, I have done a lot of work similar to this, and was looking at expanding more into intraday trading (too much time on my hands!) hence the tread to look at combining strategies in order to get the most of it by taking profits on smaller trades to smooth the PL
Do you only trade the short term divergence and the trend trading on the stock indexes, or do you have a more diversified basket of commodities, FX, rates, and stock indexes?
Do you find that it sufficiently smooths the returns without detracting from the PL (21% pa is good)
how are the max drawdowns? (seemingly inherent in most trend following systems - however stop and reverse may be different)
How was the recent 12 months (it looks good on your chart)- most long term trend follwers have not enjoyed them - even if 2008 was good?
(plus if you PM me there is something organised via another site you might be interested in if you are in the UK specifically related to trend follwing)

[Plaste]

Originally Posted by DugDug »

Hi Tom, I have done a lot of work similar to this, and was looking at expanding more into intraday trading (too much time on my hands!) hence the tread to look at combining strategies in order to get the most of it by taking profits on smaller trades to smooth the PL

Do you only trade the short term divergence and the trend trading on the stock indexes, or do you have a more diversified basket of commodities, FX, rates, and stock indexes?
Do you find that it sufficiently smooths the returns without detracting from the PL (21% pa is good)

how are the max drawdowns? (seemingly inherent in most trend following systems - however stop and reverse may be different)
How was the recent 12 months (it looks good on your chart)- most long term trend follwers have not enjoyed them - even if 2008 was good?
(plus if you PM me there is something organised via another site you might be interested in if you are in the UK specifically related to trend follwing)

Sounds like we're both in the same boat at the moment. I'm currently reworking an ORB index system to help smooth returns and trading S & R a la ThalesTrader in very small size for the same reasons.

The divergence trades are only on the indexes, the rest is on everything (but not individual stocks). Here's my current portfolio:

Shorts: Gilts, Euros, Spanish SM (SM = stokc market index), Italy SM, EuroStoxx 50 SM, France SM, Corn, Brent Crude, Swiss Francs, Gas Oil, Silver.

Longs: Dax, Nasdaq, Australia SM, Yen, Canadian Dollar, Euros Schatz, Eurodollar.

I've been through 50% drawdowns (though I didn't know as much then) and it is a problem with the method to some extent. 2008 returned 12.4%, 2009 9.3%. If I get a chance I'll run some simulations on Mechanica to show how adding systems improves things.

Tom.

[Plaste]

Here are the edited highlights of backtest results from my current systems:

Long term trend following only:

Compound annual return: 22.91%
Max Drawdown: 37.1%
Longest Drawdown: 1.65 years
Sharpe Ratio: 0.99

Add the medium term trend following system to the above:
Compound annual return: 32.57%
Max Drawdown: 32.57%
Longest Drawdown: 1.07 years
Sharpe Ratio: 1.17

Add the divergence stock index system to the above two:
Compound annual return: 41.48%
Max Drawdown: 31.17%
Longest Drawdown: 1.34 years
Sharpe Ratio: 1.48

Obviously we're not going to see figures as good as this in practise, but the principle certainly held up last year in practise when a lot of trend followers had a hard time but the above mix of systems still came out ahead.

[DugDug]

Thanks Tom.
Definately the best way to go to smooth returns over a portfolio is to add various strategies - if they actually increase returns over the long run they are even better. Did the website I directed you to help, or did you already know about it? (very different to this one - more tailored to trend trading) There are endless discussions about combining strategies there. Thats why I use this site more to ask and learn about day/short term trading - or associated trading ideas.

[Plaste]

Originally Posted by DugDug »

Thanks Tom.
Definately the best way to go to smooth returns over a portfolio is to add various strategies - if they actually increase returns over the long run they are even better. Did the website I directed you to help, or did you already know about it? (very different to this one - more tailored to trend trading) There are endless discussions about combining strategies there. Thats why I use this site more to ask and learn about day/short term trading - or associated trading ideas.

Thanks DugDug, I'd been there in the past but not for a long time. If they've got some useful stuff about combining strategies I'll go and have a root around. In my experience it takes a lot of work to come up with two trend following systems that, when traded together, actually improve risk adjusted performance rather than just returning an average of both.