We have to be careful in our assumptions that Trend Following is a panacea for those looking to protect themselves from market downturns. The bottom line is that diversified trend following strategies have low correlation between the traditional buy and hold portfolio heavily invested in equities and bonds. That is about as far as we… Continue reading Trend Following and Crisis Alpha
If you ever wake up one morning and decide to tackle dogma, then the best place to start your quest is in pulling apart the assumptions that are invested in any theory. I recently posted an article on Ed Thorp and his foray into game speculation where the mathematical truisms of theory were overturned by… Continue reading Assumptions – Where to look to find the weak spots in theory
There are two broad styles to trading the financial markets. The Engineers - The specialists whose approach to trading is through the use of expert knowledge applied to a few select investments - eg. the Fundamental guys (global macro), the Value Investors (aka the Buffet's or the micro guys), the Quants and technical analysts (aka… Continue reading The Engineer or the Chef?
This article titled "To Infinity and Beyond' provides a recipe to the trader seeking to compound their net wealth through the use of sound portfolio management principles that address the risk inherent in a number of return streams. It is not about picking the systems offering the best returns, but rather the process of how you go about managing the volatility of a variety of return streams that have a slight edge which then allow you to compile a robust selection of trading strategies that can navigate a broad array of different market regimes. Once you have achieved this aim, this is when you can reach to 'infinity and beyond' through position sizing and effective capital allocation in delivering a large 'bang for buck from your limited $'.
With data mining software that is readily available to retail traders such as StrategyQuant, Adaptrade and EA Studio, one of the key issues you need to address is 'curve fitting'. Curve fitting is not only restricted to data mining but is also a feature associated with mean reverting strategies that possess negative skew over the… Continue reading Workflow Tips When Using Data Mining Software