A Strong Start for the ATS Programs – September 2019
September clearly was a great month to start our Programs. Usually you find the first few months from Program inception are fairly hard going as it takes time for trend following positions to establish themselves. In the case of losses however, they are only too eager to start nibbling at your capital to build commencing drawdowns….but as luck would have it, we managed to start when markets (particularly XAUUSD, EURJPY and GBPUSD have been quite lively.
I was however expecting the worst and assuming that the first quarter might not be that forgiving…..but you gotta be happy when lady luck is on your side.
But before I get into the performance results, I thought it best to spell out what we have here.
Firstly….just because we undertake monthly reports on the CTA segment does not mean we are one. As much as we would like to stretch the bow we need to define what we are.
- We are not a Fund Manager. We are researchers, programmers and educators seeking to assist retail traders in expanding their horizons and learning the techniques of the professional Fund Managers. While we do track small nominal live accounts, we do this to validate our test results against live trading activities and also provide a degree of validity to interested members that we are prepared to back our theory with real results. We do personally trade the Programs we promote on our website…..but as we are not soliciting performance fees from our members nor are we providing signal services to our members…our private affairs can be kept just that…private. We need members to understand that a decision to trade any recommendation made on our website must be validated by each member themselves. We supply the robust methods and advice to upskill the capabilities of members to do this…but our primary aim as educators is to ensure that our members are equipped to take on the responsibility themselves.
- Our Programs are based on backtest results which we have clearly explained should not be used as a basis to project into the future. It is simply a means to evaluate whether your systems have been able to successfully navigate trending market conditions of the past, and even more importantly assess the degree to which your systems have been able to preserve capital and deal with unfavourable market conditions of the past.
- Yes our Programs (in particular our Portfolios) have fantastic looking backtests…..whoopee do…but that is simply a fact of the past. In fact if you don’t have a great looking backtest at the portfolio level, then that is a sure sign that you haven’t applied a sufficiently rigorous process to arrive at your result. There is still no guarantee however with a great looking backtest as it is so easy today with optimisation techniques and data mining to generate really swanky backtest results. The reason they look so good for us is that they are very diversified in terms of their individual system contributions. Each return stream has a very long out of sample horizon applied to it to eliminate any chance of curve fitting, and furthermore they have been mapped to the market condition to ensure that the individual return stream makes logical sense in terms of its performance against market conditions. If you delve into each individual return stream of the composite, you will see a very different story. Volatility is naturally embedded in all our individual return streams. There is no risk warehousing going on and each system has strong positive skew. The reality is this, it is impossible at the single system level to have a nice linearly ascending equity curve for trend followers. You have no control over when the market trends so do not expert an individual system to deliver continuous growth…if it does….then welcome to curve fitting. Drawdowns are a natural symptom that occurs when markets don’t trend….so expect them and learn to embrace them. If you don't have drawdowns, then that is the time to start worrying. Now while we can talk about this at the individual system level, it is the portfolios responsibility to address this volatility at a global level. This is where the degree of system diversification that we deploy delivers those great backtest results.
- We are not strongly diversified across asset classes but we are highly diversified across trend following systems and timeframes. Unfortunately as retail traders who do not have significant available capital for allocation across asset classes, our options are far more restricted in terms of what we can diversify into. You will be told by every FM and their dog that the benefits of diversification cannot be delivered to the retail trader who does not have sufficient capital to allocate widely….however we are specifically here to tell you that in fact it is possible. Given that microlots have become available in the FX and CFD space….this opens up this world to opportunity. In fact our offering here at ATS is to teach retail traders how to engage the practices and principles of the professional FM’s, but apply it to the FX and CFD space. We just need to focus on achieving diversification through different methods that are not widely known or understood by many traditional FM’s. We do this through system design principles.,,,and then many would say….that FX doesn’t trend or FX is too correlated….so how are you achieving this level of diversification? That’s when we say….become a member and find out.
- We should use FM performance results as a method to gauge realistic expectations but never assume that we can compete with them. Remember this…..the CTA performance results that we track on a monthly basis comes from the best FM’s in the world with a stellar long term track record. The results from our Programs may be correlated to a degree, but do not enter this game with expectations that you will outperform them in the long term. Let’s reserve any judgement about the future and see how we go. Who knows…..we may be more modest than we appear. 🙂
So now that we have defined who we are and what we do let’s get into the September results.
Individual Market Contributions for the Month
Gold had a cracker for September delivering 18.3% to the ATS1016 Program with strong contributions from EURJPY and GBPUSD. These contributions were more than enough to cover the whipsaws experienced with USDJPY and CADJPY over the month.
There are no signs that any current Program needs rebalancing….and all appears to be in order.
Combo Program (Portfolios) Performance for the Month
The Beauty and the Beast (Aggressive) hit the ground running delivering a wicked 20.5% return for the month on the back of XAUUSD performance. The Beauty as an individual program outperformed the Beast over the September period.
Still early days….so we cannot read anything in to these results…..but to kick things off….we generally couldn’t be happier…..but always best to stay humble….once bitten twice shy they say.
Trade well and prosper
The ATS mob
Quidquid latine dictum, altum videtur